 What is finance?

Finance addresses the ways in which organizations (and individuals) raise and allocate monetary
resources over time, taking into account the risks entailed in their projects; Managerial finance, then,
emphasizes the managerial application of these finance techniques and theories.

 Types of Finance

Individuals, businesses, and government entities all need funding to operate. Therefore, the finance
field includes three main subcategories:

 Personal finance
 Corporate finance
 Public (government) finance

1. Personal Finance: Personal finance is specific to an individual’s situation and activity. Therefore, related
financial strategies depend largely on a person’s earnings, living requirements, goals, and desires. Financial
planning involves analyzing the current financial position of individuals to formulate strategies for
future needs within financial constraints.

2. Corporate Finance: Corporate finance refers to the financial activities related to running a corporation. A
division or department usually is set up to oversee that financial activities.For example; a large company may
have to decide whether to raise additional funds through a bond issue or stock offering. Investment banks may
advise the firm on such considerations and help it market the securities.

3. Public Finance: Public finance includes taxing, spending, budgeting, and debt-issuance policies that affect
how a government pays for the services it provides to the public. It is a part of fiscal policy.

 Goal of Finance

However, two of the most common goals of financial management are to maximize profits and reduce
risk. This can help ensure that the company can generate maximum returns for investors and sustain
itself long-term. Wealth Maximization consists of activities that manage the financial resources to
increase the stakeholders' value. In contrast, Profit Maximization consists of the activities that manage
the financial resources intending to increase the Company's profitability.

 What is the function of the business?

Business functions are the activities carried out by an enterprise; they can be divided into core
functions and support functions.
Core business functions are activities of an enterprise yielding income: the production of final goods or
services intended for the market or for third parties.
Support functions are functions which support and indirectly contribute to the main purpose and
include, but are not limited to, human resources, training and development, salaries, IT, auditing,
marketing, legal, accounting/credit control and communications.
  What is the function of financial manager?

Financial managers use financial statements and other information prepared by accountants to make
financial decisions. Financial managers focus on cash flows, the inflows and outflows of cash. They plan
and monitor the firm’s cash flows to ensure that cash is available when needed. The Financial
Manager’s Responsibilities and Activities are also called as function of financial manager.
Financial managers have a complex and challenging job. They analyze financial data prepared by
accountants, monitor the firm’s financial status, and prepare and implement financial plans. One day
they may be developing a better way to automate cash collections, and the next they may be analyzing
a proposed acquisition. The key activities of the financial manager are:

1. Financial planning: Preparing the financial plan, which projects revenues, expenditures, and
financing needs over a given period?

2. Investment (spending money): Investing the firm’s funds in projects and securities that provide high
returns in relation to their risks.

3. Financing (raising money): Obtaining funding for the firm’s operations and investments and seeking
the best balance between debt (borrowed funds) and equity (funds raised through the sale of
ownership in the business).

 What is the financial statement and what is the use financial statement?

Financial statements (or financial reports) are formal records of the financial activities and position of a
business, person, or other entity. Relevant financial information is presented in a structured manner and
in a form which is easy to understand.

Uses of Financial Statements

Following are some of the uses of financial statements:

1. Determine the financial position of the business: The most important use of the financial
statements is to provide information about the financial position of the business on a given
date. This piece of information is used by various stakeholders in order to take important
decisions regarding the business.
2. To obtain credit: Financial statements present the picture of the business to the potential
lenders and this information can be used by them to provide additional credit for business
expansion or restrict the credit so as to start recovery.
3. Helps investors in decision making: Financial statements contain all the essential information
required by the potential investors for determining how much they want to invest in the
business. It is also helpful in decision making regarding the price per share that the investors
want to invest. A sound financial statement is the key to obtaining investments.
4. Helps in policy making: The financial statements help the government in deciding the taxation
and regulations policies based on the way the company is running its operations. The
government bodies can tax a business based on the level of their income and assets.
5. Useful for stock traders: Financials statements help stock traders with the knowledge of the
situation the company is in and therefore adjusting their quotes accordingly.