First, let’s think about the definitions of finance and the meaning of studying finance.

According to the dictionary, finance is defined as “The science of managing money or other assets”.

 

The following picture is the mechanism of business in general.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

An enterprise exists as the core to conduct businesses.  The enterprise invests management resources such as time, human resources, and funds in order to conduct businesses.  When business is successful, profits accrue from the business and then gain a return that is higher than the capital the enterprise invested.  When the enterprise does not have the necessary funds in business, it can conduct business by borrowing funds.  The principals who provide funds are called the investors.  Banks and shareholders fall into this category.  The investors provide funds, but they require interest in return.  The interest is being added while lending the corporate funds, with the cost which the money cannot be used for a while, and the interest rate which is commensurate with the enterprise such as the risk of bankruptcy.

In the picture above, which part corresponds to finance?  Finance is to manage money or assets.  Therefore it is the science to facilitate the indications of arrows which are the series of flows.