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Summary of Introduction to Finance

Finance is defined as the science and art of managing money, encompassing personal and business decisions related to spending, saving, and investing. Financial management aims to maximize shareholder wealth through effective planning, analysis, and risk management while balancing stakeholder needs. Firms are responsible for satisfying customers, treating employees well, maintaining good relationships with creditors and suppliers, and complying with legal and ethical standards.

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Lloyd Gabriel Poligrates
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2 views

Summary of Introduction to Finance

Finance is defined as the science and art of managing money, encompassing personal and business decisions related to spending, saving, and investing. Financial management aims to maximize shareholder wealth through effective planning, analysis, and risk management while balancing stakeholder needs. Firms are responsible for satisfying customers, treating employees well, maintaining good relationships with creditors and suppliers, and complying with legal and ethical standards.

Uploaded by

Lloyd Gabriel Poligrates
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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**Key Details**:

1. **Definition of Finance (Gitman and Zutter, 2012)**:

- Finance is the science and art of managing money.

- At the personal level, it involves decisions on spending, saving, and


investing earnings.

- In business, it covers decisions on raising money, investing to earn


profits, reinvesting profits, or distributing them to investors.

2. **Scope of Finance**:

- Raising and allocating resources efficiently to achieve business goals.

- Includes financial management, investment studies, and market analysis.

- Funds are needed for operations, expansion, equipment replacement,


investments, and internal growth.

3. **Financial Management (Cayanan and Borja, 2017)**:

- Focuses on maximizing shareholder wealth.

- Involves planning, analysis, utilization, and acquisition of funds.

- Includes risk and return management with thorough planning and


analysis to reduce risks and ensure returns.

4. **Goal of Financial Management**:

- Maximize shareholder wealth by increasing firm value and investor


returns.

- Attract more investors, generate funds, and create jobs.

- Requires balancing the needs of stakeholders (customers, employees,


creditors, suppliers, government, and the environment).

5. **Responsibilities of Firms**:
- Satisfy customers to gain profit.

- Treat employees well to enhance productivity and trustworthiness.

- Pay creditors and suppliers on time to maintain good relationships.

- Comply with government and environmental requirements to avoid legal


and ethical issues.

6. **Activities in Financial Management**:

- Planning, organizing, controlling, and directing fund utilization.

- Activities should align with strategic plans and include monitoring and
evaluation.

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