3.1.1—Role of finance
- Syllabus
- First assessment 2024
- Objective
- 3.1.1
- Level
- SL
Finance turns a plan into a feasible set of choices
Business finance provides and manages money for operating, investing and growing. It supports decisions about resources, risk, timing and control.
Finance asks not only whether a project could create value, but whether the business can fund it, survive its cash timing and accept the risk. Capital expenditure builds long-term capacity; revenue expenditure keeps current operations running.
A bakery may want a larger oven to raise output, but the finance decision includes purchase cost, maintenance, expected demand and the cash needed for wages before extra revenue arrives.
Profitability and cash availability are different constraints. A project can look profitable while creating a short-term cash crisis.