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Theoretical underpinnings of finance

Theoretical underpinnings of finance - .Interestingly,...

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Theoretical underpinnings of finance   Finance is the science of the management of money and other assets. Interestingly, the etymology of the word  finance is based on the Latin word for end or "finis". When we consider finance today, we focus on the analyses of  risk and return and on the investor's time horizon. We are not certain whether the origins of the word finance intended  to focus on the end of time, or merely the end of a life or activity. Clearly though, our earthly lives are bounded by  time. In Shakespeare's  Macbeth  we read that "Life's but a walking shadow, a poor player that struts and frets his hour  upon the stage, and then is heard no more". So we try to squeeze the most out of our limited time, and at the same  time we attempt to make our money work the most productively for us. However, if we take a Christian viewpoint, our  earthly end will bring us to an unending eternity with God in the new heaven and the new earth. This should change  our view of finance.  The existing view of finance is focused on shareholder value maximization. In theory, share price is predominantly  influenced by the present value of a firm's future cash flows. Thus, any asset is valuable "only to the extent that it  generates cash flows" Furthermore, "the timing of cash-flows matters - cash received sooner is better, because it can  be reinvested in the company to produce additional income or else be returned to investors". Finally, "investors 
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