Finance Function
Meaning and Definition
The word finance comes from the Latin word finis. Finance is the art and science of handling money. It is
the management of money. It is the management of flows of money through an organization.
Finance function is needed in all type of organizations. Of all business functions ,finance function is the
most important one. Finance function is concerned with the evaluation of how funds are procured and
used.
Different writers have defined the term business finance or finance function differently. These
definitions may be grouped in to the following three categories.
First Approach: According to first approach, the finance function in a business may be defined as the
task of providing funds needed by the enterprise on the most favourable terms. In the words of
F.W.Paish, “In a modern money using economy, finance may be defined as the provision of money at
the time it is wanted”. This approach is concerned with procurement or raising of funds and hence this is
a narrow approach.
Second Approach: According to second approach , finance is concerned with cash, Finance function is
related to every activity or transaction in the business. Mr.Haunt, Willium Donaldson and J.J.Hampton
followed this approach. According to J.J.Hampton, “The term finance can be defined as the management
of the flows of money through an organization, whether it will be a corporation, school, bank, or Govt.
Agency. This is a broad approach.
Third Approach: This is the modern approach and most acceptable one. According to this approach ,
finance function or business finance is concerned with procurement of funds and their effective
utilisation in the business. The modern scholars like Howard and Upton, Weston, Brigham, Soloman
Ezra, Van Horne etc. believed in this approach. According to them the finance function covers not only
the raising of funds but also their effective utilisation in the business. This approach is related with the
financial decision making i.e. The financial manager should consider the alternative uses and sources of
funds.
From the above discussion it can be concluded that finance function is concerned with procurement of
funds from various sources to utilise them effectively. In short , finance function is defined as provision
of money at the time when it is needed.
Meaning and Definition
The word finance comes from the Latin word finis. Finance is the art and science of handling money. It is
the management of money. It is the management of flows of money through an organization.
Finance function is needed in all type of organizations. Of all business functions ,finance function is the
most important one. Finance function is concerned with the evaluation of how funds are procured and
used.
Different writers have defined the term business finance or finance function differently. These
definitions may be grouped in to the following three categories.
First Approach: According to first approach, the finance function in a business may be defined as the
task of providing funds needed by the enterprise on the most favourable terms. In the words of
F.W.Paish, “In a modern money using economy, finance may be defined as the provision of money at
the time it is wanted”. This approach is concerned with procurement or raising of funds and hence this is
a narrow approach.
Second Approach: According to second approach , finance is concerned with cash, Finance function is
related to every activity or transaction in the business. Mr.Haunt, Willium Donaldson and J.J.Hampton
followed this approach. According to J.J.Hampton, “The term finance can be defined as the management
of the flows of money through an organization, whether it will be a corporation, school, bank, or Govt.
Agency. This is a broad approach.
Third Approach: This is the modern approach and most acceptable one. According to this approach ,
finance function or business finance is concerned with procurement of funds and their effective
utilisation in the business. The modern scholars like Howard and Upton, Weston, Brigham, Soloman
Ezra, Van Horne etc. believed in this approach. According to them the finance function covers not only
the raising of funds but also their effective utilisation in the business. This approach is related with the
financial decision making i.e. The financial manager should consider the alternative uses and sources of
funds.
From the above discussion it can be concluded that finance function is concerned with procurement of
funds from various sources to utilise them effectively. In short , finance function is defined as provision
of money at the time when it is needed.
