Meaning And Scope Of Finance

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Meaning Of Finance

The term finance should be understood in two perspectives - finance as a resource and finance as a discipline. Finance, as a resource, refers to monetary means of financing assets of an entity. Finance as a discipline or subject of study, describes how individuals , governments and corporate organizations manage the flows of money through an organization. In other words, finance tells how people make decisions about the collection and allocation of resources in organizations like corporation, school, bank or government agency. Therefore, it is important for all individuals, businesses, governments and non-government organizations to appreciate the significance of finance in their day-to-day businesses.

Finance was a branch of economics till the closure of nineteenth century. Finance as a separate academic discipline is still evolving. Practicing managers and academicians have been contributing in its expansion and enrichment.

Scope Of Finance
At the present state, the academic discipline of finance includes the following specialized areas in its scope.

1. Public Finance
Like business organizations, governments(local, state or federal) raise and spend large sum of money, but unlike business organizations, they pursue non-profit goals. To deal with governmental financial matters, a separate and specialized field of finance has emerged as public finance.

2. Securities And Investment Analysis
This area is of interest to individuals and institutional investors. It covers mainly measurement of risk and return on investment in securities.

3. Institutional Finance
Institutional finance deals with issues of capital formation and the organizations that perform the financing function of the economy. Therefore, it mainly studies saving and capital formation and institutions involved in this process such as banks, insurance companies, provident and pension funds, etc.

4. International Finance
International finance studies economic transactions among nations, corporations and individually internationally. It is concerned with flows of money across international boundaries.

5. Financial Management
Business firms face problems dealing with acquisition of funds and optimum methods of employing the funds. Thus, financial management studies financial problems in individual firms, seeks low-cost funds and seeks profitable business activities.

The popularity of finance is increasing day by day. It is because the study of finance offers rewarding careers opportunities mainly in above areas.

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