Finance is a general term referring to things about the science, development, and managing of financial instruments and money. In particular, it concerns the questions of who, what, when and where an individual, firm or government get the funds necessary for their operations plus how they use or save that money for future purposes-called investment income in the business context. Some common elements of modern finance are interest rates, asset pricing, portfolio management, insurance and balanced scorecard analysis. Finance is intimately connected with all of these aspects of running a business as well as with many other areas of the economy.
The study of modern economics, the study of the study and management of capital, finance, banking and other financial instruments is called “finance”. The field of finance can also be referred to as “finance economics”. This is because modern economic theory and the methods used to understand and analyze finance typically include elements of economics, law and accounting.
Modern concepts and practices concerning the study of finance are complicated and rapidly changing, incorporating recent changes in taxation, financing, financial institutions and debt management. There are two broad areas of contemporary economics that most people are familiar with and influence their decisions about finance: microeconomics, which concentrates on the production, sale, exchange and cost of goods and services at a local level and macroeconomics which consider larger scale issues, such as global trade, international investment and financial markets. The scope of modern micro and macro economics is rapidly expanding. In addition, the area of finance includes many other subtopics including financial engineering, monetary economics, real estate finance, portfolio management, derivatives, money markets and commodity markets.
The world of finance can be divided into two major sections: private financial institutions and public financial institutions. Private financial institutions can include savings and loans, corporate lending, credit unions, pensions, mutual funds and trust companies. Public financial institutions are those supported by the government such as banks, credit unions, the Fed, Fannie Mae and Freddie Mac. They include treasury departments, the postal service and postal savings and loan programs. Understanding how decisions made in one sector affect decisions made in another is an important part of understanding how the financial system works.
Modern advances in technology have made it possible for many people to participate in financial markets. Online access, high speed wireless internet and mobile access to cell phones allow individuals to become active participants in the global economy. Finance is an essential part of the business world and the study of corporate finance provides insights into the efficiency and risk management of businesses. Businesses that are large, medium sized and rapidly growing are more likely to be involved in some form of corporate finance.
The goal of this guide is to provide an introduction to the world of finance. It serves as an instructional manual for students who are preparing to enter the field of finance. Learning about global investments, financial markets and the role of the federal government in helping finance education would benefit future business leaders and potential students. Learning how to read financial statements, formulas and models can help students analyze current business investments and plan for the future.