1.0 INTRODUCTION
The subject of finance is not only discussed, but is part of all disciplines and all facets of socio-economic activities of humans. Finance has evolved to assume a very important position in the decisional process of households, businesses, governments and other non-business organisations. No financial decision can be efficiently and effectively implemented without financial structure.In this introductory Unit, we shall attempt to answer the following questions:
Finance has been defined in different ways. Each definition however reflects the perception of finance relative to its role and scope. However, it may not be possible to give a precise and very comprehensive definition to such a wide, complex and important subject which is of interest to everybody.
Webster’s third International Dictionary, for example, defines finance as “the system that includes the circulation of money, the granting of credit, the making of investments and the provision of banking facilities.” This definition gives an indication to the fact that finance is a system by itself and thus a broad field of activities at the centre of economic operations or social activities with economic implication.
The Shorter Oxford English Dictionary defines finance as “to lend, to settle debt, pay ransom, furnish, and procure, etc. --- the management of money --- the science of levying revenue in a state, corporation --- the provision of capital.” This definition looks at finance as a science which applies to both the public and private sectors.
The Encyclopedia of Banking and Finance has however given a broader definition of finance. Its definition is classified into three categories as follows:
Christy and Roden (1973) tried to narrow the definition of finance by defining it as the study of the nature and use of the means of payment. This definition has tried to avoid the mention of money as the centrepiece of finance. This is because finance can equally take place without money as its main feature.
Lastly, Gitman (2000) defines finance as the art and science of managing money. In contrast with Christy and Roden (1973), money is mentioned here. Virtually all individuals and organisations earn or raise money and spend or invest money. Finance is concerned with the process, institutions, markets, and instruments involved in the transfer of money among and between individuals, businesses and governments.
What is now known as finance evolved as a branch of economics in the later part of the 19th Century. Since then, finance has exerted the most important influence on technological and industrial development, the turnaround of depression or recession, consumer behaviour, administrative strategies and styles of governments and research and development etc.
- What is finance?
- How is finance related to other disciplines?
- Explain financial structure in an organization
2.0 OBJECTIVES
After studying this unit, you should be able to:- define finance clearly;
- explain the concept of financial structure in an organization management;
3.0 MAIN CONTENT
3.1 Definition of Finance
The field of finance is broad and dynamic. It directly affects the lives of every person and every organisation. There are many areas for study and large number of career opportunities available in the field of finance.Finance has been defined in different ways. Each definition however reflects the perception of finance relative to its role and scope. However, it may not be possible to give a precise and very comprehensive definition to such a wide, complex and important subject which is of interest to everybody.
Webster’s third International Dictionary, for example, defines finance as “the system that includes the circulation of money, the granting of credit, the making of investments and the provision of banking facilities.” This definition gives an indication to the fact that finance is a system by itself and thus a broad field of activities at the centre of economic operations or social activities with economic implication.
The Shorter Oxford English Dictionary defines finance as “to lend, to settle debt, pay ransom, furnish, and procure, etc. --- the management of money --- the science of levying revenue in a state, corporation --- the provision of capital.” This definition looks at finance as a science which applies to both the public and private sectors.
The Encyclopedia of Banking and Finance has however given a broader definition of finance. Its definition is classified into three categories as follows:
- to raise money necessary to organise, re-organise or expand an enterprise whether by sales of stocks, bonds, notes, etc.
- a general term to denote the theory and practice of monetary credit, banking and promotion of operations in the most comprehensive sense. It includes money, credit, banking, securities, investment, speculation, foreign exchange, promotion, underwriting brokerage trusts, etc.
- originally applied to raising money by taxes or bonds issues and the administration of revenues and expenditure by government.
Christy and Roden (1973) tried to narrow the definition of finance by defining it as the study of the nature and use of the means of payment. This definition has tried to avoid the mention of money as the centrepiece of finance. This is because finance can equally take place without money as its main feature.
Lastly, Gitman (2000) defines finance as the art and science of managing money. In contrast with Christy and Roden (1973), money is mentioned here. Virtually all individuals and organisations earn or raise money and spend or invest money. Finance is concerned with the process, institutions, markets, and instruments involved in the transfer of money among and between individuals, businesses and governments.
What is now known as finance evolved as a branch of economics in the later part of the 19th Century. Since then, finance has exerted the most important influence on technological and industrial development, the turnaround of depression or recession, consumer behaviour, administrative strategies and styles of governments and research and development etc.
Social Plugin