3.1 | Intro to Finance (1)

Finance is necessary for all business, from starting up a new business, to upgrading its capital equipment or to funding its expansion plans. Businesses need to various sources of finance to pay for their operational / daily cost, such as:

the purchase of raw materials
components and inventory
the payment of wages, salaries, rent, insurance and utility bills (for gas, electricity, water and telephone bills).

The finance department of an organization is responsible for overseeing its financial management. The purpose, or role, of finance can be characterized as either capital expenditure or revenue expenditure. Revenue expenditure and capital expenditure are of equal importance to businesses.

Capital expenditure refers to business spending on non-current assets or capital equipment of a business. It is regarded expenditure on the long-term investment of an organization on assets that offer gains in efficiency and productivity. Capital expenditure results in an increase in the earning capacity of the business. Examples includes spending on:	Revenue expenditure refers to business spending on its everyday and regular operations. These expenses have to be paid in order to keep the business operational, including routine expenditure on maintaining the firm's non-current assets. Examples include expenditure on:
Vehicles, Buildings, Research and development	Delivery Costs, Wages, Salaries, Rent etc.