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32209354-Financial-Mgmt

32209354-Financial-Mgmt

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Published by Susheel Thakur

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Published by: Susheel Thakur on Feb 02, 2011
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09/09/2012

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1
PAPER – VI : FINANCIAL MANAGEMENTUNIT – ILESSON – 1FINANCE – AN INTRODUCTIONLESSON OUTLINE
 
Significance
 
Definition of Finance
 
Functions of Finance
 
Types of Finance
 
Business Finance
 
Direct Finance
 
Indirect Finance
 
Public Finance
 
Private Finance
 
Corporation Finance
 
Finance in Relation to otherAllied Disciplines
LEARNING OBJECTIVES
After reading this lesson youshould be able to
 
Understand the significance anddefinition of finance
 
Know the functions of finance
 
Identify the different types of finance
 
Describe this relationshipbetween finance with otherallied disciplines
 
2 
Significance
Finance is the life blood of business. Before discussing the nature and scope of financial management, the meaning of ‘finance’ has to be explained. In fact, theterm, finance has to be understood clearly as it has different meaning andinterpretation in various context. The time and extent of the availability of finance in any organization indicates the health of a concern. Everyorganization, may it be a company, firm, college, school, bank or universityrequires finance for running day to day affairs. As every organization previewsstiff competition, it requires finance not only for survival but also forstrengthening themselves. Finance is said to be the circulatory system of theeconomy body, making possible the required cooperation between theinnumerable units of activity.
Definition of Finance
According to F.W.Paish, Finance may be defined as the position of money at thetime it is wanted.In the words of John J. Hampton, the term finance can be defined as themanagement of the flows of money through an organization, whether it will be acorporation, school, bank or government agency.According to Howard and Upton, “finance may be defined as thatadministrative area or set of administrative functions in an organization whichrelates with the arrangement of each and credit so that the organization mayhave the means to carry out the objectives as satisfactorily as possible.
 
3In the words of Bonneville and Dewey, Financing consists in the raising,providing, managing of all the money, capital or funds of any kind to be used inconnection with the business.As put forth by Hurband and Dockery in his book ‘Modern CorporationFinance’, finance is defined as “an organism composed of a myriad of separateenterprise, each working for its own ends but simultaneously making acontribution to the system as a whole, some force is necessary to bring aboutdirection and co-ordination. Something must direct the flow of economicactivity and facilitate its smooth operation. Finance is the agent that producesthis result”.The Encyclopedia Britannica defines finance as "the act of providing themeans of payment." It is thus the financial aspect of corporate planning whichmay be described as the management of money.An analysis of the aforesaid definition, makes it clear that finance directsthe flow of economic activity and facilitates the smooth operation. Financeprovides the required stimulus for continued business operations of allcategories. Finance is essential for expansion, diversification, modernization,establishment, of new projects and so on. The financial policy of anyorganization to a greater extent, determines not only its existence, and survivalbut also the performance and success of that organization. Finance is requiredfor investment, purposes as well as to meet substantial capital expenditureprojects.
Functions of Finance
According to Paul G. Hasings, "finance" is the management of the monetaryaffairs of a company. It includes determining what has to be paid for and when,raising the money on the best terms available, and devoting the available funds

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