Importance of Finance for non finance managers!

What is Finance?

Finance is the importance tools that assists in the formation of new businesses, and allows businesses to take advantage of opportunities to grow, employ local workers and in turn support other businesses and government through the remittance of income taxes. The strategic use of financial instruments, such as loans and investments, is key to the success of every business. Financial trends also define the state of the economy on a global level, so central banks can plan appropriate monetary policies.

Types of Finance

Venture capital is an area of finance that specializes in funding new companies and their expansion efforts. Finance makes international trade possible by issuing Letters of Credit (LOC) used to purchase goods from overseas companies. Bank loans help finance accounts receivable, and credit cards help finance a company’s travel and entertainment expenses. All this activity in turn serves to keep money flowing throughout the global economy.

Functions in Finance

Finance is the process of creating, moving and using money, enabling the flow of money through a company in much the same way it facilitates global money flow. Money is created by the sales force when they sell the goods or services the company produces; it then flows into production where it is spent to manufacture more products to sell. Finance is used to pay salaries and fund the administrative expenses of the company.

Benefits

The flow of finance starts on creation of capital used to fund business through the issuance of common stock to provide capital, bonds to lend capital. Public companies use this capital to help fund their operations, and banks use it to lend to companies and individuals to finance the purchase of goods and services.

The importance of Finance for Non-Financial Managers

It can prove to be quite helpful for non-financial managers to have knowledge about finance and accounting, especially that these two areas are quite significant in any kind of business. Through a course on finance for non-financial managers, they would be able to better understand the different concepts of finance and accounting, and use the knowledge in these concepts to make better decisions for the company that involve finances. And it can be good to note that this kind of lessons is especially designed to help managers who do not have backgrounds in the fields of finance and accounting.

The importance of Finance for Non-Financial Managers

One can expect that while enrolled in this kind of course, one can be given a crash course on the basic concepts and terms involved in finance and accounting, including trial balancing, financial decision-making models, cash flows, fixed assets, depreciation, budgeting, and financial strategies. But there is no need to worry, especially those who do not have a basic knowledge of these terms and concepts because these courses are designed to be easily understandable by people who are quite new to the world of finance and accounting.

The importance of Finance for Non-Financial Managers

Finance for non-financial managers can be seen as a great way to improve the skills and abilities of non financial managers, especially if the company places much value on leadership that gets results. This kind of course can help equip non financial managers so they too can better understand what financial reports really mean.

The importance of Finance for Non-Financial Managers

Through having an understanding of reports made by accountants and financial experts, managers will be able to better interact during management meetings as they can now make comments that they believe would be helpful in improving the of work being delivered by accountants. In the same manner, they will also be able to forecast financial problems that might develop in the future, enabling them to develop control measures to so these problems can be avoided.

Most Important Financial Tool

There are many financial measurements that help managers justify corporate funding for their facilities. Some of which are given below-

Simple Payback Period

The simple payback period expresses how long it will take for an investment to pay for itself over time.

Most Important Financial Tool

Revenue Ratios

Revenue ratios are ways of expressing how much revenue your facility turns over in a given period.

Return on Investment

Return on investment, or ROI, tells a financial executive how much profit the company can expect to make from your proposed project.

Net Present Value

Finance officers often use net present value calculations to determine whether a proposed project is worth undertaking. If you can convince the decision-maker your project has a positive net present value, it’s likely to be approved.

IRR

Internal Rate of Return (IRR) which indicates that in the stage where the Net Present Value (NPV) will be zero.

Significance

When some element of the finance process breaks down companies go out of business and the economy moves into recession. For example: If a major bank loses a significant amount of money and faces the risk of insolvency, other banks and corporate customers will stop lending or depositing money to the problem bank. It will then stop lending to its customers and they will not be able to purchase the goods or pay the bills for which they were seeking funding. The flow of money throughout the financial system slows down or stops as a result.

Considerations

All facets of the global economy depend upon an orderly process of finance. Capital markets provide the money to support business, and business provides the money to support individuals. Income taxes support federal, state and local governments. Even the arts benefit from the financial process because they draw their money from corporate sponsors and individual patrons. Capital markets create money, businesses distribute it, and individuals and institutions spend it.