Finance
is the lifeblood of business concerns because it is interlinked with all
activities performed by business concerns. Arrangement of the required finance
to each department of business concern is highly complex and needs a careful decision. The Quantum of finance may depend upon the nature and situation
of the business concern. But, the requirement of finance is broadly classified
into two parts.
1.
Long-term financial requirement
2.
Short-term financial requirement
1.
Long-term financial requirement-
The long-term financial requirement means
the finance needed to acquire land and building for a business concern, purchase
of plant and machinery, and other fixed expenditures. The long-term financial
requirement is also called fixed capital requirements. Fixed capital is the
capital used to purchase the fixed assets of the firms such as land and building, furniture and fittings, plant and machinery, etc.; hence, it is
also called capital expenditure.
2.
Short-term financial requirement-
Apart from the capital expenditure of
the firms, the firms should need certain expenditure life procurement of raw
materials, payment of wages, day-to-day expenditures, etc. this kind of
expenditure is to meet the help of short-term financial requirements are
popularly known as working capital.