What is Finance? Meaning, Definition & Features of Finance

By , April 25, 2020 9:10 pm

Meaning of Finance:

As per the dictionary, meaning finance is that the management of huge amounts of cash, especially by governments or large companies. If used as a verb it’s going to mean providing funding for an individual or an enterprise. The word has its origins to French word finance meaning an end, settlement, or retribution and utilized in the context of ending or settling a debt or a dispute. The notion is of “ending” (by satisfying) something that’s due. After adapting to English, the word is employed to define any sort of management of cash.

 

Definitions of Finance:

Finance has been closely bound with money since it replaced barter because of the means of exchange. Finance is the lifeline of all activities; economic, social, and administrative. Finance flows from the public as taxes to Government, as savings to banking and financial institutions, and as share capital or bonds or debentures to the entrepreneur. It then gets used for a spread of development and non-development activities through Government and other agencies and flows back to the public as income in various ways. Given below are some commonly understood definitions of finance:

 

Features of Finance:

Channelizing Funds: it’s well established incontrovertible fact that the economic system may be a critical element of any economy. The financial sector and financial markets perform the essential function of channeling funds from people that have saved surplus funds by spending but their income to people that have a shortage of investible funds because of their plans to spend exceed their income.

Acquisition, Allocation & Utilization of Funds: Finance as a function deals with the acquisition, allocation, and utilization of funds. A business must make sure that adequate funds are available from the proper sources at the proper cost at the proper time. It must decide the mode of raising funds, whether it’s to be through the difficulty of securities or lending from the bank. Once funds are acquired the funds need to be allocated to varied projects and services and eventually the target of the business is to earn profits which to a really large extent depends on how effectively and efficiently allocated funds are utilized. Proper utilization of funds is predicated on sound investment decisions, proper control, and asset management policies, and efficient management of capital. Yes or no is blogging site related to business and finance.

Maximization of Shareholder’s Wealth: the target of any business is to maximize and make wealth for the investors, which is measured by the worth of the share of the corporate. the worth of the share of any company may be a function of its present and expected future earnings. Finance helps in defining policies and ways to maximize earnings.

Financial Management: Maximization of the economic welfare of its owners is that the accepted financial objective of the firm. Hence, the objectives of finance are to make the sure adequate and regular supply of funds to the business and supply a good rate of return to the suppliers of capital. Finance helps by ensuring efficient utilization of capital and available resources consistent with the principles of profitability, liquidity, and safety. It provides a particular system for internal investment, financing, and internal controls. and eventually attempts to attenuate the cost of capital by developing a sound and economical combination of corporate securities.

3 Responses to “What is Finance? Meaning, Definition & Features of Finance”

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