Submitted in partial fulfillment of the requirements for the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
Of the Mahatma Gandhi University.
CHAPTER 1 INTRODUCTION
Finance can be defined as an art as well as a science of management of money and other assets. It includes the procurement of funds and effective utilization of funds. It also deals with profits that adequately compensate for the cost and risks borne by the business. The functions of raising funds, investing them in assets and distributing returns earned from assets to share holders are respectively called as financing decision, investment decision and dividend decision. A firm attempts to balance cash inflows and outflows while performing these functions. Financial statements are written reports which quantitatively describe the financial health of a company. This includes an income statement and a balance sheet, and often also includes a cash flow statement. Financial statements are usually compiled on a quarterly and annual basis. Balance sheet financial statements are used to provide insight into a company’s assets and debts at a particular point in time. Information about the company’s shareholder equity is included as well. Typically, a company lists its assets on the left side of the balance sheet and its debts and liabilities on the right. Sometimes, however, a balance sheet has assets listed at the top, debts in the middle, and shareholders’ equity at the bottom. At the bottom of the income statement, a total of the amount earned or lost is included. Often, income statements provide a record of revenue over a year’s time. Income financial statements present information concerning the revenue earned by a company in a specified time period. Income statements also show the company’s expenses in attaining the income and