Finance consists of analyzing financial terms, that is to say, in money. All the important decisions that occur in organizations or society in general, to ensure the optimal usage of resources and improve, thus the well-being of everyone.
Finance is the basis and the articulation of the capitalist system because it ensures that all decisions create value and generate wealth. Therefore, finance must allow all people to attain a higher standard of living.
The finance sector.
The finance sector groups together all activities linked to the search for capital in order to carry out an economical operation. In our world, more connected than ever, this professional sector is doing very well, and the opportunities for studying finance are numerous. Commercial and financial profiles are highly sought after by companies and banks.
The jobs in this sector mainly concern the processing of financial or accounting documents for a company. This mission is often accompanied by other activities related to management and audit.
Finance concerns businesses and states as much as households. In the entrepreneurial environment, we find this field of activity in three major sectors, banking, businesses, and merchant banks.
What is the finance function of a business?
Finance has one objective: to maximize the value of the company for its shareholders in the long term. In other words, it is about maximizing profits over a relatively long time horizon while limiting the risks involved. Corporate finance is, therefore, interested in investment decisions, financing remuneration of capital providers.
Initially, it is the finance function that is responsible for allocating to the company the funds necessary for its development, by recommending, for example, the best financing for operation, thus participating in the rationalization of the taking of the decision.
The concept of risk is inseparable from the arbitration between the different funding avenues (self-financing, borrowing). It also establishes financial ratios that allow the company to take stock of its financing capacities and implement its development strategy. We are concerned here with profitability, but also with solvency and liquidity.
Any decision involving a financial flow must be taken after consultation with the finance department, whether it is a manager or a decision-maker. It is a function as much financial, budgetary, strategic as communicational, which implies having several strings to its bow to be successful.
The economic role of finance.
In an economy characterized by the sovereignty of choice, organizations and people can exercise their decision-making power; that is, they have the ability to optimize their choices. Finance plays a crucial role in improving decision-making because it is possible to measure its degree of effectiveness in achieving or not achieving individual or collective goals.