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What is Finance? – Definition, Types, and More
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What is Finance? – Definition, Types, and More

Definition

Finance corresponds to an economic area that studies the management of money and capital, financial resources.

And also, It looks at both the obtaining of these resources and the investment and saving of them.

The intermediary financial are the agents dedicated to contacting the two parts of finance, savers, and those who need funding.

Finances help control income and expenses, both for the Government, for companies, and each of us.

And also, Finance is the economics area that studies the functioning of the money and capital markets.

The institutions that operate in them, the policies for attracting resources, the value of money over time, and capital cost.

What are the Types of Finance?

Finances can be dividing into four large groups

1.      Corporate finance

It focuses on the study of obtaining and managing the resources of companies.

Among his areas of study are

  • In which productive projects you should invest.
  • When to pay dividends.
  • And also, What are the optimal financing options?

2.      Personal finances

Refers to the study of obtaining and managing the resources of families or individuals.

Among his areas of study are

  • How to choose a profitable career or profession.
  • Optimal management of labor income and debt.
  • And also, We are investing and saving decisions.

3.      Public finances

It deals with the study of obtaining and managing the financial resources of State institutions.

Among his areas of study are

  • We are obtaining resources through taxes.
  • We are investing in profitable public projects.
  • The choice of the mechanisms for redistribution of resources.
  • And also, Proper management of the government deficit and surplus.

4.      International finance

It refers to the study of financial transactions at the international level.

Among his areas of study are

  • Debt abroad.
  • The effects of the exchange rate fluctuation on profitability.
  • Foreign capital movements.
  • And also, The inherent risk of investing in a specific country.

What are the Characteristics of Finance?

The following characterizes finances

  • They deal with the management of money and capital goods: banking and savings, investments, loans, etc.
  • As an area of ​​knowledge, finance is between economics, administration, and accounting.
  • They handle vital concepts such as risk, profit, interest rate, investment costs, etc.
  • It allow the improvement of money management for both public and private entities, both individuals or families, and large corporations.
  • They rely on other auxiliary disciplines, such as economics, accounting, statistics, and mathematics.

What is the Importance of Finance?

Given the fundamental principle of every economy.

The resources available in the world are finite, while the needs that we must cover with them are infinite.

Put another way that money is not enough to do or have it all at once.

And also, The importance of a field of study, such as finance, is obvious.

Finance allows individuals and organizations to play the game of capitalism in the best possible way.

Waste, lousy investment, administrative clutter, and poor decisions can lead a productive and useful initiative to its ruin.

And also, The resource management is something that no one today can afford to ignore.

What are the Study Areas of Finance?

Finance studies a wide range of transactions related to the optimal management of financial resources.

His areas of study include

·         The study of the profitability of investments

When is it convenient or not to invest in a project, or how to choose between several projects?

·         How to properly manage debt

Keep debt under control and take advantage of its benefits to grow in the future.

·         Keep changes in the value of money under control over time

Control the loss of value of money in scenarios with inflation.

·         The determination of the prices of tangible and intangible assets

Value the assets based on their risk and expected rate of return.

What are the Resourses of Finance?

Accounting

It is a financial resource that is using to manage the expenses and income of a company.

It is a crucial tool to know what situation a company is in and, with this documentation, to establish the necessary strategies to improve its economic performance.

Accounting can manage any group: corporate finance, personal finance, public finance, and international finance.

Behavioral finance

They are the field that analyzes finance from a psychological point of view.

And also, It was born from the union of psychology, traditional economics, and neuroeconomics.

How is the Origin of finance?

The Origin of finance can be originate around the 15th century, with the rise of capitalism.

At this time, commercial banks that offer intermediation, loan, and savings services begin to develop.

Over time, financial institutions and their products have evolved and modernized.

New intermediaries other than traditional banks have appeared and new financial products that offer many options to customers.

And also, Its scope of study has been refining over time, with the development of theories.

That attempt to explain the optimal determination of asset prices, expected profitability, decisions in uncertain scenarios, etc.

 

 

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