Question

Explain in detail what the study of finance involves (what constitutes the broad study of finance) (20 marks)

Answer 1

Finance is task of managing money through activities such as investing, borrowing, lending, saving and budgeting. In other words Finance is study of money and includes entire system created to raise, spend, invest and organize the capital require for smoth functioning of Humans all around the globe.

If we trace the origin of finance, there is evidence to prove that it is as old as human life on earth. The word finance was originally a French word. In the 18th century, it was adapted by English speaking communities to mean 'the management of money'.Today, finance is not merely a word else has emerged into an academic discipline of greater significance.

The study of finance involves the study of overall system which includes financial institutions, financial participants, financial intermediaries and general public, This process is streamlined via the financial markets that allow the flow of money, via investments and other financial instruments, between all participants. A major focus within finance is investment management money and finance then includes the associated activities of securities trading & stock broking, investment banking, financial engineering, and risk management.

There are three important areas of Finance-

1. Personal Finance.

2. Public Finance.

3. Corporate Finance

Personal Finance is defined as the Strategic planning of monetary spending saving and investment for an individual while also considering the possibility of future risk and uncertainties.

Public Finance is finance for sovereign states, supranational entities, public institutions etc., it is strategic planning of short term as well as long term finances of these institutions.

Corporate finance deals with the sources of funding and the capital structure of big corporations, MNCs, public companies. It is the strategic planning of short term as well as long term finances of these companies.

Overall the Study of Finance involves the above mentioned institutions and subjects including accountancy, economics and psychology for behavioural finance. Finance is amalgamation of many different disciplines and it teaches us the art of living and surviving amidst the hazy clouds and uncertainities of life.