Friday, January 6, 2012

Introduction of Finance & Business

The history of  financial business is not so long. finance is a part of economics till late 1800s.it emerged.it emerged as a separate discipline in early 1900s.in early 1900s . there was rapid  industrialization in the United States and in most of  the countries of Europe. the key financial issues in that period were centered around raising of capital for formation of new business,expansion,merger, and reorganization. financial as a separate subject focused on descriptive considerations and legal aspects of these events. at that time the firms were facing the shortage of capital for expansion and modernization as no capital markets were developed. therefore,shifting of funds from individual savers to businessmen was quite difficult.at that time accounting statement  of  earning and assets values were unrealistic and trading in stock by insiders and other manipulators caused prices to fluctuate dramatically.as a result,the investors used to hesitate purchase stocks  issued by corporations.therefore,finance  had  to  look into legal issues relating to the issue of securities as well.during the depression of 1930s most businesses failed to run successfully. the failure in real market transmitted  to capital market in the form of fraudulent practices. these events led finance to  shift its focus on bankruptcy and reorganization and shift to regulation of capital market. finance still was focusing on legal matter but the focus shifted to survival aspects of firms rather then their expansion and modernization.in this phase , business finance was viewed from outsiders point of view, namely,the investment bankers,lenders, and other outside interests.the amendments in companies regulations and setting of accounting standard during 1940s increased investors confidence in published financial statement.the emphasis sifted to the day- to- day problems faced by financial managers in the area of funds analysis planning and control.this pace continued and increased when some mathematical tools were developed and successfully applied to the policies relating to cash, accounts receivable , inventories and fixed assets.

          During 1950s and onwards,the application of quantitative methods for analyzing financial problems changed the perspective of looking at financial issues. the emphasis shifted from outsiders to insiders viewpoint. this together with improvements in the efficiency and regulation of financial markets provided sound basic for the development of financial theories and their applications. business finance is one of the beneficiaries of the developments taking place in computing technologies in later decades of the 1900. in recent year, we have seen the development of business finance as a major contributor to corporate prosperity and growth  in the analysis or financing and investment decisions.

       Today ,as we are in twenty first century ,finance still focuses on value maximization as the corporate objective.however,two other trends are becoming increasingly important:(1)the globalization of business and (2)the increased use of information technology.many corporation today operate multinationals.multinational operation of large corporations has been possible today because of improvement in transpotation and communication.this has contributed to satisfy the low cost and high quality needs of consumer because o lower shipping cost,large -scale production and distribution and so on .with the change in technology ,developing new products has been a challenging work for a corporation . as a result of this ,they have been bound to operate in multinational on a joint venture basis.many corporations also go multinational to take the benefit of cheaper labor costs ,benefit of large market coverage ,which otherwise  could not be achieve in domestic operation.

              The millennium  is the age of computer and information technology.there is a possibility of linking companies to companies, to investor,to customers,and other stakeholders inside or outside the organization through a well designed network of computer of computer information system .thus financial managers are increasingly able to share information and to have ,"face to face"meetings with distant colleagues through vidio telecoferencing (Brigham and Houston,2001). because of increasing use of computer software programming on financial decisone -making ,the new generation of financial managers must have a good command on data based computer information system.

         Today the are of business finance has been broadened to a wider scope. the basis concern of business finance is considerate to be a rational matching of funds to their uses in the light of appropriate decision criteria .this is only the reason that the approach of business finance has  become more analytical and quantitative.throughout the modern phase in the history of business finance,many significant developments have been made in the field of capital structure theory ,efficient market theory, capital  technique .option pricing model , arbitrage pricing theory , valuation model ,dividend policy theory , agency theory,working capital management and so on.the  finance today also covers the aspects of risk management through financial engineering and  use of derivative securities . as a result, the business finance has become more charming and challenging discipline today.


















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