Archive | Business Studies

The Unit Trust of India or UTI was established on 1st February, 1964 under the Unit Trust of India Act, 1963 by the government of India.

The Industrial Development Bank of India or IDBI was established on 1st July, 1964 as an apex bank (the counterpart of Reserve Bank) in the field of industrial finance and capital market.

The Industrial Finance Corporation of India was established on 1st July, 1948 under the Industrial Finance Corporation Act, 1948 to provide financial assistance (medium and long-term) to large-scale industries all over the country.

In order to meet the financial requirements of small scale and medium-sized industries, there was a need of special financial institutions.

Finance is the life-blood of all business activities. Finance is needed not only for establishing a business enterprise, but it is also needed to keep it alive and also to see it growing.

Generally over-capitalization implies that the capital of the company exceeds its requirements. A company is overcapitalized when its earning capacity does not justify the amount of capitalization.

Generally under-capitalization denotes the inadequacy of capital; i.e., the shortage of capital. It is a condition when the real value of the company based on its earnings is more than the book value.

Every business enterprise, whether big, medium or small, needs capital to carry on its operations smoothly and to achieve its targets.

Finance is the life blood of business. No business can run successfully without adequate finance.

The term ‘capitalization’ is used in quantitative aspect and refers to the amount at which a company’s business can he valued.

The term working capital is commonly used for the amount required for holding current assets like stock of raw material and finished goods, bills receivable, debtors and cash and also to meet the day to day expenses like salareis and wages, rent, taxes etc.

Before approaching the capital market to collect finance, it is essential to determine or estimate the capital requirements of the company.

The financial management has to take three important decision viz. (i) Investment decision i.e., where to invest fund and in what amount, (ii) Financing decision i.e., from where to raise funds and in what amount, and (iii) Dividend i.e., how much to pay dividend and how much to retain for future expansion.

As we know finance is the lifeblood of every business, its management requires special attention.

Traditionally, the role of commercial banks in providing long-term finance to industries in India has been very negligible.

Besides the issue of shares- equity and preference and debentures, a company can accept deposits from the public to finance its medium and short-term requirements of funds.