Finance - What are they? characteristics, types, resources, areas, and more

Finance

Branch of economics responsible for analyzing the acquisition and use of financial resources.

What are finances?

Finance is a branch of economics responsible for analyzing the acquisition and use of financial resources by individuals, so they are the study of money and the decisions made with it.

Economic agents are the main protagonists of finance since they are in charge of carrying out a cash flow, through various resources, in the financial system (the set of markets and other institutions where transactions are carried out).

The theory of finance is comprised of a set of concepts that organize the allocation of resources over time, without ruling out all the possible variants that influence the different alternatives of the protagonist.

The concepts that comprise the theory of finance are valid at all levels of decision making; therefore, they cover common situations, such as the acquisition of an appliance to the commercial strategy of the manager of a world bank.

Correct use of finances allows precise and effective control of the different movements related to money since it provides useful tools to evaluate the different alternatives that can influence, negatively or positively, the final decision-making, such as strategic investments. in the future, the most efficient use of money, among others.

Finance Characteristics

Mentioned below are the main features of finance:

• They allow detailed control of resource management.
• They grant the ability to evaluate different alternatives in decision-making.
• Its opportune study allows making the most favorable strategic decisions.
• They allow proper management of financial resources.
• They are based on several auxiliary disciplines, such as statistics, mathematics, accounting, among others.
• They analyze the allocation of resources over time.
• Its application is valid for all economic agents or situations in which there is a flow of money.

types of finance

The main types of finances are described below:

• Private finance: those that are dedicated exclusively to the study of the management of resources within non-governmental entities or entities, that is, belonging to the private sector. In turn, this type of finance has the following subdivisions:
  • Business finance: those that are dedicated exclusively to the management of resources in private companies and organizations, such as banks or private companies; focusing on the proper functioning and management of the set of resources.
  • Personal finance: those that are dedicated exclusively to the study of the management of resources by individuals.
  • Family finances: those that are dedicated exclusively to the study of resources in the different family nuclei, seeking to optimize the flow of money to obtain effective management of it.
• Public finances: those whose study and management are focused directly on the State and the companies under its charge.

finance resources

Finance resources are listed below:

• Accounting: resource of the finances in charge of measuring, analyzing, observing, and studying the cash flow of a certain subject, be it a company, a family, an individual or the StateAccounting allows you to keep track of previous movements and based on these carry out an effective and timely administration of financial resources.
• Behavioral finances: resource of finances whose focus points to the psychological study of a certain subject (family, individual, etc.). Based on different psychological factors, it tries to determine and explain the different behaviors related to economic agents.

Finance Study Areas

The main areas of study in finance are mentioned below:

• Profitability study: area in charge of analyzing opportune moments in which the risk imposed by an investment decreases or increases. This area is essential because the benefits or negative consequences that it can bring directly affect the economy of the subject.
• Optimal debt management: area in charge of controlling debt levels, so that they remain low and do not produce drastic effects.
• Determination of assets: area in charge of analyzing and valuing certain assets taking into account their risk and other factors that could have repercussions in the future with respect to a said asset.

 

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