'Finance' is the science of funds management.[Gove, P. et al. 1961. Finance.
Webster's Third New International Dictionary of the English Language Unabridged.
Springfield, Massachusetts: G. & C. Merriam Company.] The general areas of
finance are 'business finance', 'personal finance', and 'public
finance'.[finance. (2009). In Encyclopædia Britannica. Retrieved June 23,
2009, from Encyclopædia Britannica Online:
http://www.britannica.com/EBchecked/topic/207147/finance] Finance includes
saving money and often includes lending money. The field of finance deals with
the concepts of time, money and risk and how they are interrelated. It also
deals with how money is spent and budgeted. Finance works most basically through individuals and business organizations
depositing money in a bank. The bank then lends the money out to other
individuals or corporations for consumption or investment, and charges interest
on the loans. Loans have become increasingly packaged for resale, meaning that an investor
buys the loan (debt) from a bank or directly from a corporation. Bonds are debt
sold directly to investors from corporations, while that investor can then hold
the debt and collect the interest or sell the debt on a secondary market. Banks
are the main facilitators of funding through the provision of credit, although
private equity, mutual funds, hedge funds, and other organizations have become
important as they invest in various forms of debt. Financial assets, known as
investments, are financially managed with careful attention to financial risk
management to control financial risk. Financial instruments allow many forms of
securitized assets to be traded on securities exchanges such as stock exchanges,
including debt such as bonds as well as equity in publicly-traded corporations. Central banks, such as the Federal Reserve System banks in the United States and
Bank of England in the United Kingdom, are strong players in public finance,
acting as lenders of last resort as well as strong influences on monetary and
credit conditions in the economy.[Board of Governors of Federal Reserve
System of the United States. Mission of the Federal Reserve System.
URL:http://www.federalreserve.gov/aboutthefed/mission.htm. Accessed: 2010-01-16.
(Archived by WebCite at http://www.webcitation.org/5mpS52OAl)]
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