Finance: Finance" is a broad term that describes two related activities: the study of

how money is managed and the actual process of acquiring needed funds. Because
individuals, businesses and government entities all need funding to operate, the field
is often separated into three sub-categories: personal finance, corporate finance and
public finance.
Financial Management: Financial management is an integral part of overall
management. It is concerned with the duties of the financial managers in the business
firm. The term financial management has reholders.
Liquidity Decision
It is very important to maintain a liquidity position of a firm to avoid insolvency.
Firms profitability, liquidity and risk all are associated with the investment in current
assets. In order to maintain a trade off between profitability and liquidity it is
important to invest sufficient funds in current assets. But since current assets do not
earn anything for business therefore a proper calculation must be done before
investing in current assets.
Current assets should properly be valued and disposed of from time to time once they
become non profitable. Currents assets must be used in times of liquidity problems
and times of insolvency.
Career opportunities In Finance:
Capital Budgeting Analyst/Manager: The capital budgeting analyst/manager is
responsible for the evaluation and selection of proposed projects and for the allocation
of funds for these projects.
Credit Manager: The credit manager administers the firms credit policy by
analyzing or managing two basic activities: the evaluation of credit applications and
the collection of accounts receivable.
Financial Analyst: A financial analyst may be responsible for a variety of financial
tasks.

Primarily, the analyst is involved in preparing and analyzing the firms

financial plans and budgets. This function requires a close working relationship with
the accounting department.
Pension Fund Manager: manager the employees pension fund.
Project Finance Manager: Responsibilities include arranging financing for capital
expenditures that meet the firms capital-structure objectives.

Relationship between Accounting and Finance

Accounting and finance both are different subjects or field; however they both are
closely related to each other. While accounting is concerned with recording of
business transaction of a company and presenting it in the form of profit and loss
account to show the profit or loss of the company during a year and also it involves
preparation of balance sheet which reflects the financial position of the company at a
particular date.
Finance is a broader concept and it makes use of all the data which is presented in the
accounting like profit and loss, balance sheet, cash flow statement to make finance
related decision like how to raise money for future projects of the company, how to
utilize the resources of the company in order to efficiently and effectively produce the
good so that company makes profit. Finance therefore is a future looking concept
which makes use of past data in accounting to make decision related to future.
Without accounting data finance will find it difficult to make above decisions and also
accounting will not be effective if it is not used along with finance.

Relationship Between Finance and Economics:

Finance and economics are often taught as separate subjects, but they are interrelated
disciplines that influence one another in many ways.
Economics is a social science. It studies the production, consumption and distribution
of goods and services, as well as larger topics such as inflation, recession, and supply
and demand. It explains how a government taxes and spends. It teaches the impacts
that policy and events can have on business conditions, and it gives investors a tool to
use when analyzing companies and markets.
Careers in economics include teaching and research. Banks and other corporations
employ economists to forecast growth, inflation, interest rates and so on. Some
investors listen closely to what economists say about the markets, and others dont.
In many respects, finance is an offshoot of economics. Individuals with economic
backgrounds have made some of the most notable achievements in finance.
Finance entails the study of prices, interest rates, money flows and the financial
markets. Billions of dollars are at stake when it comes to pricing loans, investments
and insurance products. Finance provides the means to understand pricing and the

valuation of future cash flows. It also helps investors and business managers evaluate
proposals and allocate capital.
Agent and Agency Conflict
Agent: Agent are individual authorized by another person called principal ( owners or
shareholders), to act on the letters behalf.
Agency Problem: A conflict of interest inherent in any relationship where one party
is expected to act in another's best interests. The problem is that the agent who is
supposed to make the decisions that would best serve the principal is naturally
motivated by self-interest, and the agent's own best interests may differ from the
principal's best interests. The agency problem is also known as the "principalagent
problem."
Agency costs: cost that arises to minimize the agency problem is called agency cost.
Corporate governance: is the system of rules, practices and processes by which a
company is directed and controlled. Corporate governance essentially involves
balancing the interests of the many stakeholders in a company - these include its
shareholders, management, customers, suppliers, financiers, government and the
community. Since corporate governance also provides the framework for attaining a
company's objectives, it encompasses practically every sphere of management, from
action plans and internal controls to performance measurement and corporate
disclosure.
Corporate

social

responsibility:

often

abbreviated

"CSR,"

is

a corporation's initiatives to assess and take responsibility for the company's effects
on environmental and social wellbeing. The term generally applies to efforts that go
beyond what may be required by regulators or environmental protection groups.
References:http://www.managementstudyguide.com/finance-functions.htm.
http://www.managementstudyguide.com/finance-functions.htm
http://www.investopedia.com/terms/a/agencyproblem.asp.
http://www.investopedia.com/terms/c/corp-social-responsibility.asp