The activity of finance is the application of a set of techniques that individuals
and organizations (entities) use to manage their financial
affairs, particularly the differences between income
and expenditure and the risks of their investments.
An entity whose income exceeds its expenditure can
lend or invest the excess income. On the other hand,
an entity whose income is less than its expenditure
can raise capital by borrowing or selling equity claims,
decreasing its expenses, or increasing its income. The
lender can find a borrower, a financial intermediary,
such as a bank or buy notes or bonds in the bond market.
The lender receives interest, the borrower pays a higher
interest than the lender receives, and the financial
intermediary pockets the difference.
A bank aggregates the activities of many borrowers
and lenders. A bank accepts deposits from lenders, on
which it pays the interest. The bank then lends these
deposits to borrowers. Banks allow borrowers and lenders
of different sizes to coordinate their activity. Banks
are thus compensators of money flows in space since
they allow different lenders and borrowers to meet,
and in time, since every borrower, in theory, will eventually
Finance is used by individuals (personal finance),
by governments (public finance), by businesses (corporate
finance), etc., as well as by a wide variety of organizations
including schools and non-profit organizations. In general,
the goals of each of the above activities are achieved
through the use of appropriate financial instruments,
with consideration to their institutional setting.
Finance is one of the most important aspects of business
management. Without proper financial planning, a new
enterprise cannot even start, let alone be successful.
As money is the single most powerful liquid asset, managing
money is essential to ensure a secure future, both for
an individual as well as an organization.
- Personal finance
- Business finance
- Shared Services
- Finance of states
- Financial economics
- Financial mathematics
- Experimental finance
- Related Professional Qualifications
Main lists: List of basic finance topics and List of finance topics
- Funding, a synonym of financing
- There are also over 250 other finance articles in Wikipedia. See list of finance topics.
- Important publications in finance
- Financial plan
- Economic Calendar
- Financial planning
- Payday loan
- Settlement (finance)
- Behavioral finance
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