Introduction
A business has many facets, such as technical, administrative, financial, and commercial. This paper focuses on the financial elements of operating a company, which are critical to its survival. This aspect is a component of financial management, which entails achieving organizational goals through the efficient and effective oversight of financial assets. Decision-making is vital in managing financial resources, and it takes different forms, such as capital budgeting and investing.
Although making decisions in the business is based solely on technical and practical discipline, financial decision-making is based on ethical and moral principles such as integrity and honesty. These ethical and moral principles are consistent with the principles taught in the Bible. These biblical principles are stewardship, honesty, integrity, and diligence, which are all vital in financial decisions. Therefore, financial management concepts are integrated with biblical ideas. This paper will illustrate the biblical concepts integration of three financial management concepts.
Financial Management from a Biblical Perspective
The first financial concepts are stocks, bonds, and the time value of money. The time value of money refers to the effect that time exerts on the importance of money. It represents the concept that the present money’s worth is more than its worth in the future due to its interest-earning potential. Stocks and bonds are investment options for a business to increase the value of their money through earning interest. The time value of money requires a company to consider increasing its worth through investment channels such as stocks and business.
Making the financial decision to invest requires the biblical principles of stewardship, honesty, and integrity. For instance, in Proverbs 21:5, the Bible advises that the goals of the diligent lead to yield, specifically as haste leads to poverty (King James Bible, n.d). Enforcing the principle of stewardship allows businesses to avoid making impulsive investments based on emotion rather than facts by extending this method to financial decisions.
The Bible is an excellent resource for learning about personal finance and investing. The parable of the talents, found in Matthew 25:14-30, teaches about prudent financial management and making the best use of one’s resources (King James Bible, n.d). This parable’s teachings are consistent with investing in one’s financial management. In this allegory, the business owner bestows monetary sums on his employees, each of whom is represented by a “talent,” with the expectation that they will use the money wisely and increase its value. Those who make the most profitable investments are rewarded; those who do not are disciplined.
Like other religious books, the Bible emphasizes spreading wealth across various assets and avoiding excessive risk. Ecclesiastes 11:2 advises “investing in seven endeavors, even eight,” because “you do not know what disaster may come upon the nation.” (King James Bible, n.d). This strategy encourages diversification as a strategy for reducing exposure to any investment, and it also considers the interest rate risks associated with bonds. These Bible examples support the idea that the Bible can be integrated with the concept of the time value of money, which also applies to stocks and bonds.
The second financial concept is the net present value, discounted cash flow, and project analysis. This concept focuses on assessing the profitability of a project or venture to determine if it is worthwhile. The present net worth of cash inflows against the outflows in the present, while discounted cash flow measures the value of an investment using its anticipated future cash inflows (Shakespeare, 2020). Project analysis also assists in identifying feasible and profitable projects based on their cash flows. All of these aspects are involved in the planning stage of a project to determine its viability.
The Bible, for example, emphasizes the importance of planning and budgeting before embarking on any activity. According to Matthew 14:28-30, “Assume one of you wants to build a tower; before deciding whether or not one has enough money to finish, one must first figure out how much it will cost. (King James Bible, n.d). If this concept were applied to project analysis, it would encourage project managers to conduct thorough analyses of the costs and benefits of potential initiatives before embarking on any of them.
The Bible stresses the importance of being trustworthy and truthful when handling money. As Proverbs 16:11 puts it, “The Lord owns the weights and measures; the integrity of the scales and the accuracy of the weighing pan” (King James Bible, n.d). This concept can be incorporated into project analysis as a directive to project managers to discuss the project’s costs and benefits openly and forthrightly.
The other financial concept is capital budgeting, the weighted average cost of capital. Capital budgeting is a financial management technique that analyzes potential investments’ benefits and drawbacks (Mubashar & Tariq, 2019). The weighted average cost of capital (WACC) is a financial criterion used to measure the cost of capital of a company. Proverbs 21:5 highlights the importance of good stewardship and careful planning, saying that the goals of the diligent lead to profit as surely as haste leads to poverty (King James Bible, n.d).
Applying this concept in capital budgeting can help ensure that investments are carefully considered and deliberated. When a person’s offspring are not assured of inheriting wealth or a throne, Proverbs 27:23-24 advises, “Be sure you know the status of your flocks, devote careful attention to your herds” (King James Bible, n.d). The biblical injunction to give an account of one’s material possessions and to act as a responsible steward of one’s resources is an expression of the idea of accountability.
The Bible also emphasizes the importance of being trustworthy when dealing with money. As stated in Proverbs 11:1, dishonest scales are an abomination to the Lord, but a just weight is his delight (King James Bible, n.d). Capital budgeting can capitalize on this concept by pushing managers to be candid in evaluating investment opportunities and reporting financial measurements such as the weighted average cost of capital. The concepts of capital budgeting and the weighted average cost of capital have integrated biblical concepts into financial decision-making.
Conclusion
In conclusion, the biblical principles of honesty, integrity, stewardship, and hard work provide a solid financial foundation for a business pursuing a financially successful business. Businesses should recognize that financial decision-making is not only based on technical and practical disciplines but also on ethics and morals. Acknowledging and implementing biblical principles in their day-to-day financial dealings will enable businesses to achieve their financial objectives and uphold ethical and moral values. Financial decision-makers who understand the value of stewardship are better able to use the business’s financial resources for its success. Simultaneously, the accountability concept helps to ensure that individuals in charge of the finances make sound decisions.
References
King James Bible. (n.d.). Web.
Mubashar, A., & Tariq, Y. B. (2019). Capital budgeting decision-making practices: Evidence from Pakistan. Journal of Advances in Management Research, 16(2), 142–167. Web.
Shakespeare, C. (2020). Reporting matters: The real effects of financial reporting on investing and financing decisions. Accounting and Business Research, 50(5), 425–442. Web.