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 18 th century, it was adapted by English speaking communities to mean the management o f money. Since then, it has found a permanent place in the English dictionary. Toda y, 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 ty pe 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 i s 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 o f currency notes, other valuables, etc.). Finance is a prerequisite for obtainin g physical resources, which are needed to perform productive activities and carr ying business operations such as sales, pay compensations, reserve for contingen cies (unascertained liabilities) and so on. Hence, Finance has now become an organic function and inseparable part of our da y-to-day lives. Today, it has become a word which we often encounter on our dail y basis. 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 con verted into cash." 2. According to Experts, "Finance is a simple task of providing the necessary funds (money) required by t he business of entities like companies, firms, individuals and others on the ter ms 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 inv olves cash directly or indirectly." 4. According to Academicians, "Finance is the procurement (to get, obtain) of funds and effective (properly pl anned) utilisation of funds. It also deals with profits that adequately compensa te for the cost and risks borne by the business." Features of Finance The main characteristics or features of finance are depicted below. 1. Investment Opportunities 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, ac quiring commercial assets, etc.), 2. Carrying on business activities (like manufacturing, trading, etc.), and 3. Acquiring financial securities (such as shares, bonds, units of mutual f unds, etc.). Investment opportunities are commitments of monetary resources at different time s 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 resour ces most efficiently under the conditions of cut-throat competitive markets. Profitable opportunities shall be a vision. It shall not result in short-term pr

ofits at the expense of long-term gains. For example, business carried on with non-compliance of law, unethical ways of a cquiring the business, etc., usually may result in huge short-term profits but m ay also hinder the smooth possibility of long-term gains and survival of busines s in the future. 3. Optimal Mix of Funds Finance is concerned with the best optimal mix of funds in order to obtain the d esired 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 prof its 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 organisation or wo rkplace. Internal controls are set of rules and regulations framed at the inception stage of the organisation, and they are altered as per the requirement of its busines s. However, these rules and regulations are monitored at various intervals to accom plish the same which have been consistently followed. 5. Future Decision Making Finance is concerned with the future decision of the organisation. is an indicator of growth and good returns. This is possible only w A "Good Finance ith the good analytical decision of the organisation. However, the decision shal l be framed by giving more emphasis on the present and future perspective (econo mic conditions) respectively. Conclusion on Finance Finance to be more precise is concerned with the management of, 1. Owned funds (promoter contribution), 2. Raised funds (equity share, preference share, etc.), and 3. Borrowed funds (loans, debentures, overdrafts, etc.). At the same time, Finance also encompasses wider perspective of managing the bus iness generated assets and other valuables more efficiently.