What is finance?
Finances are a branch of economics that studies the movement of money between individuals, companies or the state. It also examines the collection and administration of the money they made to achieve their respective objectives, taking into account all the risks that entails.
The history of finance as a systematic discipline existed since the nineteenth century before that, the research and / or application was almost nonexistent, or too basic to be considered as a discipline itself. The main task of the financiers at the time was keep books or seek financing when needed. In the early twentieth century, during the second Industrial Revolution, businesses began to expand and mergers began, so it took large numbers of shares and hence, entrepreneurs are more concerned with financial markets. In the following years, and the surges of the Depression of the 30’s and the Second World War, not finance became important within firms, since the economy was in a crisis and financing policies were not risky. In the late 50s ‘and throughout the 60s, developed forms of financial analysis and the 70’ developed the foundations of finance today, focused on profitability and growth. Currently, finance focus on creating shareholder value and satisfy customers.
Banks are the main facilitators of funding through the provision of credit. Also important are the private equity, mutual funds, hedge funds, among others. An entity that has income above your expenses, you can make loans or invest excess capital, while the entity with revenues exceeding expenses can raise capital by borrowing, selling securities, increase revenue or decrease expenses.The lender gets a borrower and a financial intermediary, such as banks. The lender receives interest and the borrower pays a higher interest than the lender receives. The bank then keeps the difference.
Banks account for the activities of borrowers and lenders. They accept deposits from lenders, on which they pay interest. Then lend the deposits to borrowers and allow lenders themselves and coordinate their activities.
Finance is used by businesses, governments, individuals, and also by numerous organizations. All have in common that achieving your goals depends on a good investment, that is, a good money management. Proper use of financial instruments is what will determine the success of a company or a person.
Personal finance is the application of finance and principles of a person or family in their desire to carry out their activities with the best distribution of money for it. So, should recognize how occupy their income on education, health, food, clothing, insurance, luxury, transportation, etc.. It must have into account the income, expenditure, savings and always setting the risks and future events. Part of personal finance are checks, few savings, credit cards, loans, investments in the stock market, retirement plans, taxes, etc..
Corporate finance is that seeking financial decisions made by companies and the tools and analysis used for that decision. The objective of this type of finance is to maximize corporate value while reducing the financial risks of the company. In this study are real assets that a company has to invest and raise funds to get investable assets. Also part decisions on dividends and management decisions. All this in order to maintain the value of the company with the proper use of financial resources.
As for public finances, are those related to the payment of the collective or governmental activities, and the administration and the purposes of such activities. The main thing in this field is knowing what to do and how to pay to achieve these activities. In this type of finance, the active state.
In any field, finance is the key to a person, company, government or state can achieve economic stability and success to achieve their respective goals. So, finance also called the art of money management. Without that manageability, you can only expect economic failure rather than a secure future.