INTRODUCTION TO FINANCIAL STATEMENT

FINANCE:

 Derived from the Latin word finer, meaning “to end” or “to pay”.
 The art and science of managing money.
It is the allocation of scarce resources which includes money.

IMPORTANCE OF FINANCE

Shetty et al (1995) Viewed finance as the operational or practical side of economics, the practical
science of the production and distribution of wealth.

 Production: acquisition while

 distribution: utilizationSaldana (1997)
Finance is the efficient allocation of scarce resources

Finance is the efficient acquisition, distribution/allocation, and utilization scarce money/fund

resources.

Medina (2007) Finance is the study of the acquisition and investment of cash for the purpose of
enhancing value and wealth.

Allocation-determining where to use funds currently available to the firm

Acquisition -obtaining funds from the right sources at the right time

Utilization -the using of funds

Funds- Needed to finance operations of people and organizations

Primary Goals of Business Finance

1. To earn profit
2. To increase its own value as an economic identity
3. To improve the quality of life in the community

FUNCTIONS OF BUSINESS FINANCE

1. Allocation of financial resources

2. Procurement of funds
3. Efficient and effective utilization of financial resources