Read and summarize chapter 1 of Financial Management Text book in at least 400 words.
*Answer #13 of the questions at the end of the chapter.
Finance is the application of economic principles and concepts to busi- ness decision-making and problem solving. The field of finance can be considered to comprise three broad categories: financial management, investments, and financial institutions:
■ Financial management. Sometimes called corporate finance or busi- ness finance, this area of finance is concerned primarily with financial decision-making within a business entity. Financial management deci- sions include maintaining cash balances, extending credit, acquiring other firms, borrowing from banks, and issuing stocks and bonds.
■ Investments. This area of finance focuses on the behavior of financial markets and the pricing of securities. An investment manager’s tasks, for example, may include valuing common stocks, selecting securities for a pension fund, or measuring a portfolio’s performance.
■ Financial institutions. This area of finance deals with banks and other firms that specialize in bringing the suppliers of funds together with the users of funds. For example, a manager of a bank may make decisions regarding granting loans, managing cash balances, setting interest rates on loans, and dealing with government regulations.
No matter the particular category of finance, business situations that call for the application of the theories and tools of finance generally involve either investing (using funds) or financing (raising funds).
Managers who work in any of these three areas rely on the same basic knowledge of finance. In this book, we introduce you to this com- mon body of knowledge and show how it is used in financial decision-