Finance is a broad term for subjects regarding the study, production, and distribution of various financial assets and liabilities. In particular, it usually deals with questions of why and how an individual, firm or nation acquire the capital goods required to carry on certain activities or to make progress in a given field; called accumulated capital in the business context. The accumulation or savings of capital goods may be either by borrowing or creating them; depending on the prevailing circumstances. Finance can further be used to describe the processes by which the resources of a firm are converted into cash that will be put to work either for the benefit of the firm or for the advancement of society. Ultimately, finance is the art and science of working capital.
Today, there are three basic types of financing that people engage in: credit, capital goods financing, and banking. Credit is simple money borrowings from the bank, secured by the borrower’s promise to pay back the loan. This form of financing is popular for everyday purchases and is the most common type of bank loans. The second form of financing is through bank credit, which is essentially a loan where the bank guarantees that the borrower will repay the loan. The third, and most unusual, form of financing is through money management, where money is stored in a bank account with interest derived from market rates or dividends paid to the shareholders.
Banks, leverage or debt, capital markets, money, and financial systems are all related to the study of finance. At the most basic level, it is concerned with how money is made and used to accomplish specific tasks. Finance has many different theories and concepts as well as various approaches to solve practical problems. The most prominent among these is micro-pricing, which deals mainly with the measurement and selection of prices. Other theories of finance deal with macroeconomics, such as interest, optimal investment, monetary policy, budgeting, and risk. One of the most influential areas of modern finance theory is the theory of value based on risk, which applies the idea that value of a certain asset can be determined through the knowledge of its price history.
The study of finance also includes three main subcategories of topics: individual finance, corporate finance, and public (government) finance. Each subcategory has its own particular focus and methodology. For instance, individual finance concentrates on issues dealing with how individuals manage their money. Corporate finance revolves around issues related to making, using, and trading financial instruments, including stock, bonds, mutual funds, and securities.
In order to be a professional in the field of finance, you need to attend some of the classes related to the subject, such as accounting, finance, economics, statistics, business studies, and personal finance. Then, you need to do graduate studies in business or law, or an area of higher education in order to gain a master’s degree, Ph.D., or other comparable designation. Some of the advanced degrees available are doctorates in accounting, fund management, public policy, quantitative methods, financial analysis, banking, and banking technology. Many financial analysts work in investment banks, corporate headquarters, and financial institutions.
The requirements for getting into any of the three main areas of finance career usually include at least a bachelor’s degree. In addition to having a four-year undergraduate degree, many financial-analysts also require law school, business, mathematics, and accounting degrees. It is also necessary to have at least three years experience working in finance and in related fields, including government jobs. There are also opportunities for financial analysts in a variety of settings, including government, privately for profit, nonprofit organizations, international businesses, and international finance.