Academic Essay

1450 WordsMar 28, 20146 Pages
NATURE AND SCOPE OF BUSINESS FINANCE Finance emerged as a separate field of study in early 20th Century essentially on legalistic matters relating to mergers, consolidations, formation of new firms and various types of investment securities. The main concern was the acquisition of capital for the expansion to cope-up with the industrialization process. In 1950’s the increasing acceptance of present value concept s encouraged financial managers to explain their responsibilities and become concerned with the selection of capital investment projects Today external factors have an increasing impact to a financial manager .These include: * Heightened corporate competition * Technological change * Volatility in inflation and interest rates * Worldwide economic uncertainty * Fluctuating interest rates that affect the acquisition of cap[ital (loans and debentures) * Tax law changes and ethical considerations over certain financial dealings. As a result, finance is required to play an evermore vital role within an organization and as such a finance manager is seen as team player in the overall effort of a team player in the overall effort of a company to create value (maximization of shareholders wealth) Thus financial manager must have flexibility to adapt to changing external environment in order for the firm to survive (flexible in a cost beneficial manner) Definition of finance Finance is a body of facts, principles and theories dealing with the raising and using of money by individuals, businesses and governments. -It also includes the study of financial markets and institutions as well as the activities of the government with emphasis on those aspects relating to company and individual businesses. -Finance deals with how individuals divide their income between consumption and investment; and to business organizations due to recourse problems

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