subject: Finance, What Does It Mean? [print this page] Finance, what does it mean? The word "finance" means the science of managing funds. This overall topic can be divided into business finance, personal finance, and public finance. The topic of finance includes saving, and lending money, spending and budgeting as well as investing and risk.
A major area of finance is banking. The basic principle of banking is that individuals or business entities deposit money into a bank then the bank lends that money to other individuals or business entities which use or invest it. The bank charges interest to those who borrow the money, sometimes paying interest (at a lower rate) to those who deposit it into the bank.
Investment is an important area of finance, and refers to the handling of financial assets. A good practical definition of an "asset" is something which generates an income. Many people think of cars, houses and other possessions as "assets" but that is misleading because those things usually cost money rather than generating it. One way to become rich is to buy assets.
Public finance is influenced strongly by central banks. Examples of central banks are the Federal Reserve System banks in the USA and the Bank of England in the UK. They usually have a large degree of control over the economy of a country, including monetary and credit conditions.
Socks and shares are sold by a company as a way of raising money it needs and can be purchased by other companies (such as pension funds) or by individuals. Business finance includes such areas of money management as cash flow and profitability which are vital to any business.
Personal finance includes income, expenses, insurance, budgeting, borrowing and credit, debts and debt handling, and cash surplus as well as taxes and leaving ones assets for future generations.
by: Thomas Goldman
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