In most of the cases by the word 'finance' we mean the task of 'raising of funds'. In this case 'finance' is used as a 'transitive verb'. But the word 'finance' also can be used as a noun. In case of noun 'finance' is a subject where matters related to financing are discussed.
In business the task of fund raising is indicated by 'finance'. In the early stage of it's evolution the main or only function of finance was raising of fund. But with the expansion of business sector the scope of finance also expanded. Now by the term finance we mean a complete package of investment planning, investment, fund raising, assets & risk management, preservation and distribution of profit and all other functions required for optimum investment management.
The explanation of Oxford Dictionary regarding finance is: ''Provide capital for a person or enterprise''.
Professor Lawrence J Gitman advocated that, ''finance is the art and science of managing money''. Professor also mentioned the valuable aspect of finance as 'managing money'. That is money must be raised, protected, invested, operated and allocated to different heads to ensure desired goal of a business. Thus in short 'management of money' can be safely termed as the core concept of finance.
Finance and Goal Business
We can raise questions: what is the goal of a business concern? What is the role of finance in achieving the goal of the business. Infect there is no significant contradiction between the goal of a business and the goal of finance. Both are complementary to each other. Thus proper selection of sources of capital and proper investment decision are essential for achieving desired goal of the business. The relationships of interdependence between finance and goal of business can be shown by the above image.
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