DEFINITION, ORIGINS AND PRINCIPLES OF FINANCE

Jun 18th, 2015
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What is Finance: FINANCE is the study of how individuals, institutions , governments, business entities acquired, use and manage money and other financial assets. In short, it is the study of sources and uses of money and other financial assets including its management.

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What is FinanceFINANCE is the study of how individuals, institutions , governments, business entitiesacquired, use and manage money and other financial assets.In short, it is the study of sources and uses of money and other financial assets including itsits management.Origins of Finance-finance traces its roots in economics and accounting. Economists use a supply and demandframework to explain how the prices and quantities of goods and services are determined ina free market economic system. Accountants provide the record-keeping mechanism forshowing ownership of the financial instruments used in the flow of financial funds amongdepositors, investors and borrowers.4 concepts (pillar) or principles of finance1 Time value of money - the value of money or a peso today is worth more than a peso at the end of 1 year2 Risk or Return - higher returns are expected for taking more risk or high yield investmentsis equated with high risk while low-yield investments means low risk involved3 Financial Markets -efficient in pricing securities; as new information is available in the market,prices quickly change to reflect that information.4 Reputation matters - individuals and business entities has their own ethical behavior, it ishow they treat other legally, fairly and honestly. They must have the trust and confidenceof their customers, employees , owners as well as the community and society within whichthey operate.Learning Objectives of Finance-to make informed eco

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