Financial requirements of business organisations

At present, people have complex needs and wants. In this context, it is important to study the various market conditions and identify different business opportunities available. Selection of sources of finance for an organization and invest them profitably should be carefully decided. In this section, we will identify various types of financial requirements of an organization.

i. Initial capital requirements
   It is required to buy assets and incur certain expenditures when starting up a new business.
   Therefore, funds  are required to finance initial capital requirements of a company for
    properties,equipment, furniture, buildings etc.
ii. Business expansion requirements
     Funds are also required for business expansion activities. The company may require opening
     of new  departments or branches for which the company has to invest in more equipment,
      furniture, buildings etc.
iii. Acquisition of other businesses
     Funds may also be required in financing acquisition of another operating business as a strategic
      move. For example, a furniture shop owner may acquire a carpentry workshop. This will help
      him in supplying materials, opening another sales outlet etc.
In addition to the above mentioned basic needs, following requirements too, play an important role.

• To carry out day-to-day activities

                 Example : ¤ For purchasing stocks
                 For Sundry expenses

• To face unexpected incidents

              Example : ¤ Getting unexpected orders
              Bad debts

It is clear that a business organization may find different types of financial requirements in carrying out its business operations. On the other hand, there can be different types of investment objectives also.
Accordingly, the financial requirements of an organization can be discussed under two main categories based on time.
01. Financial requirements to meet long term investment opportunities
      Long term financial requirements are to invest in assets which are long term in
      nature such as acquisition of lands, buildings, properties etc. These are called
      long term financial requirements.
02. Financial requirements to meet short term investment opportunities Short term financial
       requirements are to meet financial requirements of carrying
       out day-to-day activities such as paying salaries and wages, insurance premium,
       traveling charges, electricity, taxes, settling trade debts etc.
The above financial requirements may vary from organization to organization depending on their nature and size of the organization. For example, there can be more short term financial requirements for a grocery shop whilst there can be more demand for long term financial requirements for a construction company.