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Finance

2007 Schools Wikipedia Selection. Related subjects: Economics

   Finance

   Finance Overview
   Capital
   Investment
   Cash flow
   Credit
   Debt
   Funding
   Hedging
   Interest
   Risk
   Yield
   Arbitrage

   Types of Finance
   Corporate finance
   Personal finance
   Public finance

   Asset Types
   Real Estate
   Securities
   Commodities
   Futures

   Financial Vehicles
   Collective Investment Schemes
   Trusts

   See Also
   Entrepreneur
   Financial market
   Insurance
   Economy
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   Finance studies and addresses the ways in which individuals,
   businesses, and organizations raise, allocate, and use monetary
   resources over time, taking into account the risks entailed in their
   projects. The term finance may thus incorporate any of the following:
     * The study of money and other assets
     * The management and control of those assets
     * Profiling and managing project risks
     * As a verb, "to finance" is to provide funds for business.

Examples of some basic financial concepts

   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 pay back.

   A specific example of corporate finance is the sale of stock by a
   company to institutional investors like investment banks, who in turn
   generally sell it to the public. The stock gives whoever owns it part
   ownership in that company. If you buy one share of XYZ Inc, and they
   have 100 shares available, you are 1/100 owner of that company. You own
   1/100 of the net difference between assets and liabilities on the
   balance sheet. Of course, in return for the stock, the company receives
   cash, which it uses to expand its business in a process called "equity
   financing". Equity financing mixed with the sale of bonds (or any other
   debt financing) is called the company's capital structure.

   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.

Personal finance

   Questions in personal finance revolve around
     * How much money will be needed by an individual (or by a family) at
       various points in the future?
     * Where will this money come from (e.g. savings or borrowing)?
     * How can people protect themselves against unforeseen events in
       their lives, and risk in financial markets?
     * How can family assets be best transferred across generations
       (bequests and inheritance)?
     * How do taxes (tax subsidies or penalties) affect personal financial
       decisions?

   Personal financial decisions may involve paying for education,
   financing durable goods such as real estate and cars, buying insurance,
   e.g. health and property insurance, investing and saving for
   retirement.

Business finance

   In the case of a company, managerial finance or corporate finance is
   the task of providing the funds for the corporations' activities. It
   generally involves balancing risk and profitability. Long term funds
   would be provided by ownership equity and long-term credit, often in
   the form of bonds. These decisions lead to the company's capital
   structure. Short term funding or working capital is mostly provided by
   banks extending a line of credit.

   On the bond market, borrowers package their debt in the form of bonds.
   The borrower receives the money it borrows by selling the bond, which
   includes a promise to repay the value of the bond with interest. The
   purchaser of a bond can resell the bond, so the actual recipient of
   interest payments can change over time. Bonds allow lenders to recoup
   the value of their loan by simply selling the bond.

   Another business decision concerning finance is investment, or fund
   management. An investment is an acquisition of an asset in the hopes
   that it will maintain or increase its value. In investment management -
   in choosing a portfolio - one has to decide what, how much and when to
   invest. In doing so, one needs to
     * Identify relevant objectives and constraints: institution or
       individual - goals - time horizon - risk aversion - tax
       considerations
     * Identify the appropriate strategy: active vs passive - hedging
       strategy
     * Measure the portfolio performance

   Financial management is duplicate with the financial function of the
   Accounting profession. However, Financial Accounting is more concerned
   with the reporting of historical financial information, while the
   financial decision is directed toward the future of the firm.

Shared Services

   There is currently a move towards converging and consolidating Finance
   provisions into shared services within an organization. Rather than an
   organization having a number of separate Finance departments performing
   the same tasks from different locations a more centralized version can
   be created.

Finance of states

   Country, state, county, city or municipality finance is called public
   finance. It is concerned with
     * Identification of required expenditure of a public sector entity
     * Source(s) of that entity's revenue
     * The budgeting process
     * Debt issuance ( municipal bonds) for public works projects

Financial economics

   Financial economics is the branch of economics studying the
   interrelation of financial variables, s.a. prices, interest rates and
   shares as opposed to those concerning the real economy. Financial
   economics concentrates on influences of real economic variables on
   financial ones, in contrast to pure finance.

   It studies:
     * Valuation - Determination of the fair value of an asset
          + How risky is the asset? (identification of the asset
            appropriate discount rate)
          + What cash flows will it produce? (discounting of relevant cash
            flows)
          + How does the market price compare to similar assets? (relative
            valuation)
          + Are the cash flows dependent on some other asset or event?
            (derivatives, contingent claim valuation)

     * Financial markets and instruments
          + Commodities - topics
          + Stocks - topics
          + Bonds - topics
          + Money market instruments- topics
          + Derivatives - topics

     * Financial institutions and regulation

Financial mathematics

   Financial mathematics is the main branch of applied mathematics
   concerned with the financial markets. Financial mathematics is the
   study of financial data with the tools of mathematics, mainly
   statistics. Such data can be movements of securities - stocks and bonds
   etc. - and their relations. Another large subfield is insurance
   mathematics.

Experimental finance

   The goals of experimental finance are to establish different market
   settings and environments to observe experimentally and analyze agents'
   behaviour and the resulting characteristics of trading flows,
   information diffusion and aggregation, price setting mechanisms, and
   returns processes. Researchers in experimental finance can study to
   what extent existing financial economics theory makes valid
   predictions, and attempt to discover new principles on which such
   theory can be extended. Research may proceed by conducting trading
   simulations or by establishing and studying the behaviour of people in
   artificial competitive market-like settings.

Related Professional Qualifications

   There are several related professional qualifications in finance, that
   can lead to the field:
     * Qualified accountant qualifications: Chartered Certified Accountant
       ( ACCA), Chartered Accountant ( CA), Certified Public Accountant (
       CPA)
     * Non-statutory accountancy qualifications: Chartered Cost Accountant
       CCA Designation from AAFM
     * Business qualifications: Master of Business Administration ( MBA),
       Doctor of Business Administration ( DBA)
     * Finance qualifications: Chartered Financial Analyst (CFA),
       Association of Corporate Treasurers (ACT), Masters degree in
       Finance, Certified Market Analyst (CMA/FAD) Dual Designation,
       Master Financial Manager (MFM), Corporate Finance Qualification
       (CF)
     * Quantitative Finance qualifications: Master of Quantitative Finance
       (MQF), Master of Computational Finance (MCF), Master of Financial
       Mathematics (MFM)

   Retrieved from " http://en.wikipedia.org/wiki/Finance"
   This reference article is mainly selected from the English Wikipedia
   with only minor checks and changes (see www.wikipedia.org for details
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