There is no money for raw materials, and the loan application is sitting in the bank. How does the factory keep running? That is where the importance of business finance shows.
1. Plan before you need the money
In today's competitive open market economy, every government, non-government and international business has to give finance pre-planned importance. Well-thought, skilled financial management lowers risk and raises profit.
2. Four sides of the importance
The book gives four sides: capital crisis, a backward banking system, less educated entrepreneurs, and productive investment with national income. Tap a cell to see each problem and how finance answers it.
gridtap a cell
Problem and finance answer
aspect
problem
how finance helps
capital crisis
raw materials not bought on time
fund collected on time, used by plan
backward banking system
loan not arranged in time
well-planned fund raising, right investment decision
less educated entrepreneur
no long term plan
cheaper source, suitable project
productive investment
national income needs successful investment
cost-benefit analysis picks the profitable project
Bangladesh is a developing country, so a financial crisis is a regular issue for businesses. If raw materials are not bought on time, production can be hampered. Finance ideas help collect the needed fund at the right time and use it in a planned way.
Our financial organizations are not as well organized as those of advanced countries. So a loan cannot be arranged in the expected time after applying, and it may fail for lack of property to pledge. A business person must therefore collect fund on time in a well-planned way and take the right investment decision.
Most entrepreneurs in Bangladesh are less educated and cannot run their financial activities on a long term plan. In the book's words, the only reason for this loss is financial mismanagement. With enough knowledge of finance, a businessman can collect fund at the right time from a less expensive source, and earn enough profit by investing in a suitable project.
A successful investment plays a direct role in raising national income. With finance knowledge, cost-benefit analysis lets you choose the most profitable project among the alternatives. This matters for the economic development of the whole country too.
Now drop four situations into the four boxes.
sort themchip, then bin
Which aspect?
Pick up a chip, then drop it in a box.
Right. Next one.
Not yet. Ask: is the trouble money, the bank, planning, or the result of an investment?
All in place. A lack of raw materials is capital crisis, a late loan is a backward banking system, loss from weak planning is the less educated entrepreneur's problem, and successful investment raises national income.
In productive investment there is one question: which project gets the money? There are three alternatives. Guess first, then measure.
guess, then weighpick one
Which project pays best
The three projects' costs and benefits are imaginary, not figures from the book.
The method for choosing the most profitable project is cost-benefit analysis. Put its steps in order.
in ordertap in order
Cost-benefit steps
What comes first? To choose, you need alternatives in hand.
Yes. And then?
Not yet. Each step stands on the one before it.
Right order. Without a list there is nothing to compare, without weighing cost and benefit you cannot tell the most profitable one, and until the choice is made you do not know where to invest.
3. Check yourself
The first question is a straight one.
check yourselfpick one answer
Question 1
Why is a loan not available even when applied for within the desired time in financial institutions?
This is not the answer to this question. The book says: Financial organizations are not well-organized like those of advanced countries, so a loan cannot be arranged in expected time and may fail for lack of property to pledge;
This is not the answer to this question. The book says: Financial organizations are not well-organized like those of advanced countries, so a loan cannot be arranged in expected time and may fail for lack of property to pledge;
Right. The book says: Financial organizations are not well-organized like those of advanced countries, so a loan cannot be arranged in expected time and may fail for lack of property to pledge;
This is not the answer to this question. The book says: Financial organizations are not well-organized like those of advanced countries, so a loan cannot be arranged in expected time and may fail for lack of property to pledge;
In the second, find the reason.
check yourselfpick one answer
Question 2
How are the entrepreneurs of most small enterprises in Bangladesh generally considered?
This is not the answer to this question. The book says: Most entrepreneurs in Bangladesh are less educated and cannot conduct financial activities through a long term plan;
Right. The book says: Most entrepreneurs in Bangladesh are less educated and cannot conduct financial activities through a long term plan;
This is not the answer to this question. The book says: Most entrepreneurs in Bangladesh are less educated and cannot conduct financial activities through a long term plan;
This is not the answer to this question. The book says: Most entrepreneurs in Bangladesh are less educated and cannot conduct financial activities through a long term plan;
Think the last one through before you answer.
check yourselfpick one answer
Question 3
To meet the financial crisis caused by a backward banking system-
i. a plan to reduce income tax must be made ii. money must be arranged in a planned way iii. profitable use of money must be ensured through a right investment decision
This option does not match which statements are true; the true ones are ii and iii. The book says: Financial organizations are not well-organized like those of advanced countries, so a loan cannot be arranged in expected time and may fail for lack of property to pledge;
This option does not match which statements are true; the true ones are ii and iii. The book says: Financial organizations are not well-organized like those of advanced countries, so a loan cannot be arranged in expected time and may fail for lack of property to pledge;
Right. The true statements are ii and iii. The book says: Financial organizations are not well-organized like those of advanced countries, so a loan cannot be arranged in expected time and may fail for lack of property to pledge;
This option does not match which statements are true; the true ones are ii and iii. The book says: Financial organizations are not well-organized like those of advanced countries, so a loan cannot be arranged in expected time and may fail for lack of property to pledge;
The whole note on seven cards.
cut from the notetap to turn over
Seven cards
QuestionWhat happens to risk and profit under well-thought financial management?
AnswerRisk is reduced and profit is increased.
QuestionWhy is financial crisis a regular issue for businesses in Bangladesh?
AnswerBecause Bangladesh is a developing country.
QuestionName a reason a loan is not arranged in time in Bangladesh.
AnswerFinancial organizations are not well-organized (lack of property to pledge also).
QuestionHow are most entrepreneurs in Bangladesh, and what is the reason of their loss?
AnswerLess educated; financial mismanagement.
QuestionWhat plays a direct role in increasing national income?