Question: Explain fully the concept of finance.
Q. What is Finance? Meaning
Before we begin, first let’s understand the origin of word “FINANCE.” If we trace the origin of finance, there is evidence to prove that it is as old as human life on earth. The word finance was originally a French word. In the 18th century, it was adopted by English speaking communities to mean “the management of money.” Since then, it has found a permanent place in the English dictionary. Today, finance is not merely a word else has emerged into an academic discipline of greater significance. Finance is now organized as a branch of Economics.
Furthermore, the one word which can easily replace finance is “EXCHANGE.” Finance is nothing but an exchange of available resources. Finance is not restricted only to the exchange and/or management of money. A barter trading system is also a type of finance. Thus, we can say, Finance is an art of managing various available resources like money, assets, investments, securities, etc.
At present, we cannot imagine a world without Finance. In other words, Finance is the soul of our economic activities. To perform any economic activity, we need certain resources, which are to be pooled in terms of money (i.e. in the form of currency notes, other valuables, etc.). Finance is a prerequisite for obtaining physical resources, which are needed to perform productive activities and carrying business operations such as sales, pay compensations, reserve for contingencies (unascertained liabilities) and so on.
Hence, Finance has now become an organic function and inseparable part of our day-to-day lives. Today, it has become a word which we often encounter on our daily basis.
Q. What is 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 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 favorable 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) utilization of funds. It also deals with profits that adequately compensate for the cost and risks borne by the business.”