In layman’s terms, finance is the study or act of acquiring or creating money or assets. It includes all those activities which are concerned with money or its creation. Finance is used to help individuals and institutions obtain loans or invest money in order to earn returns. It is also used to help businesses or the government get money for various projects, needs, and expenses.
Basically, finance is the systematic process by which money is acquired, used and disbursed. Finance is the total process by which monetary systems are operating; it is the science of funds management. Finance is commonly divided into two major categories-monetary and non-monetary systems. In other words, finance covers everything related to money or finance as it relates to economic activity. In this article, we will discuss some of the most important areas covered in today’s financial textbooks and financial research.
The first area in today’s financial textbook which tackles the question of finance is personal finance. In this section, students learn about the three basic financial decisions that individuals must make everyday-such as purchasing a car, getting a mortgage loan, or financing a college education. Personal finance touches on all areas of managing one’s money such as saving for retirement, buying a house, or funding children’s education. As one can see, personal finance encompasses a wide variety of decisions and factors. Personal finance also includes all of the subcategories of personal finance such as asset management, estate planning, retirement plans, credit cards, investing and much more.
Another area of great importance in today’s financial literature is that of finance theory. The theory portion of the curriculum within the field of Finance focuses on the particular areas of money management. The areas of theory in Finance include Banking, Leverage or Debt, Public Debt, Private Debt, Business Credit, and Money Creation, and Investing, Technology, and Entrepreneurship. All of these theories focus on how individuals make decisions with regards to the use of their money as well as the effect it has on other individuals, businesses, and the economy as a whole.
The third area of great importance within the field of financial economics is that of time value. Within the field of time value, students learn how to calculate how much an investment will earn after a certain period of time (i.e., endowment value). Additionally, financial economics students learn how to utilize economic time to its full advantage, i.e., the time to make informed decisions when it comes to making investments, borrowing, contracting, selling, etc., and the time to manage assets and accounts receivable.
Capital management is also an important topic within the study of economic economics. The study of capital usually begins with the concept of value and price. Later in this class students learn about the various types of capital, such as plant, property, equipment, intangible property, bank deposit, securities, government bonds, and other types of capital. Capital are the entities (including individuals) that create value in a transaction. A firm may create value by producing or employing resources, while a government agency creates value by using its monopoly of a certain asset, such as currency.