The five basic principles that form the foundation of finance consists of cash flow is what matters, money has a time value, risk requires a reward, market prices are generally right and individuals respond to incentives.

False

Explanation:

cash flow is what matters: incremental cash flows matter, not accounting profits.*money has a time value: one dollar today is worth more than one dollar tomorrow.risk requires a reward: investors are risk adverse, so a risky investment requires a reward or a higher rate of return.market prices are generally right: financial markets are extremely efficient in determining the price of securities and other assets.conflicts or interest cause agency problems: managers (agents) may sometimes act based on self interest and not in the best interest of their clients, resulting in a loss of value for them.

*Many people confuse finance with accounting and they are very different. Finance uses accounting information to make decisions, but finance is about cash flows and time, e.g. a firm may have a huge profit because it sold all its merchandise on credit, but financially it's broke because it can't even pay its utilities.

The activity of providing goods and services involving financial and commercial and industrial aspects.