Question

Explain the Nature and Significance of finance? 

Answer 1

Meaning: - 
In Sanskrit saying 'Artha Sachivah' which means "Finance is the supreme controlling factor" which brings the significance of 'finance. Finance is what finance does. 

1. Finance may be defined as the provision of money at the time it is wanted. It is necessary throughout the activities of promotion, organization and regular operation of a business. It must take care of all financial needs of business.
2. Finance holds the key to all business activities. Business activity cannot be pursued without financial support. Finance contributes to different business functions such as purchasing, production, marketing and so on. It administers every business activity.
3. Finance enables the business to its obligation promptly and without any difficulty. Finance is accepted as a weapon to pay its bills promptly.
4. Finance is concerned not only with measuring profitability but setting minimum standards for profitability. It is also concerned with measuring cost of capital for any given industry.
5. Finance is required to generate finance. Its generation depends upon coordination of different business functions. The financial proposition would be successful if it is used effectively in different business activities.
6. Thus finance is said to be 'circulatory system' of economic body. It makes possible co-operation between many units of business activity.
7. Therefore finance is a 'specialized operation'. It is an inseparable part of business administration. Finance has been described in several ways; it is related to money and money measurement. In fact, it is strength of business activity.