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Financial Management - Finance – An Introduction

Significance and Definition of Finance

   Posted On :  19.06.2018 08:38 am

Finance is the life blood of business. Before discussing the nature and scope of financial management, the meaning of ‘finance’ has to be explained. In fact, the term, finance has to be understood clearly as it has different meaning and interpretation in various contexts.

Significance

 
Finance is the life blood of business. Before discussing the nature and scope of financial management, the meaning of ‘finance’ has to be explained. In fact, the term, finance has to be understood clearly as it has different meaning and interpretation in various contexts. The time and extent of the availability of finance in any organization indicates the health of a concern. Every organization, may it be a company, firm, college, school, bank or university requires finance for running day to day affairs. As every organization previews stiff competition, it requires finance not only for survival but also for strengthening themselves. Finance is said to be the circulatory system of the economy body, making possible the required cooperation between the innumerable units of activity.
 

Definition of Finance

 
According to F.W.Paish, Finance may be defined as the position of money at the time it is wanted.
 
In the words of John J. Hampton, the term finance can be defined as the management of the flows of money through an organization, whether it will be a corporation, school, bank or government agency.
 
According to Howard and Upton, “finance may be defined as that administrative area or set of administrative functions in an organization which relates with the arrangement of each and credit so that the organization may have the means to carry out the objectives as satisfactorily as possible.
 
In the words of Bonneville and Dewey, Financing consists in the raising, providing, managing of all the money, capital or funds of any kind to be used in connection with the business.
 
As put forth by Hurband and Dockery in his book ‘Modern Corporation Finance’, finance is defined as “an organism composed of a myriad of separate enterprise, each working for its own ends but simultaneously making a contribution to the system as a whole, some force is necessary to bring about direction and co-ordination. Something must direct the flow of economic activity and facilitate its smooth operation. Finance is the agent that produces this result”.
 
The  Encyclopedia  Britannica  defines  finance  as  “the  act  of providing the means of payment.” It is thus the financial aspect of corporate planning which may be described as the management of money.
 
An analysis of the aforesaid definition makes it clear that finance directs the flow of economic activity and facilitates the smooth operation. Finance provides the required stimulus for continued business operations of all categories. Finance is essential for expansion, diversification, modernization, establishment, of new projects and so on. The financial policy of any organization to a greater extent, determines not only its existence, and survival but also the performance and success of that organization. Finance is required for investment, purposes as well as to meet substantial capital expenditure projects. 
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