Finance is a relatively broad term which includes many things regarding the science, development, and management of financial resources and securities. Finance affects all aspects of society and economies including individuals, businesses, the government, and even interest groups such as corporations and unions. The study of how funds are managed and controlled helps in predicting economic fluctuations and delivers valuable information regarding long term viability of various organizations. Finance is used to assist organizations in creating and managing financial plans and policies to meet their goals and objectives. Its scope covers all areas of human endeavor and is considered a human right.
There are four main types of financial systems that influence the way we conduct financial activities. These include financial markets, banking, insurance, and investment banking. Financial markets refer to the entire range of financial tools and markets that facilitate transactions and exchanges of financial instruments such as currencies, bonds, stocks, mutual funds, and other securities. The most common form of financial market is the exchange market. It includes securities exchanges, brokerages, clearing houses, marketplaces, and central banks.
Behavioral finance refers to the study of economic choices and their effects on the character and direction of an economy. Finance is also a field that studies and monitors the behavior of individuals and institutions towards money and credit. It applies to both private and public finances. Some of the topics of behavioral finance are macroeconomics, financial decision-making, consumer decision-making, and economic activity.
The third major area of modern finance is securities and investing. Securities markets include trading, buying, selling, and mortgaging of different forms of financial instruments, such as bonds, stocks, mutual funds, and other securities. Investing refers to the buying and selling of financial instruments for the purpose of creating wealth or to earn returns on ones own capital. A number of investment strategies are employed by both individuals and companies to manage their finance portfolio.
The fourth subfield of modern financial science is corporate finance. It studies the activities of corporations and other institutions in the financial market. The main focus of corporate finance is identifying opportunities for earning profit and for reducing financial risk. There are two main aspects to corporate finance: venture capital and captive funding. Venture capital is the capital provided by corporations for start-up or expanding their business. Captive funding occurs when a bank provides a loan to a company, in return for the promise to repay the bank with interest.
Finally, one of the most important areas of finance is money management. Money management deals with the control of the money supply and the interest rate on loans, among other financial products. It includes the regulation of credit markets, interest rates on mortgage loans, and other money market products. Finance is therefore the planning, organization, management, investment, distribution, and repayment of funds that are obtained through lending, borrowing, or savings. It also includes the supervision of financial activities in the money markets.
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