Business finance is the scientific study of financial transactions that relate to money and/or investments in a business. This includes the supply, safekeeping, administration, recovery, disposition, and allocation of the funds. It is also sometimes referred to as corporate finance since it is generally concerned with the use of corporate assets for the purpose of making business profits. The study of business finance may be related to banking, investing, economics, or any other area of applied research devoted to the subject.
Finance is an area of practical application that attempts to deal with all these various areas of business activity and combines them into a comprehensive analysis of the effects of changes in fiscal instruments on the value of a firm, its ability to earn future profits, and the possibility of the owner cashing in his property and distributing funds to those who benefit from his ownership. In practical application, business finance identifies the methods, techniques, and the information needed for an orderly process by which capital is raised, invested, and allocated between different parts of a company. A firm can use business finance to purchase or dispose of existing tangible assets, to make loans or buy securities, to issue equity, to build up capital, to structure and develop effective working capital management policies, and to create or sell operating departments. All of these processes, and others such as buying, selling, developing, analyzing, maintaining, and exiting business deals, are involved in the process of business finance.
Another branch of business finance concerns itself with the use of capital assets for the purpose of either expanding the capacity of a firm to do business or raising additional capital for short-term financing requirements. One of the most familiar forms of capital financing is owner financing, which occurs when a firm sells one of its existing assets, such as its plant and property, to another firm for cash consideration. Owner financing results in a reduction of the net worth of the firm and a rise in the market value of the investment. There are two other forms of capital financing that are more complex, technical, and less obvious to most people; debt financing and capital stock financing.