The term ‘fixed capital’ is often considered to be equivalent to fixed assets, which represents the employment of capital in permanent assets and other non-current assets. The fixed assets are assets of enduring nature that the business does not aim to dispose of, or that could not be discarded of without interfering the business actions. Thus a company holds the fixed assets with the intention of making profits directly or indirectly and not for the purpose of sale in the ordinary course of business. The fixed assets include land, building, plant, machinery, furniture, fixtures, vehicles etc.

Making investment in the fixed capital is the primary step for setting up a business enterprise. The investment in non-current assets is termed as ‘fixed capital.’ Such assets include items in which capital is locked for a long time. Although they do not show the investment in physical productive facilities, yet they are essential for the success of the business and regarded as vital part of the capital arrangement.

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The working capital is the life-blood and nerve centre of a business firm. The sufficiency of working capital assists in raising credit standing of a business because of better terms on goods bought, lesser cost of manufacturing due to the acceptance of cash discounts, favorable rates of interest etc.

No business can run effectively without a sufficient quantity of working capital. It is crucial to retain right level of working capital. Finance manager is required to decide the amount of accurate working capital.

The internal financing is a technique under which all profits of a company are not distributed amongst the shareholders as dividend, but a part of the profit is re-invested in the company. This process of retaining profits year after year and their utilization in the business is also known as ‘ploughing back of profits.’

These retained earnings are used in future for funding innovation and growth programmes and for fulfilling the fixed or working capital needs of the company. Since it means dependence on inner resources to meet up the fiscal requirements of the company.

It is basically a frugal step that a company takes, in the sense that instead of dispersing the total profits by way of dividends, it keeps a certain portion of it to be re-introduced into the business enterprise for its expansion. This is also known as ‘self-financing’ or ‘inter financing.’

This is considered as an idyllic technique of financial growth strategies because there is no instant pressure to pay any return on this portion of stockholders’ equity. It is an adjunct of sound financial management. It creates no lawful formalities as make borrowing either from the public or from the banks. The strategy of internal financing is the best method of financing the projects of recognized businesses without troubling their capital structure.

Financial plan is a statement estimating the amount of capital and determining its composition. The quantum of funds needed, will depend upon the assets requirements of the business. The time at which funds will be needed should be carefully decided so that finances are raised at a time when these are needed.

The next aspect of a financial plan is to determine the pattern of financing. There are a number of ways for raising funds. The selection of various securities should be done carefully. The funds may be raised by issuing of capital and debentures, raising of loans etc. Once a pattern of financing is selected then it becomes very difficult to modify it. A financial plan also spells out the policies to be pursued for the floatation of various corporate securities, particularly regarding the time of their floatation.

A financial plan should be carefully determined. It has long-term impact on the working of the enterprise. It should ensure sufficient funds for genuine needs. Neither the plans should suffer due to shortage of funds nor there should be wasteful use of them. The funds should be put to their optimum use. The main objectives of financial plan are as follows:

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Financial Management is one of the crucial functional areas of management, because the success of a company wholly depends on the proper use of its financial resources. The significance of financial management cannot be overstressed. Sound financial management is necessary in all organizations whether big, small or medium.

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Finance is universally considered as the life & soul of business, trade, commerce and industry.

Finance is highly cardinal part of a business, essential for a business organization, and very vital for execution of business plans.

The activities of employees, workers, officers, traders and industrialists are moulded by the financial factors. Maintaining a proper amount of finance is a key to success. The better a company manages its finance structure, the less the company needs to borrow.