Finance may be defined as the art and science of managing money. The major areas of finance are: (1) Financial services and
(2) Managerial finance/corporate finance/financial management. While financial services is concerned with the design and delivery of advice and financial products to individuals, business and governments within the areas of banking and related institutions, personal financial planning, investments ,real estate, insurance and so on, financial management is concerned with the duties of the financial managers in the business firm. 1. In General sense,
"Finance is the management of money and other valuables, which can be easily converted into cash." 2. According to Experts,
"Finance is a simple task of providing the necessary funds (money) required by the business of entities like companies, firms, individuals and others on the terms that are most favourable to achieve their economic objectives." 3. According to Entrepreneurs,
"Finance is concerned with cash. It is so, since, every business transaction involves cash directly or indirectly." 4. According to Academicians,
"Finance is the procurement (to get, obtain) of funds and effective (properly planned) utilisation of funds. It also deals with profits that adequately compensate for the cost and risks borne by the business."
Features of Finance1. Investment The main characteristics or features of finance are depicted below. In Finance, Investment can be explained as a utilisation of money for profit or returns. Investment can be done by:-
1. Creating physical assets with the money (such as development of land, acquiring commercial assets, etc.), 2. Carrying on business activities (like manufacturing, trading, etc.), and 3. Acquiring financial securities (such as shares, bonds, units of mutual funds, etc.). Investment opportunities are commitments of monetary resources at different times with an expectation of economic returns in the future.
2. Profitable Opportunities
In Finance, Profitable opportunities are considered as an important aspiration (goal). Profitable opportunities signify that the firm must utilize its available resources most efficiently under the conditions of cut-throat competitive markets. Profitable opportunities shall be a vision. It shall not result in short-term profits at the expense of long-term gains. For example, business carried on with non-compliance of law, unethical ways of acquiring the business, etc., usually may result in huge short-term profits but may also hinder the smooth possibility of long-term gains and survival of business in the future.
3. Optimal Mix of Funds
Finance is concerned with the best optimal mix of funds in order to obtain the desired and determined results respectively. Primarily, funds are of two types, namely,
1. Owned funds (Promoter Contribution, Equity shares, etc.), and 2. Borrowed funds (Bank Loan, Bank overdraft, Debentures, etc). The composition of funds should be such that it shall not result in loss of profits to the Entrepreneurs (Promoters) and must recover the cost of business units effectively and efficiently.
4. System of Internal Controls
Finance is concerned with internal controls maintained in the organization or workplace. Internal controls are set of rules and regulations framed at the inception stage of the organization, and they are altered as per the requirement of its business. However, these rules and regulations are monitored at various intervals to accomplish the same which have been consistently followed.
5. Future Decision Making
Finance is concerned with the future decision of the organization. A "Good Finance” is an indicator of growth and good returns. This is possible only with the good analytical decision of the organization. However, the decision shall be framed by giving more emphasis on the present and future perspective (economic conditions) respectively.
A mutual fund...