Question Paper from: SBI Clerk mains 2016

"Business finance refers to the funds and monetary support required by an entrepreneur for carrying out the various activities relating to his/her business organisation. It is needed at every stage of a business life cycle. For instance, in starting a business, it is essential for acquiring fixed assets, such as land, building, plant and machinery etc. as well as for meeting the day­to­day expenses in the form of payment of wages and salaries, purchasing raw materials etc. In order to successfully operate and expand the business, funds are necessary for promoting and marketing the product; distributing it to the prospecting consumers; as well as for managing the firm’s human resource base. Further, in the changing business environment marked by increasing competition, additional funds are desirable for continuous modernisation and up gadation of the business unit. Though the amount of the capital needed by an enterprise depends upon the nature and size of the business, but its timely and adequate supply is indispensable for any form of individual set up (whether small, medium or large). Recognising this fact, the Government of India has evolved a well developed financial system in the country. The financial system refers to an institutional arrangement through which the savings in the economy are mobilised and effectively allocated among the ultimate borrowers. It operates through a network of financial markets and institutions, which are broadly categorized into money market and capital market. Given this financial set up, the Central and the State Governments have been making all efforts for .meeting the financial requirements of the entrepreneurs. These are in the form of several financial schemes and funding options offered by the ministries, public and private banks, small industries development organisation, national small industries corporation limited, state financial corporations etc. Thus, India has a sound financial structure which is capable of providing a strong base for setting up of business units in the country. Growth of a business is essential for sustaining its viability, dynamism and valueenhancing capability. It reflects the ability of a company to earn higher profits and compete with the rivals in an effective manner. The three widely used measures of corporate growth are: Increase in sales. Increase in Profits and Increase in Assets. A company can achieve its growth objectives by expanding the existing market for its product and entering into new markets. Therefore, an entrepreneur must make a thoughtful analysis of all the possible options available to him for expanding his businessby taking into account the inherent risks, the financial requirements and the surrounding regulatory framework. "

The financial system refers to through which the savings in the economy are mobilised and effectively allocated.