Finance is a broad term encompassing many things about the study, development, and management of finances and money. In particular, it covers the issues of why an individual, organization or government obtains the funds required to operate through a process of production and repayment known as productive finance-the basic unit of modern economic activity. Finance can be used to understand and analyze the costs of doing business as well as the costs involved in producing and distributing goods and services. The process of producing and circulating money is the central activity of all modern governments. In simple terms, it can be viewed as the road map to the operation of the economy.
A look at the history of financial development shows that finance has evolved through time, with the most significant changes being introduced during the period of industrialization. Industrialization created tremendous increases in production and distribution, but the expansion also created enormous changes in the way money was acquired and spent. At the start of the twentieth century, there were virtually no differences between what kinds of personal finance were practiced between the upper class and the lower class, but as time passed, the nature of finance developed into three main categories: banking, fiscal policy, and industrial policy.
In broad strokes, banking refers to the practice of creating and managing financial assets. The most common examples of banking are banks, including commercial banks, savings and loans, and mortgage companies. Other types of banking include insurance companies, investment banks, and public banks. Public banking provides services such as savings, loans, deposit insurance, and securities trading.
In addition to banking, there are two other major categories of modern financial mathematics and business theory: financial economics and financial pathology. Financial economics focuses on the process by which money is produced, where it is spent, and how taxes are used to fund it. Financial economics also covers money management in a comprehensive way, including economic policies concerning inflation, interest rates, risk, and other economic considerations. Financial pathology concerns itself with the investigation and treatment of economic disorders.
Finance and accounting are closely related, but they are different concepts. They go back to the beginnings of the discipline, and even farther back into the history of Western civilization. Early finance developed in ancient Greece and grew into a major part of the Roman economy. In the Roman Empire, finance acquired a strong hold and became almost a science, as the use and calculation of monetary values became a field of technical genius.
Today, the field of finance continues to advance, with more interrelated disciplines emerging. While traditional banking and insurance continue to exist, new areas of finance have emerged, including investment banking, market banking, venture capital, corporate finance, and financial engineering. All of these have had significant impacts on the world of finance, and the future of finance itself. With an uncertain economy, this may be the best time ever to get a degree in finance.
