Definition of Finance

Finance is defined in numerous ways by different groups of people. Though it is difficult to give a perfect definition of Finance following selected statements will help you to deduce its broad meaning.

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 Academicians,

“Finance is the procurement (to get, to 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”.

Most organisations have finance managers or financial departments in charge of financial operations. Financial management performs the following finance functions:

- Planning

- Budgeting

- Obtaining funds

- Controlling funds

- Collecting funds (Credit management)

- Auditing

- Managing taxes

- Advising top management on financial matters

For example, obtaining funds is a very important finance function, because the amount of money needed for various time periods and its sources are fundamental questions in sound financial management. Credit management gives a firm chance to earn money having an interest on credits and loans given. Finance manager must be sure that the firm doesn’t lose too much money to bad debt losses.