2А. What Is Finance?
1. The field of finance is broad and dynamic. It directly affects the lives of every person and every organization, financial and non-financial, private or public, large or small, profit-seekingor non-profit.Finance can be defined as the art and science of managing money. All individuals and organizations earn or raise moneyand spend or invest money.Finance is concerned with the process, institutions, and markets, the instruments involved in the transfer of money among and between individuals, businesses and governments.
2. Finance can be defined at both the aggregate or macro level and the firm or micro level. Finance at the macro level is the study of financial institutions and financial markets and how they operate within the financial systems. Finance at the micro level is the study of financial planning, asset management,and fund raisingfor business firms and financial institutions.
3. Finance has its origin in the fields of economics and accounting.Economists use a supply-and-demand frameworkto explain how the prices and quantities of goods and services are set in a free-enterpriseor market-driven economic system. Accountants provide the record-keeping mechanism for showing ownership of the financial instruments used to facilitate the flow of financial funds between savers and borrowers. Accountants also record revenue, expenses,and profitabilityof organizations involved in the production and exchange of goods and services.
4. Large-scale production and a high degree of specialization of labour can function only if there exists an effective means of paying for productive resources and final products. Business can obtain the money it needs to buy capital goodssuch as machinery and equipment only if the institutions and markets have been established for making savings availablefor such investment. Similarly, the federal government and other governmental units can carry out their wide range of activities only if efficient means exist for raising money, for making payments, and for borrowing.
5. Financial markets, institutions or intermediaries,and business financial management are basic elements of well-developed financial systems. Financial markets provide the mechanism for carrying out the allocation of financial resourcesor funds from saversto borrowers.Financial institutions such as banks and insurance companies,along with other financial intermediaries, facilitate the flow of funds from savers to borrowers. Business financial management involves the efficient use of financial capital in the production and exchange of goods and services. The goal of the financial manager in a profit-seeking organization is to maximize the owners' wealth through effective financial planning and analysis, asset management, and of financial capital. The same financial management functions must be performed by financial managers in not- for-profit organizations,such as governmental units or hospitals, in order to provide the desired level of service at acceptable costs.
Task 5. Which of the following do you think is true or false? Use the expressions given below.
To my mind... I quite agree that... I fully disagree… It seems to me ... Of course, it is true... that... According to... Certainly it is... Far from it... I think/believe... Absolutely/precisely so... I don't think so...
1. Finance can be defined as the art and science of allocation money.
2. Finance at the macro level is the study of financial planning and fund raising for firms.
3. Finance is connected with economics.
4. Accountants use a supply-and-demand framework to explain the set of the prices.
5. Economists record revenue and expenses of organizations.
6. Well-developed financial system consists of financial markets, institutions or intermediaries and business financial management.