Financing in the Financial Market
Finance is a broad term for things regarding the study, development, and management of financial resources and securities. Financial theory suggests that the behavior of prices, income, distribution, allocation, and savings is determined by three primary forces. These forces interact to cause changes in financial outcomes and institutions. They are called the economic environment, the financial services industry, and the market. All three interact to determine the course of human action and, through it, changes in financial resources and securities.
The study of finances has three important strands: microeconomics, macroeconomics, and public finance. Microeconomics studies the interactions of individuals and firms in markets. Public finance refers to the administration of financial activities by governmental agencies. The three strands of this topic are personal, corporate, and financial activities.
Personal finance pertains to individuals and their actions in regard to their own finances. It includes personal assets, liabilities, income, payroll, estate, and retirement accounts. Corporate finance involves those activities of corporations in buying assets, issuing securities, licensing products, and providing employee benefits. Public finance includes the costs and disbursements made by public institutions in meeting their obligations. All three include taxation and other direct measures in their treatment of the financing of financial activities.
The practice of financial analysis is an essential part of the study of finance. This involves the study of the market, institution, sector, company, and country. To become an effective manager of financial affairs, one must also be knowledgeable about business institutions, public policies affecting finance, and the types of securities used in the market. There are many job titles for financial analysts. Chief financial officers, budget planners, financial consultants, and risk managers are only a few of the titles given to those in this field.
The third strand of finance is that of investment banking. Investment banking, which sometimes also referred to as commercial banking, is the practice of borrowing money to make loans and buy securities for future investment. Broad terms like proprietary, marketable, or reliable are used to describe these investments. The difference between these types of finance and traditional banking is that modern investment banking transactions usually take place over short periods of time rather than long periods. The main types of assets being traded in investment banking are government bonds, treasury bills, commercial real estate loans, certificates of deposit, and mortgage backed securities.
The fourth strand of finance is known as commercial lending. This is the sector that lends money for the purposes of purchasing raw materials, equipment, and services needed in production processes and related activities such as advertising and sales. Lending in the commercial lending field includes real estate loans, merchant financing, credit Unites, and financing for start-up companies. In addition, this area of finance also includes derivatives, hedge funds, and private equity.