Finance is a broad term encompassing many things regarding investments, the management, development, and the financial planning of money and other assets. It includes taxation, economics, accountancy, investment, lending, estate, and financial planning. The word also includes the profession of professional financial planners, as well as individuals who assist in managing or advising wealthy families. Finance is a field that requires expertise and rigorous study in order to master. It is not a simple field to become involved in as it requires analytical skills, financial management abilities and the ability to make sound decisions in challenging circumstances. Individuals wishing to enter the field should have a number of abilities and should be able to demonstrate an understanding of risk and loss.
A major portion of finance is concerned with analyzing market data to determine which investments are the best. It also takes into consideration the current state of the economy and what effect changes in those variables will have on long-term financial planning. Finance analyzes how various investments will impact current and long-term financial situations. Examples of this include looking at alternative investments such as equity funds, bonds, cash deposits, insurance, derivatives, real estate properties, investments in the stock market, micro-cap stocks, venture capital, non-standard loans, and the efficiency of financial institutions. All aspects of the economy are studied including personal income and consumption, inflation, employment and economic growth, budget deficits and governmental policies.
There are many different areas of finance to choose from. Career choices include banking, insurance, public accounting, investment banking, securities brokerage, private financial services, bond investing, merchant banking, and investment management. Banking jobs range from bank tellers and loan officers to the CEO and CFO. Insurance work often involves life, health, and annuities and deals with insurance agencies, providers, and risk management. Public accounting focuses on financial statements and law enforcement work deals with fraud and internal controls.
Investment banking deals with creating money for businesses and individuals by pooling collective investments to provide short-term financing. Equity transactions fund specific projects while derivatives are financial contracts involving currencies, stocks, or futures. Securities transactions require traders to buy and sell financial products such as options, futures, and securities. Management of debt provides debtors with a source of long-term funding. Private financial services offer a variety of non-financial services such as estate planning and investment advice.
The world of finance encompasses a wide range of human endeavors, from managing money in banks and other financial institutions to analyzing and predicting the value of individual stocks. The analysis and forecasting of investments and the buying and selling of securities to help determine the overall success or failure of an enterprise. Businesses rely on finance to acquire and manage needed funds for growth and expansion, as well as provide methods for making repayments on accounts held by the company.
As one of the major components of economics, finance is important in all societies. It uses the resources of society to produce the objects, goods, and services of daily use and creates a demand for more of these objects and services. Finance is involved in the management of resources and the allocation of income and other resources according to goals and objectives. In addition, it directly effects allocative activities, such as investment, production, consumption, distribution, and saving, and these activities form the structure of the economy.