What Is Finance - Part 1

By Author: Aravind Kumar
Total Articles: 12
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The act of providing money in the form of a loan or capital is known as finance and is something that everyone from governments to the private individual uses. This is part of the area of economics that focuses on the strategies and methods of looking after money and other financial assets. It can be also defined as the management of funds and capital required by a business and private activities. Large companies with even larger portfolios will employ a finance manager to help control their assets.This involves lending money to another company or individual, either from internal resources or externally. The word Optimizing may sound strange but it refers to taking measures that minimize the cost of financing while simultaneously attempting to maximize the profits out of the employed finance. Bad debts are poor finance management where rules have not been followed; the result of this is depressed markets, low production and a cash crisis. For this reason, a finance manager is expected to be very judicious in either the use of available funds or allocation for expenses.It is not uncommon to hear finance managers referred to as ...
... bean counters as they are looking at immediate returns and initial costs against the potential at a later stage. Finance managers are the pessimists whereas sales managers are the optimists who look to the future and not to the past! For most small business owners there is not a clear distinction between personal and business which often leads to the funds being used in areas that are not part of the arrangement. Lenders are not very happy about this type of situation because they like to know exactly what they are funding.This may cause some concern amongst small business owners but they should train themselves to be more focused on their business which should in turn create a better frame of mind for the future. Fortunately, small businesses can always use the more approved methods of friends or relations to help provide finance. Finance managers can help improve their company's profits by using external sources which also lessens the risk on them at the same time. The famous comedian Bob Hope best summed up the subject when he once said; a bank is a place that will lend you money but only if you can prove that you don't need it.

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