Adequate finance’ is required in the business because of following reasons
(i) Necessary to Start Business Every new venture needs money to buy plant and machinery or to conduct certain activities. All financial needs will not be estimated in the absence of this concept.
(ii) Necessary for Business Cycle No matter how well business is doing, a good finance manager has to prepare for rainy or even for stormy season. Business and economic cycles bring dark clouds you can’t predict. That’s why financial plans are created for downturns.
(iii) Necessary for Growth Success can bring a business to a difficult crossroads. Sometimes to attain more or to achieve greater success, a company needs significant financial investment to acquire new capital, staff or inventory. This can only be possible after the proper arrangements of business finance.
(iv) Necessary for the Payments of Debts The firm or a company can meet its liabilities in time. Prompt payment of debts can be possible only because of management of business finance and can help in raising credit standing.
(v) Necessary for Availing the Opportunities The company can take the advantage of upcoming opportunities and can earn more.