Understanding

Finance
IT’S ALL ABOUT THE MONEY! MONEY! MONEY!!!!!
Finance Unraveled

 It is defined as both a science and an art of correct application of

the economic and accounting concepts and principles that define
the system, structure and process of management, allocation and
utilization of financial resources, investments, and expenditure.
Finance Key Concepts Continued

1. It is Both Science and Art

2. It is the Application of economic and accounting concepts and
principles
3. It is a System, structure and process
4. It the Management, allocation and utilization of financial
resources, investment and expenditure
Finance Key Concepts

1. Both Science and Art

 Science because it is based on the current facts and truth.
 Art because it is ever evolving towards more complexity.
2. Application of economic and accounting concepts and principles
 Finance is PART of Economics and Accounting works in hand with
Finance.
 Economics as a social science is concerned with efficient utilization of
scarce resources to satisfy human needs and wants.
 Accounting is an art of recording business transaction and deals with the
preparation of financial statement.
Finance Key Concepts Cont.

3. System, structure and process

 The field of finance provides and clearly defines a systematic,
structured and procedural mechanism on the various financial
activities affecting the business.
 System connotes that the financial activities of the business are
properly coordinated with the whole structure.
Finance Key Concepts Cont.

4. Management, Allocation and Utilization

 Management implies the efficient handling of business resources of
business resources, particularly those that are financial in nature.
 Allocation connotes the wise distribution of financial resources to
the different functional areas, the proper assignment of funds
between current and non current assets, and the correct sourcing of
funds based on the concepts of risk and return.
Finance Key Concepts Cont.

5. Financial resources, Investments and Expenditure

 Financial resources – refers to the funds of a business which are
provided by the owner or by the creditors.
 Financial investments – are resources that are expected to
provided
 Financial expenditures of a business may cover the operating
expenditures and the capital expenditures.