so these are the different context of finance but now we are going to focus on business finance and learning about business finance can also help you to understand the finance in other context so what are the areas of business finance one is capital budgeting capital budgeting answers in what fixed asset and when a forum should invest the other relative related area is dividend policy when a firm makes profit the firm will normally distribute the profit to the owners but if the firm decides to reinvest how much of the profit should be reinvested so if the firm reinvest the dividend will be lower
so these kind of decisions are the area of dividend policy then again the area of capital structure which deals with raising money how to raise money for the investment and it also involved deciding when to raise the money from which sources the forum should raise money should it should the firm raise money more from the owners or more from the creditors and the other area of Finance is working capital management which is related to the management of short-term assets more particularly short-term cash flows
it involved for example cash budgeting managing of current assets managing up current liabilities etc so these are the areas of Finance which can be related with the balance sheet of a business organization you know that the balance sheet of a business organization has two sides the left-hand side contains the assets and the right-hand side contains the liabilities and owner’s equity in other words we can say that liabilities and owner’s equity x’ are the sources of fun because when you are liable to someone that means you are supposed to pay that means you have other people’s money borrowed from them and equity is also other people’s money but it is the owners money that you have in your business okay so we can say that the right-hand side of the balance sheet actually indicate the sources of money the business organization has and the left-hand side of the balance sheet contains the assets which are essentially the uses of money
because how do you use the money normally you buy different types of assets so this type of assets are contained in the left hand side so a business organization can have assets only if the business organization has money in the first place then the organization then the firm can use the money to buy assets this is why the sources of money and the users of money should be equal and this is why the left hand side and the right hand side of the balance sheets are equal.
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