Sunday, October 1, 2006

Finance Basics

Simply put, Finance is management of money. But Finance is a very widely used term and has numerous meanings for different people. Finance is used by individuals (personal finance), by governments (public finance), by businesses (corporate finance), etc., as well as by a wide variety of organizations including schools and non-profit organizations. In general, the goals of each of the above activities are achieved through the use of appropriate financial instruments, with consideration to their institutional setting.

In the words of John Bentley, “What is high finance? It’s knowing the difference between one and ten, multiplying, subtracting and adding. You just add noughts. It’s no more than that”. But Edmund Burke, an Anglo-Irish statesman, author, orator and political philosopher, observes that “The objects of a financier are, then, to secure an ample revenue; to impose it with judgment and equality; to employ it economically; and, when necessity obliges him to make use of credit, to secure its foundations in that instance, and for ever, by the clearness and candor of his proceedings, the exactness of his calculations, and the solidity of his funds”.

The pen is mightier than the sword, but no match for the accountant. Glancey, Jonathan
Jonathan Glancey is an architectural critic and writer. As of 2004, he is the architecture and design editor at The Guardian,

The purpose of this blog is to disseminate knowledge on Finance. Since it is easy to be overwhelmed with the range of knowledge and insight on Finance, we have divided the blog into two main sections: Personal Finance and Business Finance.

Personal Finance revolves around the financial planning of an individual for his family, his retirement planning, and wealth or asset creation. Tax planning, Insurance, House finance, Gold, Stocks, Mutual Funds, wills, bequests and inheritance form part of personal finance. More and more instruments like options, metals, commodities, etc are making the scene more intriguing and interesting.

Business Finance revolves around the financial management of the funds of the company, These funds can be “owned” and/or “owed”. Balancing risk and profitability is the broad objective of the firm so as to maximize shareholders value.

Eventually as Narayanan Murthy says, “the power of money is the power to give it away’. It may be comparatively easy to learn finance when compared to having a purposeful and peaceful life. So we’ll keep ourselves limited to Finance!

For starters go to this link from Wharton:

Between eighteen and twenty, life is like an exchange where one buys stocks, not with money, but with actions. Most men buy nothing.
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