What Is Finance? What Does Finance Mean?
Finance is a term that addresses matters regarding the management, creation, and study of money and investments. It involves the use of credit and debt, securities, and investment to finance current projects using future income flows. Finance is closely linked to the time value of money, interest rates, and other related topics because of this temporal aspect.
Finance can be broadly divided into three categories:
- Public finance
- Corporate finance
- Personal finance
Other specific categories include behavioral finance, which seeks to identify the cognitive, emotional, social, and psychological reasons behind financial decisions.
Key Takeaways
- Finance is a term that broadly describes the study and system of money, investments, and other financial instruments.
- Finance can be broadly divided into three categories: public finance, corporate finance, and personal finance.
- Subcategories of finance include social finance and behavioral finance.
- The history of finance and financial activities dates back to the dawn of civilization.
- Finance has roots in scientific fields such as statistics, economics, and mathematics but it also includes nonscientific elements that liken it to an art.
Understanding Finance
Finance is typically broken down into three broad categories: public finance, corporate finance, and personal finance.
Public finance includes tax systems, government expenditures, budget procedures, stabilization policies and instruments, debt issues, and other government concerns. Corporate finance involves managing assets, liabilities, revenues, and debts for businesses. Personal finance defines all financial decisions and activities of an individual or household, including budgeting, insurance, mortgage planning, savings, and retirement planning.