Finance is a large and varied field of study that involves the science and application of money, credit, banking, and lending. In particular, it covers the issues of how an organization, business or government obtains the funds needed for its operations and what they use those funds for-called consumption credit in the business context and capital budgeting in the personal financial context. The study of finance offers many benefits to those involved in all areas of it: governmental policies and programs, private sector monetary systems and banking systems. Finance science generally deals with the economic aspects of both money and credit. This broad field also includes topics such as accounting, economics, auditing, and counseling on financial matters.
In the broadest sense, finance describes the process of managing financial resources. Money is the source of finance and it is used to purchase goods and services on behalf of the borrower in exchange for a certain amount of secured loan or equity. Finance is closely related to investment but it is one area of economics that is often looked at separately because of the great scope and complexity involved in making financial decisions. Public finance and personal finance are closely related but distinct areas of the discipline.
Personal and corporate finance are closely related but different concepts. With personal finance, an individual’s or a family’s purchasing power is increased through investment or saving. This sort of finance takes the form of borrowing for purposes that do not further increase the individual’s capacity to earn income. An individual’s personal savings is termed capital and its accumulation is the basis for future consumption and income. This form of financing is important to businesses because it gives them the chance to expand their enterprise by making further investments that yield additional profits.
The study of behavioral economics describes human behavior in the financial markets. Behavioral finance attempts to explain why people make financial decisions and how those decisions affect the market. Behavioral economists have made many contributions to the field of public finance by using empirical research in macroeconomics and microeconomics as well as in business. One of the main articles of this school is “Behavioral Finance: A Primer”, which is written by Edward Glaeser. This main article covers the introduction of behavioral economics to the field of public finance.
The second main article of this series is “The Art of the Budget”. This article traces the history of budgeting and its use as a tool for both economic and social policy. The main idea of this article is that public finance is more than just creating a budget; it is also about considering the choices we make in life and our long-term decisions. This article emphasizes on the importance of budgeting and its necessity as a key element of long-term planning. This piece of writing will also explain how budgeting affects the long-term economic viability of a government.
The third main article of this series is “Inner Workings of the Public Finance Process: A Brief Introduction to Concepts, Theory, Practice and Models” by Christopher Keith. This article traces the development of financial economics from the classical theory of the three elements of capital, risk, and production towards the more current approach of financial economics with four different perspectives on financial problems: the end user, the domestic sector, the public sector, and the firm sector. The focus of this article is to give an overview of the theory and conceptual structure of financial economics. It then goes on to discuss the key concepts of risk, the ability of the firm to capture losses, and production capacity.