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The Meaning Of The Term Finance

Jun 17, 2008
When a person refers to the term finance they are refering to when money is provided for a commercial activity either public, personal, business, government or individuals. As a branch of a broader subject referred to as 'economics', finance can also be viewed as a method of managing assets of people, businesses or government entities.

Private corporations in addition to the public sector use the term when they engage in discussions of business matters either of their own or others assets. Management of finance has also developed into a specialized branch within in businesses and governments or with in the financial sector and is usually carried out by finance managers who hold degrees in finance and economics and are experts in their fields.

The responsibility these managers have is to improve company profits by using their own resources by providing funds to another which then must be paid back. The whole basis of optimization is to enable the maximum return from your finance whilst ensuring the cost to arrange it stays at a minimum.

Because the world revolves around finance, when there is a problem with bad debts and depressed markets, production and sales start to decrease as it is a very fine line between being in the green and being in the red. The finance manager's job is to maximize profits whilst keeping the risk to a minimum so you can understand why stress just naturally goes with the job of finance manager.

It has been said by a number of people that finance managers can often be short sighted at times as they sometimes miss seeing the long term projections. Unlike the sales managers who would like to invest in the future by product development, finance managers are rather skeptical of financing a project whose benefits lie in the future; even though their management governs future outcomes too.

For most small business owners there is not a clear distinction between personal and business finances which often leads to moneys being spent in areas that are not part of the loans terms. Most lenders may put terms in the contract to call in the loans balance if they feel they have been deceived this way because they are unsure whether the business interest of the loan is being served and hence whether they will repaid.

This may cause honest concern amongst small business owners but they should discipline themselves to be more focused on their business finances and not personal enjoyment which should in turn create a better state of business for their future. Also, small businesses can always use other methods of borrowing money from friends or relations to help provide finance.

Of course lenders are out to make a profit and business loans can be expensive, a situation which is partly designed to increase the finance company's return and to offset any potential loss on return. Banks have always been known as institutions that prefer to lend money to those that least need it which is why if you are already wealthy and require a loan it is often arranged very easily and at a preferential rate of interest.
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