The Field of Finance
Finance refers to the management, movement and raising of money. Although related to economics in that they both study production and consumption, Finance encompasses all activities which enable households, corporations and governments to acquire the capital needed for functioning; furthermore it involves studying risks and returns as central elements in all investment activity.
Financial systems comprise flows of funds that move money between savers and entities needing it, including individuals (personal finance), companies (corporate finance) and government (public finance). Savings and investments move freely among countries at any given time; their impact can ripple throughout economies worldwide and societies more broadly.
Financial systems research can be traced back to areas like statistics and mathematics; modern theories largely adhere to scientific formulae. Yet this area of business involves non-scientific elements as well as human emotions when making financial decisions, so their study remains highly subjective.
When companies and governments need extra cash, they can borrow from private investors – usually via debt or equity offerings – through various financial intermediaries such as banks or investment firms. Such intermediaries earn interest on any loans made; additionally they charge higher rates of interest than would normally be available on the market in exchange for their services.
An individual with a sound knowledge of finance can make intelligent choices when it comes to their personal finances. A knowledgeable individual can develop a budget, invest wisely, and reduce debt risk while making wise choices regarding insurance and estate planning.
Larger organizations utilize financial departments to manage their resources and fund-raising efforts, including activities such as issuing stock or bonds, managing accounts receivable and payables and overseeing other major money-related tasks. Typically these departments are led by someone holding the title “chief financial officer”.
An individual with a bachelor’s degree in finance may work in any number of roles. Financial managers, for example, may oversee an entire financial department at a small to mid-sized business. Other professionals working in finance may hold advanced degrees and/or be licensed or certified for specific fields like mortgage banking or financial planning.
College graduates with majors in finance can pursue careers in real estate, banking and insurance industries. Others may pursue graduate-level study with master’s degrees or self-study courses such as CFA Certification to develop more in depth knowledge of this subject area. No matter which path one chooses – having a solid knowledge of finance helps keep our global economy running smoothly!
