FINANCIAL Definition & Meaning

Acquiring and managing debt properly can help a company expand and become more profitable. Personal finance defines all financial decisions and activities of an individual or household, including budgeting, insurance, mortgage planning, savings, and retirement planning. There are any number of professional and personal reasons to study finance. A search of the internet provides a long list of finance-related professions. Interviews with senior managers reveal that an understanding of financial tools and concepts is an important consideration in hiring new employees.

Managerial finance

One common example of anchoring is the conventional wisdom that a diamond engagement ring should cost about two months’ worth of salary. Both forward and options contracts were integrated into Amsterdam’s sophisticated clearing process by the mid-17th century. 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.

Areas of finance

Dodd-Frank also created the Consumer Financial Protection Bureau (CFPB) to protect consumers from harm caused by unscrupulous banking activities. Today, the hope is that financial institutions will be stopped short of the gross negligence evident prior to 2007 and consumers won’t be left out in the cold due to actions beyond their control. The regulation of the financial industry kicked into high gear in the 1930s and for those times and conditions was a necessary development of our financial industry and regulatory oversight.

Behavioral Finance

It does this by managing inflation, reducing unemployment rates, and stabilizing interest rates in a changing economy and market. In addition, the Fed works to stabilize the economy and the financial system by supervising the largest private banks. Financial activities for a business would include budgeting current capital, capital for future years, funding and refinancing projects, and assets to ensure that the company has the best deal possible in the current market.

Return could be the interest earned on an investment in a bond or the dividend from the purchase of stock. Return could be the higher income received and the greater job satisfaction realized from investing in a Forest Arrow college education. This means that for investors to take greater risks, they must have the expectation of greater returns. Investors would not be satisfied if the average return on stocks and bonds were the same as that for a risk-free savings account. Stocks and bonds have greater risk than a savings account, and that means investors expect a greater average return. Issuing a mortgage can be profitable for a bank, but it also allows people to live in their own homes and to pay for them over time.