Finance refers to the management of resources and money by individuals, public institutions, and businesses. This field encompasses borrowing and lending money between people as well as investing in stocks or bonds and selling and trading them on markets for individuals or business enterprises. Finance also encompasses risk and return considerations that are integral when saving and spending.
Finance has long been part of human society. The first known set of rules governing financial transactions dates back to around 1800 BCE in the Code of Hammurabi. Since then, developments in finance have evolved such that it can now be considered a science – its roots lie in mathematics, statistics, physics and chemistry as well as non-scientific elements that give it artistic qualities like anticipating human emotions.
Financial literacy is vitally important, so you can become a more informed consumer and investor. From purchasing cars or homes, planning for retirement, managing day-to-day finances or making retirement investments, finance is at the core of many key decisions you will be making in your lifetime. When making these choices you’ll use its principles as guidance towards selecting the ideal path forward.
An education in finance can pave the way to success in various careers. Undergraduate students who major in finance may go on to become certified public accountants (CPAs), investment or commercial bankers or pursue a master of business administration degree (MBA). A career in finance may also provide wealth and security as well as personal satisfaction.
Personal, public and corporate finance are three of the primary fields of finance. Personal finances encompass activities undertaken by an individual or family such as budgeting, saving, spending and debt management such as mortgages or credit cards. Personal finance may also involve selecting investments such as CDs, money market accounts or stock/bond mutual funds for savings purposes.
Corporate finance focuses on the financial activities of companies and businesses, such as analyzing markets to identify opportunities and challenges, determining costs associated with financing activities, setting long-term goals and strategies for growth, setting prices for products or services in conjunction with marketing teams to ensure prices do not alienate customers, nor fail to generate sufficient revenue to cover expenses.
Finance is a broad field with multiple subfields that each possess their own set of tools and methodologies. For example, mathematical finance utilizes mathematics, economics, computer programming and predictive models to make optimal decision-making recommendations for future behavior prediction and prediction of optimal decision-making strategies. Meanwhile experimental finance uses scientific methods and hypotheses testing to examine viability of an action or entity; both efforts to quantify risk and reward improve decision-making across many areas of business such as personal, public, corporate and governmental finances – the goal being maximization of value while minimization of risk!
