In simple word leverage is power and relationship between two interrelated variables These variables may be output , sale , cost and profit Finance manager calculates these leverage by apply formula and then uses them for taking decision in favour of company’s shareholder Main aim of leverage testing is maximize the earning of shareholder and reduce the risk of company. Finance of Non-Profit Organization: – The finance of non-profit organization is concerned with the practices, procedures and problems involved in financial management of charitable, religion, educational, social and other similar organizations. Business Finance: – The study of principle, practices, procedures and problems concerning financial management of profit making organization engaged in the field of industry, trade and commerce is undertaken under the discipline of business finance. Business finance deals with the finance of business objectives and it is concerned with the planning and controlling firm’s financial resources.
According to GuthMan and Dougal business finance can be defined as the activity concerned with planning, raising, controlling and administrating of funds used in the business”. Financial management is concerned with business finance, i.e. the finance of profit seeking organization. Financial management is concerned with the management of funds in a corporate enterprise or financial management is concerned with the procurement and use of funds in a business. It is not possible to substitute or eliminate this function because; the business will close down in the absence of finance.
Financial management is the managerial activity, which is concerned with the planning and controlling of the firms financial resources. According to Solomon Ezra, financial management is concerned with the efficient use of an important economic resource, namely capital funds”. According to Solomon Ezra finance function as the study of the problems involved in the use and acquisition of funds by a business”. In addition to the management of long-term asset, the current assets should be managed efficiently against the dangers of ill liquidity. After preparing capital structure, an appropriate source of finance is selected.
The first task of financial manager is to estimate short term and long-term financial requirements of his business. It may be wise to finance fixed assets through long-term debts and current assets through short-term debts. Various sources from which finance may be raised include: share capital, debentures, financial institutions, commercial banks, public deposits etc.
If finance is needed for short period then banks, public deposits and financial institutions may be appropriate. On the other hand, if long-term finance is required then, share capital, and debentures may be useful. The cash management should be such that neither there is a shortage of it and nor it is idle. An efficient system of financial management necessitates the use of various control devises. The use of various techniques by the finance manager will help him in evaluating the performance in various areas and take corrective measures whenever needed. A financial manager is a person who is responsible to carryout finance functions.