• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
Googlesir Logo

Googlesir

  • Home
  • Entrepreneurship
  • Employee Guide
  • Marketing and Sales
  • Space
  • Investment & Earning

12 Key Factors Affecting Business Finance (Complete List)

Last Modified: 28 February, 2020 Leave a Comment

Finance may be defined as such administrative area or organization, or such a group of Administrative functions, related to cash and Debt system, which may provide cooperation to the organization in procuring required sources for adequate fulfillment of its objectives.

factors affecting business finance
factors affecting business finance

Now, the question arises, which are the factors influencing the financial system of the business.

In response, it may be said that normally fixed capital and working capital is required for a business or enterprise.

Factors Affecting Business Finance

An entrepreneur should manage finances, by keeping the following points into consideration:

1. Nature of Business

If the nature of the business or enterprise requires heavy machinery and implements for production of the products, then fixed capital will be substantially required, otherwise less fixed capital will be required.

On the contrary, if the nature of the business is of manufacturing consumer goods, then the financial requirements will be high.

Related: Top 10 Need and Importance of Business Finance.

2. Size of Business

If the business is large-sized, it will require more land and buildings, machinery and implements, etc.

To meet these requirements, the high volume of fixed capital and working capital will be required, otherwise less capital will be required.

3. Production Technique

If the technique of production of the business is labour intensive, the financial requirements will below.

However, if production is by use of machinery in place of labour and the production process complicated, the higher volume of finances will be required.

4. Promotion Cost

If the business requires promotion expenses, initial expenses and cost on Goodwill, at the time of its promotions, then the high volume of finances will be required.

Related: 16 Factors Responsible for Rapid Growth of Promotion (Explained).

5. Economic Social Environmental

Economics social environment also influences the finance.

If people have the tendency to make a higher investment in industries, in place of incurring much expenditure on procuring commodities and services, then the requirement of Finance will be low, otherwise, it will be high.

6. Time Taken in Sales of Production

In Business where the products sell immediately after production, the requirement of Finance is less.

On the contrary, if time in the sale of the products is much more, the requirements of Finance will be more.

These internal and external factors also affecting the capital structure.

7. Terms of Purchase and Sale

Financial management depends upon the terms of purchase and sale.

factors affecting business finance
factors affecting business finance

If in a Business, the material is available on credit and its sale is in cash, then the requirement of Finance will be lesser.

In contrary conditions, the requirements of finances will be much more.

Related: 18 Major Factors Affecting Capital Structure (Complete List).

8. Business Cycle

If the business cycle is in the shape of the boom, the requirement of fixed capital will be low, but the requirement of working capital increases.

9. Form, Philosophy and Style of Management

The financial requirement is influenced by the form, philosophy, and style of management in the enterprise.

If the Business is managed by a professional person and it has a good reputation in the money market, then the business may not require a high volume of finances.

On the contrary, if the management is by traditional methods and confidentiality is given more importance, then financial requirements are much more.

Thus, these lists and explanation of financial factors that influence the value of a business. And also factors affecting a business’s choice of source of finance.

10. Possibilities and Rate of Development Extension of Business

Businesses with possibilities of higher development and extension have low financial requirements, otherwise, the requirement of Finance is high.

These all factors to consider when choosing business finance

11. Scale of Distribution

If the entrepreneur gets the sale of his products only in large quantities through its sellers, the finance in large quantities will be required.

On the contrary, if the sale is got done in small quantities, finance in low quantity is required.

12. Other Factor

Besides aforesaid factors, many other factors or elements also influence the financial management of the business.

These are the availability of means of transport, possibilities of increase in money circulation, policies of Government, possibilities of War, etc.

Thus, now you know what are the factors affecting business finance?

Read More:

  • 15 Key Features of Effective Management Control System
  • 10 Important Objectives of Demand Forecasting (With Examples)
  • 18 Nature and Characteristics of Entrepreneurship
  • 8 Main Nature and Scope of Venture Capital (Explained)
  • 25 Major Benefits or Advantages of Branding (Explained)
  • 12 Essential Steps in Planning Process (Explained)
  • Commercial Banks: Difficulties, Advantages & Disadvantages
  • Top 10 Role of Entrepreneurs in Bringing Social Stability
  • 15 Importance and Limitations of Microeconomics (Explained)

Share Now:

  • Share
  • WhatsApp
  • Tweet

Leave a Comment

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

More to See

skills and qualities of successful sales manager

18 Essential Skills and Qualities of a Successful Sales Manager

roles and responsibilities of sales manager

21 Important Roles and Responsibilities of a Sales Manager

characteristics of personal selling

18 Key Characteristics of Personal Selling: A Comprehensive Guide

challenges of doing personal selling

15 Major Challenges of Doing Personal Selling: Explained

objectives of personal selling

16 Main Objectives of Personal Selling: A Comprehensive Guide

importance of personal selling to society

17 Crucial Importance of Personal Selling to Society

benefits of using pricing skimming for business

21 Benefits of Using Price Skimming for Business: Explained

E-mail Newsletter

Footer

Search Here

Know Us

  • Home
  • Blogs
  • About US
  • Contact Us
  • Privacy Policy

Goals to Achieve

  • 101 Business Lessons from Bhagavad Gita (Every Entrepreneur Should Know)
  • 17 Roles of Creativity and Innovation in Entrepreneurship
  • 51 Different Types of Green Entrepreneurship: For a Sustainable Future
  • 101 Small Business Ideas from Home for Ladies
  • Why My Supermarket Business is Not Growing (14 Reasons)
  • 25 Key Benefits of Having a Business Plan (With Examples)

© 2023 Copyright - Googlesir.com