Features of Finance

The main characteristics or features of finance are depicted below.

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1. Investment Opportunities

In Finance, Investment can be explained as a utilisation of money for profit or returns.

Investment can be done by:-

1.         Creating physical assets with the money (such as development of land, acquiring commercial assets, etc.),

2.         Carrying on business activities (like manufacturing, trading, etc.), and

3.         Acquiring financial securities (such as shares, bonds, units of mutual funds, etc.).

Investment opportunities are commitments of monetary resources at different times with an expectation of economic returns in the future.

2. Profitable Opportunities

In Finance, Profitable opportunities are considered as an important aspiration (goal).

Profitable opportunities signify that the firm must utilize its available resources most efficiently under the conditions of cut-throat competitive markets.

Profitable opportunities shall be a vision. It shall not result in short-term profits at the expense of long-term gains.

For example, business carried on with non-compliance of law, unethical ways of acquiring the business, etc., usually may result in huge short-term profits but may also hinder the smooth possibility of long-term gains and survival of business in the future.

3. Optimal Mix of Funds

Finance is concerned with the best optimal mix of funds in order to obtain the desired and determined results respectively.

Primarily, funds are of two types, namely,

1.         Owned funds (Promoter Contribution, Equity shares, etc.), and

2.         Borrowed funds (Bank Loan, Bank overdraft, Debentures, etc).

The composition of funds should be such that it shall not result in loss of profits to the Entrepreneurs (Promoters) and must recover the cost of business units effectively and efficiently.

4. System of Internal Controls

Finance is concerned with internal controls maintained in the organisation or workplace.

Internal controls are set of rules and regulations framed at the inception stage of the organisation, and they are altered as per the requirement of its business.

However, these rules and regulations are monitored at various intervals to accomplish the same which have been consistently followed.

5. Future Decision Making

Finance is concerned with the future decision of the organisation.

A "Good Finance” is an indicator of growth and good returns. This is possible only with the good analytical decision of the organisation. However, the decision shall be framed by giving more emphasis on the present and future perspective (economic conditions) respectively.

 Conclusion on Finance

Finance to be more precise is concerned with the management of,

1.         Owned funds (promoter contribution),

2.         Raised funds (equity share, preference share, etc.), and

3.         Borrowed funds (loans, debentures, overdrafts, etc.).

At the same time, Finance also encompasses wider perspective of managing the business generated assets and other valuables more efficiently.