Finance is a term that addresses matters regarding the management, creation, and study of money and investments. It involves the use of credit and debt, securities, and investment to finance current projects using future income flows. Finance is closely linked to the time value of money, interest rates, and other related topics because of this temporal aspect.
Understanding Finance
Finance is typically broken down into three broad categories: public finance, corporate finance, and personal finance.
Public finance includes tax systems, government expenditures, budget procedures, stabilization policies and instruments, debt issues, and other government concerns. Corporate finance involves managing assets, liabilities, revenues, and debts for businesses. Personal finance defines all financial decisions and activities of an individual or household, including budgeting, insurance, mortgage planning, savings, and retirement planning.
Finance arose as a study of theory and practice distinct from the field of economics in the 1940s and 1950s. It began with the works of Harry Markowitz, William F. Sharpe, Fischer Black, and Myron Scholes.123 Particular realms of finance such as banking, lending, and investing have been around in some form since the dawn of civilization.
The financial transactions of the early Sumerians were formalized in the Babylonian Code of Hammurabi around 1800 BCE. This set of rules regulated ownership or rental of land, employment of agricultural labor, and credit.