1. What is Finance and Financial Management?

Finance and Financial Management encompass numerous business and governmental

activities. In the most basic sense, the term finance can be used to describe the activities of a
firm attempting to raise capital through the sale of stocks, bonds, or other promissory notes.
Similarly public finance is a term used to describe government capital raising activities
through the issuance of bonds or the imposition of taxes. Financial management can be
defined as those business activities undertaken with the goal of maximizing shareholder
wealth, utilizing the principles of the time value of money, leverage, diversification, and an
investment’s expected rate of return versus its risk.
2. Why is it important for business students to study finance even if the topic is not
their major?
In simplest terms, financial accounting is the communication of information about a
business or other type of organization ( such as a charity or government ) so that individuals
can assess its financial health and prospects. Probably no single word is more relevant to
financial accounting than “ information.” Whether it is gathering financial information
about a specific organization, putting that information into a structure designed to enhance
communication, or working to understand the information being conveyed, financial
accounting is intertwined with information.
3. Why is it important to understand finance to run a successful business?
Business finance is the process of managing an organization’s money. The purpose of
business finance is also to ensure that a business has adequate operating funds and that is
spending and investing its money carefully, wisely, and effectively.