The Terms and Roles of Finance

The key role of finance in any business is to manage money; whether it be raising capital through share capital and bank loans, raising credit (short-term capital), or handling the costs of the business. Without finance, a business would not function, as quoted by (Griffin, 2015); ‘Money is the lifeblood of a business and finance is the nerve center’.

The project team can also use the technique of calculating the rate of return using the investment value of the project wherein the increase in the rate of return indicates for the growth of the organization.

* Long Term Interest Rate: The interest rate you will pay on bonds issued this year. Bonds are 10-year coupon notes, meaning that you pay the interest each year for the next 10 years, then repay the principal. Bond rates are driven by the prime rate and by your Leverage (Assets/Equity) ratio. The higher the ratio, the more risk you present, and the higher the interest rate

Description: Return on Assets (ROA) is synonymous with return on investment. It indicates how well a firm uses its assets to produce net income. It is calculated by dividing a company’s net income by its average total assets for a given period. Like ROE, ROA is often used as a measurement of firm value by providing solid insight to the number

The internal rate of return (IRR) is a rate of return used in capital budgeting to measure and compare the profitability of investments. Generally speaking, the higher a project 's internal rate of return is, the more desirable it’s to undertake the project. As such, IRR can be used to rank several prospective projects a firm is considering. The project with the highest IRR would probably be considered the best and undertaken first. IRR is sometimes referred to as economic rate of return (ERR) or simply the rate of return (ROR). In theory should companies undertake all projects or investments available with IRRs that exceed the cost of capital.

ROLE: Finance is any area of study that helps get manage or invest the money. There is business finance, investment finance, home finance, car finance, and many other types. For most people managing their own money, personal finance is the most important type of finance.

Finance is a vast area of facts, principles and theories dealing with various ways of raising and using it by individuals and others. It deals with how individuals and companies divide their business income between consumption and how to choose from among the available investment opportunities and how they raise money for increased consumption or investment.

essentially center on the costs of investments relative to the benefits that will be generate from

Debt is a financial instrument that is used to finance an organization by paying back borrowed capital with interest. Debt instruments are notes, loans, bonds, and debentures are used to pay for needs for an entity preferably in the short term. An advantage of good debt is the predictability of payments to

It is the minimum rate of return the firm must earn overall on its existing assets. If it earns more than this, value is created.

Finance is something that every person, business, or government agency must deal with if they want to be successful. Finances cannot be ignored or left on their own to take of themselves.

Return on investment (ROI) is the concept of an investment of some resource yielding a benefit to the investor. A high ROI means the investment gains compare favorably to investment cost. As a performance measure, ROI is used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. In purely economic terms, it is one way of considering profits in relation to capital invested.

In finance, investment = cost of capital, like buying securities or other monetary or paper

Finance is simply defined by investopedia.com as, “Finance is the science that describes the management, creation and study of money, banking, credit, investments, assets and liabilities” [web]. The role of some of the mentioned elements, along with others, in economic development are mentioned and discussed in Schumpeter’s Theory.

Bonds are instrument of indebtedness of the bond issuer to the holder. A bond is can also be defined as a debt security under which conditions the issuer owes the holder debt which comes with conditions and there is an obligation to pay interest and repay the principal at a later date when the bond matures. Sometimes interest, maybe payable at fixed intervals, for example semiannual, monthly, annually. Bonds usually are negotiable and this simply means that ownership of the instrument can be transferred in the secondary market.