What Is Finance?

Finance is a term for 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. Because of this temporal aspect , finance is closely linked to the time value of money, interest rates, and other related topics.

Finance can be broadly divided into three categories: 

• public finance 
• corporate finance 

Personal finance  There are many other specific categories, such as behavioral finance, which seeks to identify the cognitive ( eg, emotional, social, and psychological) reasons behind financial decisions. Public finance includes tax systems, government expenditures, budget procedures, stabilization policy and instruments, debt issues, and other government concerns. Corporate finance involves assets, liabilities, revenues, and debts for a business. Personal finance defines all financial decisions and activities of an individual or household, including budgeting, insurance, mortgage planning, savings, and planning.


Corporate Finance


Businesses financing through a variety of means, ranging from equity investments to obtain credit arrangements. A firm might take out a retirement from a bank or arrange for a line of credit. Acquiring and managing debt properly can help a company expand and become more profitable.Startups may receive capital from angel investors or venture capitalists in exchange for a percentage of ownership. If a company thrives and goes public, it will issue shares on a stock exchange; such initial public offerings (IPO) bring a great influx of cash into a firm. Established companies may sell additional shares or issue corporate bonds to raise money. Businesses may purchase dividend-paying stocks, blue-chip bonds, or interest-bearing bank certificates of deposit (CDs); they may also buy other companies in an effort to boost revenue.

History of Finance

Finance, as a study of theory and practice distinct from the field of economics, arose in the 1940s and 1950s with the works of Harry Markowitz, William F. Sharpe, Fischer Black, and Myron Scholes, to name just a few.

Particular realms of finance—such as banking, lending, and investing, of course, money itself—have been around since the dawn of civilization in some form or another.

The financial transactions of the early Sumerians were formalized in the Babylonian Code of Hammurabi (circa 1800 BCE). This set of rules regulated ownership or rental of land, employment of agricultural labor, and credit.

Yes, there were loans back then, and yes, interest was charged on them—rates varied depending on whether you were borrowing grain or silver.

By 1200 BCE, cowrie shells were used as a form of money in China. Coined money was introduced in the first millennium BCE. King Croesus of Lydia (now Turkey) was one of the first to strike and destroy gold coins around 564 BCE—hence the expression, “rich as Croesus.”