Question

Finance, which is an applied discipline, is actually an art of discounting. ” Explain whether the explanation is correct by adhering to the conceptual and theoretical (theoretical) approaches in the literature.

Answer 1

The given statement that "finance ,which is an applied discipline,is actually an art of discounting" is not completely true as finance is a very wider concept and discounting is just a part of it.Finance is the study of money and how it is used.Specifically it deals with the questions of how an individual,company or government acquires the money needed called capital in the company context and how they then spend or invest that money.Core financial theories can largely be divided into different categories financial economics,mathematical finance and valuation..

Discounting is only a part of valuation which is just one of the three parts of finance,Finance is about the overall system which comprises of the financial markets that allow the flow of money,via investments and other financial instruments,between and within these areas and this flow is facilitated by the financial services sector.

Finance is whole spectrum which consists of deployment of assets and libalities into allocated ratios and it is a much wider concept than discounting.Discounting is an inherenr part of finance but it is just an small part of finance.The whole gambit of finance is not just limited to corporate finance but it also includes personal finance as well as public finance.

Capital decisions which are to be decided on the basis of the discounting of various cash inflows to compare with cash outflows uses different types of rules which includes a high application of discounting .It can be said that discounting plays a critical part but the world of finance is too large and discounting is just a minor tool.

So the given statement is not apt.