Modern concept of finance is outsider looking approach
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Answer:
The modern approach is fact-based and lays emphasis on the factual study of the political phenomenon to arrive at scientific and definite conclusions. Today political scientists are more interested in analyzing how people behave in matters related to the state and government.
So finance functions, according to this approach, covers financial planning, raising of funds, allocation of funds, financial control, etc. The modern approach considers the three basic management decisions, i.e., investment decisions, financing decisions, and dividend decisions within the scope of the finance function.
(i) It is an outsider-looking the approach that completely ignores internal decision-making as to the proper utilization of funds.
(ii) The focus of the traditional approach was on the procurement of long-term funds. Thus, it ignored the important issue of working capital finance and management.
(iii) The issue of allocation of funds, which is so important today, is completely ignored.
(iv) It does not lay focus on day to day financial problems of an organization.