•   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 action of finance is the application of a set of techniques that individuals and organizations use to manage their monetary dealings, particularly the differences between income and expenses and the risks of their investments.

An individual whose income goes over his expenses can lend or invest the surplus income. On the other hand, an individual whose income is less than its expenses can raise assets by borrowing or selling equity shares, decreasing its expenses, or increasing its income. The lender can find a borrower, a monetary go-between, 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 collects the activities of many borrowers and lenders. A bank accepts deposits from lenders, on which it pays interest. The bank then lends these deposits to borrowers. Banks allow borrowers and lenders of different sizes to organize 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, theoretically, 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 (….)Inc, and they have 100 shares available, you are 1/100 owner of that company. You own 1/100 of anything on the asset side of the balance sheet. Of course, in return for the stock, the company receives cash, which it uses to enlarge 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 finance.

Finance is used by individuals, by governments, by businesses,

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 a variety of points in the future?
•   Where will this money come from (e.g. savings or borrowing)?
•   How can people protect themselves against sudden events in their lives, and risk in financial markets?
•   How can family assets be best transferred across generations (inheritance)?
•   How do taxes (tax funding 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, (health and property insurance), investing and saving for retirement.

Business finance

 In the case of a company, executive finance or corporate finance is the task of providing the funds for the corporations' activities.

It generally engages 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 expanding 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 buyer of a bond can resell the bond, so the actual recipient of interest payments can change over time.

Bonds allow lenders to regain the value of their loan by simply selling the bond.

Another business decision concerning finance is investment, or fund management. An investment is gaining of an asset in the hopes that it will maintain or increase its value. In investment management 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 duplicated 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 company.

Shared Services

There is currently a move towards meeting 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 focuses on influences of real economic variables on financial ones, in difference 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
•   Stocks
•   Bonds
•   Money market instruments
•   Derivatives
•   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 information with the tools of mathematics, mainly statistics. Such data can be movements of stocks and bonds and their relations. Another large subfield is insurance mathematics.

Experimental finance

The goals of Experimental Finance are to establish different market settings and environment to observe experimentally and analyze agents' behavior and the resulting characteristics of trading flows, information dissemination and aggregation, price setting mechanism and returns methods. In view of the negative aspects of financial economics, researchers in Experimental Finance can study to what extent existing theory makes

valid predictions and attempt to discover new principles on which theory can be extended through artificial competitive markets.