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In: Finance
Explain the significance of finance in a business organization and the implications of agency relationships in...
Explain the significance of finance in a business organization and the implications of agency relationships in financial management.
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Expert Solution
FINANCE is a very important function in a business responsible for multiple primary functions like acquiring and managing funds to enable the smooth operation and growth of the firm. A well planned and devised business and financial plan is essential for the growth and development of the firm.The importance of finance lies in its ability or capacity of this function to keep a business operating smoothly without running out of funds to tactical and strategic plans of the firm. Finance relies on multiple sub functions like accounting, financial management etc.
An agency relationship is a kind of fiduciary relationship in which the principal allows an agent to act on his or her behalf. Here for the business purpose the agent is subject acts as per the principal’s control and directive and must consent to her instructions. Few examples where we can see agency relationships include relationships between employer & employee, lawyer & client etc.
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