Finance involves managerial decision-making.

Decisions made today could have implications for tomorrow and although we are unable to predict events with certainty, possibility of occurrence can be determined by assigning statistical inference of probabilities.
In investing in a particular business endeavor, the primary goal is profit maximization but sometimes, loss do occur, such occurrence may be the result of certain events not hitherto anticipated.

In finance, we talk about risk and returns. Every investor must have a baseline of minimum returns that will induce him to undertake certain measures of risk.

The relationship between risk and profitability is positively linear related. Simply put, the higher the level of risk, the higher is the corresponding measure of returns. Every investor must have a baseline of minimum returns that will induce him to undertake certain measures of risk.

Essentially, the business firm must always balance the risk of business ventures with the returns expected therefrom.

Any investment with risk profitability is called a premium investment and the rate (interest or bond rate) is always high. A risk free investment like treasury bills carries no inherent risk as repayment is very certain. It is also called Gift-edge security.