FINANCE

CONCEPT
The concept of finance comes from the French word finance. The term refers to the
analyses, techniques and decisions taken, in a given period of time, by the state,
companies or private individuals, for the use and management of money and other
assets. This is a branch of economic sciences.

There are those who define finance as an art since it is very complex to achieve a balance
between money coming in, spending it, without forgetting the risks involved in investing.
To name a few basic issues that are taken into account in finances are how much to save,
spend, invest, lend and what risk can be taken.

There are several ways to classify finances, one of them is according to who will use them
and what their objectives are. If it is the case of a state, they will be called public finances,
if for private use they will be called personal and if they are used by companies they will
be called corporate.

In the last case mentioned, companies have as their main objective to increase their profits,
for which they require investment and financing. The way to accomplish this task is
through the appreciation of your actions. This type of finance is usually related to
investment banking. Bankers take into account the shortcomings of corporations and try to
solve them by transferring capital. In this way certain associations often arise. Personal
finance is related to expenses, income, savings, investments, risks and even speculation, but
on a much smaller scale, it is usually related to families. There are those who consider that
in many cases personal finances are of great importance since in a large percentage the
problem does not lie in low income but in failures when managing it and the imbalance
between liabilities and assets.

Finally, public finances must be defined. As already mentioned, those who manage these
finances are the states. The elements taken into account are public expenditure and income,
both external and internal debt, expenditure on goods and services produced by the states
and in parallel to these. States must be very cautious in their fiscal policies, since they have
a direct impact on the macroeconomy, whether on consumption, investment or savings, not
only of citizens, but also of large companies. States can choose to have deficit, surplus or
equilibrium balances, meaning that the result between income and expenditure is negative,
positive or equal to zero. In the first case, companies gain a certain capacity to save and
invest, in the second case, states increase their capacity to invest and save.

DEFINITION OF FINANCE, ACCORDING TO VARIOUS

AUTHORS.

 Simón Andrade defines the term finance in the following ways:

 1) "Area of economic activity in which money is the basis of various
achievements, whether these are investments in the stock market, real
estate, industrial companies, construction, agricultural development, etc."

2) "Area of economics in which the functioning of capital markets and the

supply and price of financial assets are studied."

 According to Bodie and Merton, finance "studies the way in which scarce
resources are allocated over time."
 For Ferrel O. C. and Geoffrey Hirt, the term finance refers to "all activities
concerned with the raising of money and its effective use."
 The author Alfonso Ortega Castro defines Finance as: “The discipline that, with
the help of others, such as accounting, law and economics, tries to optimize the
management of the human and material resources of the company, in such a
way that, without compromising its free administration and future development,
it obtains a maximum and balanced benefit for the owners or partners, the
workers and society.”
 The author Guadalupe Ochoa Setzer defines Finance as: “The branch of
economics that is related to the study of investment activities in both real and
financial assets and their administration.
 According to the dictionary of the Royal Spanish Academy (RAE), the
term finance comes from the French word finance and refers to the
obligation that a subject assumes to respond to the obligation of another
person. The concept also refers to funds, assets and public finances.
 According to Paul Lira Briceño: Finance is the set of activities that
help manage money efficiently, over time and under risk
conditions, with the ultimate goal of generating value for
shareholders.
 David Wong Cam: Finance means a process that involves the efficient management of a
company's resources, and the knowledge and management of the relationships between
the capital market and the company. Finance constitutes a balance between liquidity, risk
and profitability.

Corporate finance, the central theme of this book, analyzes the process that relates the
capital market with companies.

 Alfonso Ortega Castro defines finance as: 'The discipline that, with the help of others, such
as accounting, law and economics, tries to optimize the management of the company's
human and material resources, in such a way that, without compromising its free
administration and future development, it obtains a maximum and balanced benefit for the
owners or partners, the workers and society.'
 Meybol Baca, William Moreno, Abner Romero, Anfrony Membreño 'Short and Medium Term
Finance'. Finance is a branch of economics that studies how a company, individual or the
State obtains and manages the funds it needs to meet its objectives and the criteria with
which it disposes of its assets.

Two characteristics distinguish financial decisions from other resource allocation decisions:

1. Costs and Benefits are distributed over time

2. These are not known in advance by the investor.

 Jorge Humberto Blanco Restrepo, José María Maya Mejía: From the French finance which
means to finish, to terminate. In practical terms, it is a branch of administration that is
responsible for studying the cycle or flow of money and how it is converted into resources
that are used again to generate money [...].

 They are defined as the art and science of managing money, affecting the lives of every
person and organization. Finance is concerned with the process, institutions, markets and
instruments involved in the transfer of money between individuals, businesses and
governments.

 In the free encyclopedia Wikipedia we have that finance is: A branch of economics that studies the obtaining and
management, by a company, individual or the State, of the funds it needs to meet its objectives and the criteria
with which it disposes of its assets and is usually defined as the art and science of managing money.

At this point and taking into account the previous proposals, I propose the following definition of finance: "Finance is a
branch of Economics that studies the obtaining and effective use of money over time by the individual, company,
organization and the State."

Taking into account the above, we find that the term Finance includes the following basic elements that we must take
into account:
It is a branch of Economics. We remember that one of the definitions of economics is: "The correct and prudent
administration of the scarce resources of a society, family or individual, with the purpose of satisfying their material
needs. Within this context, finance focuses on economic resources (money).”
Studies the Obtaining and Effective Use of Money: In this way and in general terms, it helps to make decisions
about: How much to spend?; How much to save?; How much to borrow?; How much to invest? and How Much Risk to
Take?
It affects individuals, companies, organizations and the State: Hence, finance specializes according to its field of
action in: personal, corporate and public finances.

Conclusions: After having carried out this research, it can be said that finances are all the activities and decisions taken by company
managers with the main objective of commenting on their assets and these are classified into public finances: economic activities of the
public sector, these finances study the resources and the needs of the community seeking above all to satisfy public needs. Private
finance: Its economic environment is based on improvements in its production. The importance of both is that the public sector is
responsible for planning, execution and control that goes directly to the business and public economy. The relationship between
finance and administration is based on finding money and knowing how to use it, that is, having a good income and few expenses or
those necessary to provide good services.

LITERATURE.-

[1] ORTEGA CASTRO, Alfonso. INTRODUCTION TO FINANCE. McGraw Hill. Mexico. 2002.
[2] OCHOA SETZER, Guadalupe. FINANCIAL ADMINISTRATION. McGraw Hill. Mexico.
2002.

[1]: Obtained from: "Finance." Wikipedia, The Free Encyclopedia, October 1,

2008,<http://es.wikipedia.org/w/index.php?title=Finanzas&oldid=20525385> .

[2]: From the book: «Dictionary of Economics», Third Edition, by Andrade Simón, Editorial
Andrade, 2005, Page. 293.

[3]: From the book: «Finance», by Bodie Zvi and Merton Robert, Prentice Hall - Pearson
Education, 2003, page. 2.
[4]: From the book: «Introduction to Business in a Changing World», Fourth Edition, by Ferrel
O. C., Hirt Geoffrey, Ramos Leticia, Adriaenséns Marianela and Flores Miguel Angel, McGraw-
Hill Interamericana, 2004, p. 8.

[5]: Obtained from: "Definition of Economics." Promonegocios.net, October 1,

2008,<http://www.promonegocios.net/economia/definicion-economia.html> .

From the book FINANCE and FINANCING, Paul Lira Briceño, First edition: June
2009, Edition: Eduardo Lastra, Alejandro Arce, Printed in Peru

From the book, Concept and introduction to finance 'Short and Medium Term
Finance', Second Edition, by Meybol Baca, William Moreno, Abner Romero, Anfrony Membreño.