An Introduction to Finance

Finance is a broad term used to describe various things regarding the study, production, management, and distribution of financial assets and liabilities. All activities related to money are included in the field of finance. People involved in any form of business deal with finance as the term suggests they deal with financial facts. The role of finance is very important and can never be taken for granted. No society can function without money so everyone should be interested in it. At all costs someone should not be using it for evil purposes.

Finance has various parts like budgeting, tax management, investment, monetary policy, business, etc. Finance includes all aspects of human effort to produce wealth. All these concepts are interrelated and influences each other. The three branches of Finance are also known as; central, local, and global finance. Budgeting is the process of planning for future consumption and preparation for short-term cash demands.

The major areas of finance are property management, banking, insurance companies, micro and small enterprise, futures and commodity markets, personal financial services, payroll, industrial and retail trading, finance research, non commercial credit, non traditional loans, and technology. The most important functions of banks are deposit management, depository institution management, underwriting, merchant banking, home financing and lending, mortgage banking, wholesale and retail banking, credit card processing, securities brokering, and insurance industry. A wide range of financial goods and services are offered by financial institutions like; general banking, saving and lending market, government and corporate lending, individual lending, investment grade securities trading, corporate borrowing, retail and business lending, mortgage, industrial and commercial lending, buying and selling in a volatile market, merchant banking, trade financing, forward contract, and international financing. Some of the leading financial institutions include commercial banks, savings and loan, credit unions, trust companies, mortgage banking, and specialty banks.

There are various types of economic systems like capital budgeting, income budgeting, asset budgeting, entrepreneurship, financial markets, consumption, investment, financial engineering, theory of value pricing, entrepreneurship development, market economy, international trade, price system, firm-owner cooperation, indirect exchange, firm-institutions, mutual funds, and government financing. The study of economics incorporates accounting principles with a focus on distribution, inflation, economic growth, cost of living, international trade, balance of payments, government finances, and monetary policies. There are two main concepts that form the basis of economics: first, the theory of economic production; second, the theory of economic demand. The analysis of economics is based on a mixture of qualitative and quantitative economic techniques and methods, including macro economic indicators.

The concept of personal finance has been around since time immemorial. In ancient times, it was practiced by the rich, who used their accumulated assets to acquire personal possessions and goods. Personal finance can be defined as the process through which individuals or households prepare and manage their financial resources, such as cash, deposits, securities, and monetary resources. Today, it is one of the most important components of financial planning. The basic function of personal finance is to match an individual’s monetary resources with his desired objectives and actions.

Money management is the process of buying and selling of securities on behalf of individuals and institutions to meet their financial needs. Money management involves the determination of the role of bank loans and other financing and the selection of appropriate sources for funding. Therefore, the purpose of finance is to manage wealth and apply sound money management practices.