Talk:Finance

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abstruse terms[edit]

It's literally ridiculous to be using such abstruse terms as "the economics of contingent claims." If your aim is to educate, then use language that more than one half of one percent of your audience can understand. But your use of this term makes it abundantly clear that your aim is not to educate, but try to show how "smart" you are. And that's not a smart thing to do. —Preceding unsigned comment added by 69.113.188.66 (talk) 05:16, 27 March 2008 (UTC)

  • Actually the economics of contingent claims (that is, option theory) is critical to the understanding of finance. What is ridiculous is that no attempt has been made to achieve a uniform level of discussion. That contingent claims theory is discussed in the same article as how to collect an unpaid bill is what's ridiculous. I think the author needs to start over, or, more likely, a different author should give the topic a try. The List of finance topics entry is excellent and would make a much better starting point. Stephen A. Ross' entry "Finance" in the New Palgrave Dictionary of Economics also provides an outstanding overview of aspects of financial thinking, although at a quite technical level. 69.243.144.144 (talk) 01:18, 3 January 2009 (UTC)Larry Siegel
  • The notion of this whole article is ridiculous because FINANCE is not the SCIENCE OF FUND MANAGEMENT, or any of the other horseshit definitions stated in this article. FINANCE is the FUNDING OF [THINGS]. Banks finance the construction of a building. Governments finance the construction of roads and bridges. Shareholders finance the capital of a corporation. Fucking progressive juvenile idiots.

Term[edit]

There are several links to Finance and Financial and the term probably deserves some kind of separation from the theoritical Financial economics. The former redirection to Finance and investment makes no sense, especially since there is a separate entry for just Investment. There is alot of work that should be done within the finance field, both at writing articles and stubs, but also in tying loose ends togeather and trying to achieve at least some kind of workable structure. -- Mic 10:53 Apr 11, 2003 (UTC)

Mic, its gotten a lot better! :) But the list of finance topics included in this article, should be yanked out and a link should be put in its place to List of finance topics. I will do this after checking for differeences in the lists, unless anyone raises any serious objections. - Taxman 21:21, May 5, 2004 (UTC)
Good idea. I was getting tired of making duplicate entries, one for each list. A single list should do fine. You might also want to get rid of the list at mathematical finance. Its largely a duplicate of the main list. mydogategodshat 18:49, 7 May 2004 (UTC)
The redundant one in Finance is gone. I verified line-by-line that there were no links deleted that weren't in List of finance topics. As for mathematical finance, I think it is correct and standard practice for a subtopic to have a list of topics under that specific subtopic. What needs to be done though is to add any links from the mathematical finance article into List of finance topics that aren't already there. - Taxman 00:17, May 9, 2004 (UTC)

There is a fourth topic beyond commodities, stocks, bonds - currencies. It should be included for completeness. Hannes Tilgner

Links[edit]

Anyone know about these links? Do they belong here? Any comments?

To me they seem not very appropriate for the general finance article, maybe more appropriate for public finance or a separate article on financing education in the US, as they are all US related it appears. - Taxman 23:28, Jun 23, 2004 (UTC)
These links deal with very specific issues. I dont think we have articles on these topics yet. If you know anything about public school financing you could start an article and add the links there. mydogategodshat 02:53, 25 Jun 2004 (UTC)

Lead section[edit]

Wow, can you please discuss before making that radical of a change? I do not think it is better, and not very general or accurate. What about risk? Characterizing it as only the diff between income and expense is very oversimplified. - Taxman 14:19, Dec 14, 2004 (UTC)

Someone put the page up on Wikipedia:Cleanup, which is what brought me here. I didn't make all of the changes I had in mind; I only got so far as debt before I realized I needed to go to bed. I didn't delete anything; I just added new material at the top.
Well thanks for coming, there was no cleanup tag put here, so we didn't know. We welcome your efforts to improve the article. It is not that great now, but it needs to be done so that it is as general as possible and ecompasses the whole field. - Taxman 20:29, Dec 14, 2004 (UTC)
The page as it stands doesn't answer the question of what finance is for. Once you know finance is for, you can talk about how risk enters into pricing financial instruments, but for a general-purpose encyclopedia article, you need to start at a more elementary level. Anyway the previous version of the article was awfully academic. Financial economics is the study of finance; finance is not just the applied form of financial economics. The average person who buys a house doesn't think too much about the time value of money when they get a mortgage, for example. The financial markets existed before financial economics was around to explain them, etc. -- Walt Pohl 16:51, 14 Dec 2004 (UTC)
You're missing the big picture. It's not all about financial instruments. Risk must be considered as a much more fundamental issue than price of financial instruments. The issue is that finance covers a broad area and a lot of parts: capital decisions, debt and equity financing of corporations, risk management and insurance, personal finance, investment, and a lot of other areas. Now of course the beginning should be as accessable as possible to the lay person, but it should be correct and general too. What do you have in mind? - Taxman 20:29, Dec 14, 2004 (UTC)
Thinking about it some more, I probably should say more about risk than I originally was planning on. Why don't I just do it, and you can judge it then? -- Walt Pohl 05:03, 15 Dec 2004 (UTC)
I have removed "The simplest form of financial activity is debt." because it is obviously untrue. There are many forms of financial activity that are simpler than mortgages, bonds, and loans, for example, a cash purchase to name just one. I also doubt the value of the new material. If seems that the article is turning into a meandering description of select finance topics instead of being a concise introduction to finance in general terms. mydogategodshat 18:12, 14 Dec 2004 (UTC)
By your definition, what doesn't count as finance? Barter? -- Walt Pohl 05:03, 15 Dec 2004 (UTC)
I am not defining finance. The removed statement is about "financial activities" which is much broader than finance. Even if we changed the statement to read "In finance, the simplest form of activity is debt.", I still have doubts about it. I think that it can be argued that areas of working capital management are simpler than debt financing. Try floating a bond issue and by time you've paid hundreds of thousands of dollars in legal, accounting, and brokerage fees you will be longing for the simplicity of cash flow budgeting. At any rate, its probably unnecessary to claim that one area of finance is the simplest. mydogategodshat 05:44, 15 Dec 2004 (UTC)
If we decide to start adding select finance topics to this article, we have to decide which ones. Probably the most general finance topic is the time value of money, discounting, NPV, ect. These concepts are used in all of finance. mydogategodshat 02:49, 15 Dec 2004 (UTC)
Maybe, but this is still a rather academic view of finance. Plenty of individuals or businesses make financial decisions without using anything like NPV (even though they should). -- Walt Pohl 05:03, 15 Dec 2004 (UTC)
You seem to have an anti-academic predisposition. I see no problem with including these core finance topics. Your statement that plenty of individual or businesses make financial decisions without using these core finance techniques is quite true. But you have to ask, Is it finance. I would argue that making a financial decision is not the same as finance. Buying a chocolate bar is a financial decision: It is not finance. Using your "anti-academic" definition, how do you differentiate finance from management accounting or managerial economics. mydogategodshat 06:37, 15 Dec 2004 (UTC)

I have added a paragraph at the beginning on what finance is for. I think it makes a nice intro to the article. However, the article needs much more work. In addition, the para just after mine is now out of place and should probably be rewritten or deleted, but I don't like to delete other people's work. 69.243.144.144 (talk) 01:27, 3 January 2009 (UTC)Larry Siegel

That's not a terribly encyclopedic lead section; I would prefer we stick to definitional text. Kuru talk 01:59, 3 January 2009 (UTC)
Actually this article is so bad that I don't mind your deletion of my lede. The whole thing needs to be written again, preferably by someone with a graduate finance education from a top 15 business school. 162.83.248.98 (talk) 03:03, 6 January 2009 (UTC)Larry Siegel

The financial economics section[edit]

I am not comfortable with the financial economics section as it currently reads. It basicly claims that financial economics consists of asset valuation, financial markets, financial institutions, and financial instruments. The problem is not that these arn't part of financial economics. They are. The problems is that they are also part of finance proper. I have dug up my old notes from financial economics and from finance courses annd there is considerable overlap in topics. However there is a difference in the way they are presented. Financial economics gets to these topics by studying the role of money in the economy, at the micro level (risk, portfolio analysis, etc.) and also at the macro level (financial flows, demand for money, deposit multiplier, etc.). Finance proper gets to them from a more practical angle, from the perspective of the user of the financial assets, and from the decisions that an individual or organization is about to make. Any comments? mydogategodshat 22:10, 12 Jan 2005 (UTC)

Portal[edit]

There is a new portal. See Wikipedia:Wikiportal/Business, Economics, Finance. Maurreen 03:45, 18 July 2005 (UTC)

Improvement Drive[edit]

The article Grameen Bank is currently nominated to be improved on Wikipedia:This week's improvement drive. If you want to support the article, you can vote for it there.--Fenice 09:05, 9 August 2005 (UTC)

error : explanation of share[edit]

From the section "Examples of some basic financial concepts" : <quote> The stock gives whoever owns it part ownership in that company. If you buy one share of XYZ Inc, and they have 100 shares available, you are 1/100 owner of that company. You own 1/100 of anything on the asset side of the balance sheet. <unqoute> Actually, share holder's equity = assets - liabilities. Therefore the last sentence should be : You own 1/100 of the net difference between assets and liabilities on the balance sheet.

  • Actually, you're both right. You own 1/100 of the asset side of the balance sheet, and you owe 1/100 of the liability side (but you do not owe more than the amount of your investment in the stock; you have "limited liability." So a condensed way of saying this is that you own 1/100 of the net difference. [Special:Contributions/69.243.144.144|69.243.144.144]] (talk) 01:33, 3 January 2009 (UTC)Larry Siegel

Interproject cooperation - finance, business, economics[edit]

The main article on management links to Financial Management, which links directly here, with no note of it being redirected. This article says that Financial Management is historical accounting, not managing financial resources. How do we solve this? --SueHay 14:59, 9 March 2007 (UTC)

Finance Picture (2013 revisit)[edit]

Is it not slightly America-centric to have a Wall Street sign? Is there not some symbol slightly more universal? 89.213.1.85 16:56, 18 May 2007 (UTC) How about a red shield? That's pervasive globally though they're good at hiding it.

--76.83.249.234 07:07, 12 July 2007 (UTC)

More than six years on, and I can only second this concern. Let's take suggestions here for updates. Feel free to list ideas below. I have added mine. prat (talk) 02:52, 20 November 2013 (UTC)

- generalized cash images (money)
Generally uninformative and pandering again to a base understanding of the area rather than being illustrative. However, images are very much available already. prat (talk) 02:52, 20 November 2013 (UTC)
- surprising cash images (historic money)
Historic money of the island of Yap - a huge piece of rock! Defines more clearly the breadth and logistics of finance as an historic and present day profession!
- generalized trade images (diagrams explaining relationships between buyer and seller in financial terminology, for example accounting for assets liabilities on each party)
As the forefather of financial systems, trade is perhaps the best subject upon which to focus image selection. prat (talk) 02:52, 20 November 2013 (UTC)
- generalized conceptual diagrams of financial instruments (eg. illustrating state and non-stated issued assets: the popularly familiar state-issued money, market-style consolidated ledger assets (stocks/bonds), other assets such as carbon credits, non-state issued assets (precious metals, cryptographic currencies, etc.)
Probably one of the most applicable options. There seems to be a shortage of these on commons - can't find even one. We don't want to fall too heavily in to Money though, but rather illustrate the breadth of the area of finance more readily than a simple allusion to Wall Street. prat (talk) 02:52, 20 November 2013 (UTC)
- money in art
Josef Wagner's Höhenberg Beim Notar. A bit stereotypical, but at least less US-centric.

Let's aim to make a decision on this before 2014. prat (talk) 02:52, 20 November 2013 (UTC)

Cleanup tag[edit]

Normally I hesitate to put such tags on articles, but I thought it important to tag this one. This is a very important topic, but much of the content consists of bullet points, almost as if it was taken from a Powerpoint presentation! Could someone knowledgeable in this area please review this material and fill it out with prose? An encyclopedia should have more than a series of short lists. Thanks, Walkerma 02:17, 22 September 2007 (UTC) I also think that the number of tiny sections is excessive - this is part of the same "pseudo-Powerpoint" problem. If headings like Disadvantages of credit trade need to be there (though I'm unconvinced!) they should be written as ;Disadvantages of credit trade, which will appear as Disadvantages of credit trade. Walkerma 02:26, 22 September 2007 (UTC)

Concur that the article is in sorry state at the moment. The middle third of the article does indeed seem to be a simple outline which needs to either be fleshed out or removed. I'll be happy to start a purging this weekend; and I'll try to locate cites for the remaining material. Kuru talk 03:23, 11 October 2007 (UTC)

Essential Confusion[edit]

The confusion is not limited to the editors working on the article. The general topic of money, whence it comes and how it is managed, the topic in question, is subject to a general societal obfuscation. The article is merely a reflection of this fact. Still, just taking the "management of money/wealth" tack and putting effort into a well composed article would remedy the situation. 74.78.162.229 (talk) 01:08, 30 June 2008 (UTC)

Paragraph Order[edit]

I think the following paragraphs should be reversed in order. The first talks about an example of corporate finance, but the second is the one that introduces the fact that there are several types of finanace (amongst them, corporate)

A specific example of corporate finance is the sale of stock by a company to institutional investors like investment banks, who in turn generally sell it to the public. The stock gives whoever owns it part ownership in that company. If you buy one share of XYZ Inc, and they have 100 shares outstanding (held by investors), you are 1/100 owner of that company. Of course, in return for the stock, the company receives cash, which it uses to expand its business in a process called "equity financing". Equity financing mixed with the sale of bonds (or any other debt financing) is called the company's capital structure.

Finance is used by individuals (personal finance), by governments (public finance), by businesses (corporate finance), 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.

—Preceding unsigned comment added by 189.216.191.243 (talk) 07:08, 12 July 2008 (UTC)

I agree. I have restructured the section The main techniques and sectors of the financial industry, reviewed its grammar and (I hope) clarified the expression, including re-sequencing some of its ideas. yoyo (talk) 18:59, 9 July 2010 (UTC)

Confusing List[edit]

* Financial institutions can use short-term savings to lend out in the form of short-term loans:
o Credit on open account o Bank overdraft
o Short-term loans
o Bills of exchange
o Factoring of debtors


It sounds as if a short-term loan is a type of short-term loan —Preceding unsigned comment added by 189.216.245.27 (talk) 17:29, 14 July 2008 (UTC)

One simple question[edit]

When we talk about the Fed, or another country's central bank, "raising the interest rates", who does the interest get paid to? In other words, if the central bank loans money to the government at interest, who is ultimately receiving those interest payments? Someone with knowledge of public finance, please respond--inquiring minds want to know! —Preceding unsigned comment added by 207.155.244.69 (talk) 23:54, 18 February 2009 (UTC) the interest, or eventually profit, will go to the private owners of the fed, regular rich citizens get the interest. —Preceding unsigned comment added by 72.131.14.164 (talk) 05:33, 5 March 2009 (UTC) so, doesn't it seem kind of oppressive that one private group of rich people has a monopoly over the debt of an entire nation?? shouldn't that money get used for the public good?

Loaning money in normal times is not one of the roles of a central bank. Especially not to the government. Regardless, this question does not belong to this article. However, in answer to your question, typically most of the money gets paid back to the government. E.g. the Federal Reserve made a profit of $82 billion in 2010 and transferred $79 billion to the U.S. Treasury. Furthermost (talk) 22:45, 6 November 2011 (UTC)

foreclosures[edit]

foreclosures are still at very high levels heading into the later stage of the first quater of the year. There is however also a lot of interest in the Florida foreclosure home market from the bargain hunters who are eager to find a bargain. With recovery at least 12 - 18 months away it’s a good time to be looking although some adviser say your better to wait for the first signs of the turn around before buying into the market. At least that way you know where the bottom of the cycle is and stand to make the most from your purchase. Florida is one of the most popular destinations in the US and future prospects should always be positive if you buy right and always remember some of the basic rules of real estate investment Amy Cooper [foreclosures] —Preceding unsigned comment added by Amycooper (talkcontribs) 09:33, 21 April 2009 (UTC)

Accuracy dispute[edit]

I disagree with the first stentence. It says, "The field of finance refers to the concepts of time, money and risk and how they are interrelated." That sentence is wrong. First, this article is not called "field of finance." Second, finance does not mean "concept of time." It also does not mean "concept of risk." Finance is how people obtain income to spend. When you say, "How am I going to finance that" you don't mean borrow money for it. You mean get income for it. Borrowing is sometimes a complication, but it is not the meaning. The sentence sounds like a public speaker's sizzler. However, this is an encyclopedia. The first sentence should not make you wonder what you're talking about. It should tell you what you're talking about. And you are not talking about borrowing.--Chuck Marean 18:00, 23 June 2009 (UTC)

I think you're talking about financing, not finance which is a field. Banking for instance is in the field of finance, and there is much more to it than obtaining money, there is expenditure and balance as well. For instance most companies have a Finance department, which isn't all about how you obtain income, there's outgoingings, payments, salaries, depreciation, budgeting, assets, costings and all manner of other activities in the larger field of Finance. Canterbury Tail talk 19:59, 23 June 2009 (UTC)
Your edit removed referenced material. What you returned it to does not make sense. For example, "Banks are the main facilitators of funding through the provision of credit." Credit means borrowing and not funding. They don't give away money. The sentence does not explain how "the provision of credit" would finance anything. The meanig of most of the words in that paragraph are not explained, and it is therefore showing off rather than explaining something. According to the ordinary meaning of the term, finance does not mean going into debt. It means getting money to pay debts so that you are not in debt. Also, lenders check with each other to limit the amount they allow you to be in debt. Credit is not how you are paying for your car. If finance is a field, it is probably called the collections department. What I wrote is based on artiles entitled "finance." The beginning of this article should point out that you finance something from income, because debts are not grants. The article should not be from the point of view of investors. Using the word "risk" is not good enough. "How are you going to pay back the money" means something, however. --Chuck Marean 16:37, 24 June 2009 (UTC)
Err, you lost me when you said "credit means borrowing and not funding". Banks provide credit. See credit (finance). That's why they issue "credit cards". The term "lender" is synonymous with "creditor". And actually, according to the ordinary use of "finance", it does often mean going into debt. Finance itself is just gathering capital, I suppose. However, if I finance a start-up, that means I raise capital and I owe money to the people who gave me that capital (I owe it either through interest payments, or through a return on equity). II | (t - c) 17:01, 24 June 2009 (UTC)
I replaced the "no references" tag with the "needs more references" tag. I added: "Finance is the science of funds management.[1] The general areas of finance are business finance, personal finance, and public finance.[2] Finance includes saving money and often includes lending money. In lending, the original investor buys the debt or equity security in the primary securities market. The next owner of the security buys it in the secondary market. Commercial banks sell bonds and lend money. Central banks sometimes print money to lend.[3] The field of finance . . ." which I hope is OK.--Chuck Marean 18:37, 24 June 2009 (UTC)
I actually think this addition was OK. Can we come to a compromise by adding that back to the lead, and forget all these tags? II | (t - c) 21:17, 24 June 2009 (UTC)

It is pretty clear that Chuck Marean doesn't understand finance, and he shouldn't be allowed to make these changes.

Classic case of layman's misconception of what finance means. — Preceding unsigned comment added by 202.1.105.231 (talk) 08:07, 9 August 2011 (UTC)

The lead[edit]

Re: “The field of finance deals with the concepts of time, money and risk and how they are interrelated. 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. 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.”

  • This is not a trade journal. It has too many links. It is only talking about secutities. When people “do their finances” they are not talking about stocks and bonds. When you “finance something” you are getting the income to pay for it. That means income rather than borrowing. There is business finance, personal finance, and public finance, which the paragraph doen’t mention at all. Did a wikipedian write it, or was it copied and pasted from a trade journal or advanced chapter of a book? Is it original research. It sounds like from a banker or stock broker's point of view.--Chuck Marean 21:43, 24 June 2009 (UTC)
I'll admit that I wrote that version of the lead, [1] and I'll admit it reads more like an overview of corporate finance and financial markets. I support adding back the information you added, and so I added it back [2]. II | (t - c) 23:00, 24 June 2009 (UTC)
Re:When you finance something, you are getting the income to pay for it -- NO. Financing something means borrowing the money in order to purchase it. Borrowed money is not income. Due to interest payments on the debit, is a net outflow. —Preceding unsigned comment added by 71.167.144.32 (talk) 00:25, 7 April 2011 (UTC)

69.146.168.219 (talk) 06:43, 9 July 2009 (UTC)Finance, quite simply put, is the management of a person or company's wealth. I looked through this article a bit and it is an absolute nightmare. I see a lot of comments in here from several different people but I do not see them backing up their knowledge of the subject. I don't really care for Wikipedia as I cannot use it for any of my schoolwork but I have to say that this article definitely needs to be written by someone who knows what they are talking about. I am a finance major but I do not have the time or the patience to do it, nor do I want to as I do not care for writing. Please get someone on this who knows what they are talking about! 69.146.168.219 (talk) 06:43, 9 July 2009 (UTC)Caprice69.146.168.219 (talk) 06:43, 9 July 2009 (UTC)

why My link is often reverted?[edit]

The links I submitted were for the individual blog entries which are purely informative in nature and have no commercial interests in them whatsoever. Hence I kindly consider the links in your external links section. spam://www.brooklyntroy.com/index.php/blog/Using-your-Self-Directed-IRA-to-obtain-non-recourse-loans.html —Preceding unsigned comment added by Sundar77 (talkcontribs) 09:22, 26 October 2009

Sundar77, the link you have given certainly does promote commercial interests. It's advertising the "brooklyn troy" firm. Please read WP:ELNO, WP:SPAM, and/or WP:LINKSPAM. tedder (talk) 08:12, 13 November 2009 (UTC)

Compensators of money flow[edit]

The section The main techniques and sectors of the financial industry contains the sentence:

Banks are thus compensators of money flows in space.

My difficulty with that sentence is that I don't understand it, and I doubt many readers would either. Here are some issues I have with that statement:

  • Why is the flow in space more significant than that in time?
  • In a fiat money economy, is a "money flow in space" anything more than an information flow?
  • In what way does a bank act to compensate a lender for moving money from one place to another?

Therefore I intend to remove it, pending somebody's explanation or improved re-statement of its essential insight. yoyo (talk) 19:14, 9 July 2010 (UTC)

accounting architecture[edit]

I NEED MEANING OF ACCOUNTING ARCHITECTURE. —Preceding unsigned comment added by 122.167.49.151 (talk) 05:58, 1 September 2010 (UTC)

Adding references for the article[edit]

There are some good references for some topics discussed in the article. I've tried to contribute them but they were deleted. Any idea why? — Preceding unsigned comment added by Inteligentwriter (talkcontribs) 16:55, 14 February 2011 (UTC)

The only link you added was to a low content, ad-covered opinion column to support the word "credit card". Why do you feel this was a reliable source or that the word needed a reference? Was there some other addition you were alluding to? Kuru (talk) 19:03, 14 February 2011 (UTC)

The lead[edit]

The lead is appalling it is irrelevant and too long, I can't believe this article has slipped from B grade. Sort it out.--Editorforthegood (talk) 19:29, 2 November 2011 (UTC)

Etymology[edit]

I came here looking for the etymology of the word finance and believe it would be a relevant addition to this article. — Preceding unsigned comment added by AiwarikiaR (talkcontribs) 16:03, 5 April 2012 (UTC)

Definition seems a little drab[edit]

I prefer the investopedia definition which focuses on financial topics as opposed to Webster's which is more general

Finance can be defined as the science that describes the management, creation and study of money, banking, credit, investments, assets and liabilities. Finance consists of financial systems, which include the public, private and government spaces, and the study of finance and financial instruments, which can relate to countless assets and liabilities. Some prefer to divide finance into three distinct categories: public finance, corporate finance and personal finance. All three of which would contain many sub-categories.

http://www.investopedia.com/terms/f/finance.asp#ixzz1se07ZOF0

--Vfranks10 (talk) 04:07, 21 April 2012 (UTC)

I agree that is a better definition. I will rewrite it a bit and make it the lead sentence. This article is so horribly written. The Sound and the Fury (talk) 23:44, 27 April 2012 (UTC)

Discussion on information removed from article[edit]

I have restructured the page to a significant degree and moved a lot of information from the page to this talk page. I thought it was redundant, annoying, and generally useless on the page. No offense to whoever wrote it. Big lists of bullet points I do not think are particularly helpful to readers, in my estimate. Please discuss any disagreement with my changes here. The below area is reserved just for directly removed information, verbatim. The Sound and the Fury (talk) 23:47, 27 April 2012 (UTC)

I'm done for now. I think hacking out all the junk makes the article much more readable and useful to the public. There is still a bunch of work to do on this and the branch articles, but I think we've made some solid improvements here. The Sound and the Fury (talk) 00:18, 28 April 2012 (UTC)

Removed info below here[edit]

Areas of study within (and the interactions among) these three levels affect all dimensions of social life: politics, taxes, art, religion, housing, health care, poverty and wealth, consumption, sports, transportation, labor force participation, media, and education. While each has a vast accumulated literature of its own, the effects of macro and micro level financing that mold and impact these and other domains of human and societal life typically have been treated by researchers as “policy,” “welfare,” “work,” “stratification,” and so forth, or have been largely unexplored. Recent research in "behavioral finance" is promising, albeit a relative newcomer, to the existing body of financial research that focuses primarily on measurement.

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 instruments sold to investors for organizations such as companies, governments or charities.[1] The 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.

Three overarching divisions exist within the academic discipline of finance and its related practices: 1) personal finance: the finances of individuals and families concerning household income and expenses, credit and debt management, saving and investing, and income security in later life, 2) corporate finance: the finances of for-profit organizations including corporations, trusts, partnerships and other entities, and 3) public finance: the financial affairs of domestic and international governments and other public entities. [2]

Finance is structured and regulated within political economies across global markets. It is both art (e.g. product development) and science (e.g. measurement), although these activities increasingly converge through the technical and institutional focus on measuring and hedging risk-return relationships that underlie shareholder value. Networks of financial businesses exist to create, negotiate, market, and trade in complex financial products and services for their own as well as their clients’ accounts. Financial performance measures assess the efficiency and profitability of investments, the safety of debtors’ claims against assets, and the likelihood that derivative instruments will protect investors against a variety of market risks.

The financial system consists of public and private interests and the markets that serve them. It provides capital from individual and institutional investors who transfer money directly and through intermediaries (e.g. banks, insurance companies, brokerage and fund management firms) to other individuals, firms, and governments that acquire resources and transact business. With the expectation of reaping profits, investors fund credit in the forms of (1) debt capital (e.g. corporate and government notes and bonds, mortgage securities and other credit instruments), (2) equity capital (e.g. listed and unlisted company shares), and (3) the derivative products of a wide variety of capital investments including debt and equity securities, property, commodities, and insurance products.

Management of current assets[edit]

Credit policy[edit]

Credit gives the consumer the opportunity to buy, purchase or acquire goods and services, and pay for them at a later date. This has its advantages and disadvantages as follows:

Advantages of credit trade[edit]
  • Usually results in more customers than cash trade.
  • Can charge more for goods to cover the risk of bad debt.
  • Gain goodwill and loyalty of customers.
  • People can buy goods and pay for them at a later date.
  • Farmers can buy seeds and implements, and pay for them only after the harvest.
  • Stimulates agricultural and industrial production and commerce.
  • Can be used as a promotional tool.
  • Increases sales.
  • Modest rates to be filled.
  • Can be a marketing tool.
Disadvantages of credit trade[edit]
  • Risk of bad debt.
  • High administration expenses.
  • People can buy more than they can afford.
  • More working capital needed.
  • Risk of bankruptcy.
Forms of credit[edit]
  • Suppliers credit
  • Credit on ordinary open account
  • Installment sales
  • Bills of exchange
  • Credit cards
  • Contractor's credit
  • Factoring of debtors
  • Cash credit
  • Cpf credits
  • Exchange of product
Factors which influence credit conditions[edit]
  • Nature of the business's activities
  • Financial position
  • Product durability
  • Length of production process
  • Competition and competitors' credit conditions
  • Country's economic position
  • Conditions at financial institutions
  • Discount for early payment
  • Debtor's type of business and financial position
Credit collection[edit]
Overdue accounts[edit]
  • Attach a notice of overdue account to statement.
  • Send a letter asking for settlement of debt.
  • Send a second or third letter if first is ineffectual.
  • Threaten legal actions.
Effective credit control[edit]
  • Increases sales
  • Reduces bad debts
  • Increases profits
  • Builds customer loyalty
  • Builds confidence of financial industry
  • Increase company capitalisation
  • Increase the customer relationship
Sources of information on creditworthiness[edit]
  • Business references
  • Bank references
  • Credit agencies
  • Chambers of commerce
  • Employers
  • Credit application forms
Duties of the credit department[edit]
  • Legal action
  • Taking necessary steps to ensure settlement of account
  • Knowing the credit policy and procedures for credit control
  • Setting credit limits
  • Ensuring that statements of account are sent out
  • Ensuring that thorough checks are carried out on credit customers
  • Keeping records of all amounts owing
  • Ensuring that debts are settled promptly
  • Timely reporting to the upper level of management for better management.

Stock[edit]

Purpose of stock control
  • Ensures that enough stock is on hand to satisfy demand.
  • Protects and monitors theft.
  • Safeguards against having to stockpile.
  • Allows for control over selling and cost price.
Stockpiling
Main article: Cornering the market

This refers to the purchase of stock at the right time, at the right price and in the right quantities.

There are several advantages to the stockpiling, the following are some of the examples:

  • Losses due to price fluctuations and stock loss kept to a minimum
  • Ensures that goods reach customers timeously; better service
  • Saves space and storage cost
  • Investment of working capital kept to minimum
  • No loss in production due to delays

There are several disadvantages to the stockpiling, the following are some of the examples:

  • Obsolescence
  • Danger of fire and theft
  • Initial working capital investment is very large
  • Losses due to price fluctuation
Rate of stock turnover

This refers to the number of times per year that the average level of stock is sold. It may be worked out by dividing the cost price of goods sold by the cost price of the average stock level.

Determining optimum stock levels
  • Maximum stock level refers to the maximum stock level that may be maintained to ensure cost effectiveness.
  • Minimum stock level refers to the point below which the stock level may not go.
  • Standard order refers to the amount of stock generally ordered.
  • Order level refers to the stock level which calls for an order to be made.

Cash[edit]

Reasons for keeping cash[edit]
  • Cash is usually referred to as the "king" in finance, as it is the most liquid asset.
  • The transaction motive refers to the money kept available to pay expenses.
  • The precautionary motive refers to the money kept aside for unforeseen expenses.
  • The speculative motive refers to the money kept aside to take advantage of suddenly arising investment opportunities.
Advantages of sufficient cash[edit]
  • Current liabilities may be catered for meeting the current obligations of the company
  • Cash discounts are given for cash payments.
  • Production is kept moving
  • Surplus cash may be invested on a short-term basis.
  • The business is able to pay its accounts in a timely manner, allowing for easily obtained credit.
  • Liquidity
  • Quick upfront pay.



Corporate finance is a business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created for transacting and trading assets, liabilities, and risks.

Edits to lede[edit]

"Finance is the study of how investors allocate their assets over time in a risky world." The mention of "investors" and "risky world" is way too specific. --NeilN talk to me 20:53, 9 May 2012 (UTC)

Agree. The Sound and the Fury (talk) 21:23, 9 May 2012 (UTC)

Quote from Fama and Miller (1972), The Theory of Finance: "The theory of finance is concerned with how individuals and firms allocate resources through time." This is for certainty and it's the same with uncertainty. (p. 1, sentence 1) — Preceding unsigned comment added by Sigiheri (talkcontribs) 21:53, 9 May 2012 (UTC)

What about governments? --NeilN talk to me 22:05, 9 May 2012 (UTC)
Better that we use more broad language at least to kick the article off. Can narrow it down later. Obviously NeilN's objection here is sustained. The Sound and the Fury (talk) 23:35, 15 May 2012 (UTC)

I wanted to understand the differences in opinion with this lead: [3]. It says "Finance is the study of how investors allocate their assets over time under conditions of certainty and uncertainty. " ; but is that what finance is? The study of how investors allocate their assets? What about information simply about bonds and equities, that is part of finance, and yet describing the characteristics of bonds or a bond is not the same as a discussion of how investors allocate their money. The second problem I have with this sentence is "over time under conditions of certainty and uncertainty." To begin with, "over time" is obviously redundant. Everything happens in time. Secondly, what are "conditions of certainty and uncertainty"? What does this mean? I assume this was simply changed from "risky world" but it means even less. The sentence I introduced was "Finance refers to the management, creation and study of money, banking, credit, investments, assets, and liabilities." This was I think a close approximation to Investopedia or perhaps the Mishkin text. In any case, the lead should be broad enough to encompass the subject and it should be good. The Sound and the Fury (talk) 17:35, 28 May 2012 (UTC)

The lead sentence is verbatim from Fama and Miller 1972. I would say that they are right, wouldn't you? I disagree that "over time" is redundant. And I don't see what the problem is with certainty and uncertainty. This is how Fama and Miller describe finance. Regarding your post, finance is NOT the study of assets, and credit and liabilities are the same think, right? This is why I undid your post. Sorry. — Preceding unsigned comment added by Sigiheri (talkcontribs) 21:15, 28 May 2012 (UTC)

No, they are not "right". Finance is an abstract concept, there is no "right" definition, only opinions. The Sound and the Fury's broader definition is much better. --NeilN talk to me 02:45, 29 May 2012 (UTC)
I thought so too, though I was looking for some textual support. The Mishkin text does not start off with a snappy definition. I don't think the Fama and Miller sentence is useful, really. The Sound and the Fury (talk) 13:18, 29 May 2012 (UTC)

Hey, man. If you guys think Fama and Miller are not right and that you can write a better opening sentence than the fathers of modern finance, go for it. — Preceding unsigned comment added by Sigiheri (talkcontribs) 17:10, 29 May 2012 (UTC)

I really don't think that it is appropriate to undo a lead sentence with a worse lead sentence, NeilN. 18:30, 29 May 2012 (UTC)18:30, 29 May 2012 (UTC)18:30, 29 May 2012 (UTC)18:30, 29 May 2012 (UTC)18:30, 29 May 2012 (UTC)Sigiheri (talk)

Maybe there are other parts of the textbook that give a better explanation. Please keep in mind that you are asserting your version over what came before. The convention is that what is extant is nine-tenths of the law. But that aside, I'll get back about this. The Sound and the Fury (talk) 19:21, 29 May 2012 (UTC)

I am not asserting my version over what came before. In fact, what came before is almost exactly like what is there now. I am asserting that current version over your re-write. I am doing that for sure.20:24, 29 May 2012 (UTC)20:24, 29 May 2012 (UTC)20:24, 29 May 2012 (UTC)20:24, 29 May 2012 (UTC)20:24, 29 May 2012 (UTC)20:24, 29 May 2012 (UTC)20:24, 29 May 2012 (UTC)Sigiheri (talk)

Let's not get confrontational. Let's come up with the best definition for the page. Nick N and I have pointed out the problems with the current definition. We will be able to arrive at a better one together. Give me some time to dig through my old books. The Sound and the Fury (talk) 02:51, 31 May 2012 (UTC)
No problem. It would help if you clearly listed your complaints, so we can discuss them. — Preceding unsigned comment added by Sigiheri (talkcontribs) 19:16, 31 May 2012 (UTC)

I've consulted a few sources and thought about it, and I think our introduction to this expansive topic should also be expansive. It could lay out many of the issues that the topic of finance deals with and touches on, the many "types of finance" that exist, and it could include the point about investment that Sigiheri has been insistent on, as well as providing a broader view and scope, and introduction to the many articles about the topic on the encyclopedia. Here, for example, is what Frederic S. Mishkin in "Financial Markets and Institutions, Seventh Edition", says: [In fact he does not even come out and define "finance"; in answer to the rhetorical question of "Why study financial markets and institutions" he writes:]

This book provides answers to these questions by examining how financial markets (such as those for bonds, stocks, and foreign exchange) and financial institutions (banks, insurance companies, mutual funds, and other institutions) work. Financial markets and institutions not only affect your everyday life but also involve huge flows of funds—trillions of dollars—throughout our economy, which in turn affect business profits, the production of goods and services, and even the economic well-being of countries other than the United States. What happens to financial markets and institutions is of great concern to politicians and can even have a major impact on elections. The study of financial markets and institutions will reward you with an understanding of many exciting issues. In this chapter we provide a road map of the book by outlining these exciting issues and exploring why they are worth studying.

...then later: Financial markets, such as bond and stock markets, are crucial to promoting greater economic efficiency by channeling funds from people who do not have a productive use for them to those who do.

... then it goes through the various financial institutions and their functions.

Robert Shiller in his 2011 Yale course available online says:

Finance, I believe, is, as it says in the course description, a pillar of civilized society. It's the structure through which we do things, at least on a large scale of things. It's about allocating resources through space and time, our limited resources that we have in our world. It's about incentivizing people to do productive things. It's about sponsoring ventures that bring together a lot of people and making sure that people are fairly treated, that they contribute constructively and that they get a return for doing that. And it's about managing risks, that anything that we do in life is uncertain. Anything big or important that we do is uncertain. And to me that's what financial markets is about.

To me, this is a course that will have a philosophical underpinning, but at the same time will be very focused on details. I'm fascinated by the details about how things work. It can be boring, and I hope I'm not boring in this course, but it's in the details that things happen. So, I want to talk about particular institutions, and I'm interpreting finance broadly in this course. I want to talk about banking, insurance --sometimes people don't include insurance as part of finance, but I don't see why not, so we'll include it. It's about securities, about futures markets, about derivatives markets, and it's going to be about financial crises. And it's also about the future. I like to try to think about the future, although it's hard to do so. Where are we going?

Jeff Madura in his own "Financial Markets and Institutions, Seventh Edition" (why I always buy the seventh edition of things beats me - lucky 7?) writes:

Financial markets facilitate the flow of funds in order to finance investments by corporations, governments, and individuals. Financial institutions are key players in financial markets because tehy serve as intermediaries that determine the flow of funds... Today, many financial institutions offer all types of financial services, such as banking, securities services, mutual fund services, and insurance services.... [Then he talks a lot about the different types of financial markets, what they're for, etc.]

Something that appears from these texts is that "finance" is just a stand-in word, really, for "financial markets and institutions" and they mean the same thing. I think if the lead to this article could present these complexities without trying to present just one, pithy, simple definition, that would be better.

Finding the above and copy or writing it out took a while, so I don't have more time now to propose a new lead based on the above material and more, but that is the next thing. The Sound and the Fury (talk) 22:53, 13 June 2012 (UTC)

finance function[edit]

Hello, I want to know about the role of finance function in an industrial enterprise. — Preceding unsigned comment added by 116.202.70.18 (talk) 08:40, 27 August 2012 (UTC)

Misconnection of German and English wikipedia article[edit]

The German word for "Finance" is not "Finanzierung" but 'Finanzen'. 'Finanzierung' means 'Funding' and does not correspond to this article.

190.47.46.208 (talk) 14:49, 27 December 2012 (UTC)

Don't see this in the article, so it looks like it was addressed. II | (t - c) 04:20, 5 May 2013 (UTC)

Need for highlighting the concept of Investment[edit]

I strongly believe that,in the introduction for this article, just as the time value of money is made a critical point for the field of Finance, so should the concept of investment. I would ask experts to highlight the importance of the concept of investments in the introduction. Furthermore and similarly, I would explore the article, in order to find spots in where links to the article about investment should be included. For example, on the fourth bullet of section 1 (Investments and accumulation goals).

Ejspeiro (talk) 06:33, 29 August 2013 (UTC) - Thanks!

Global perspective missing[edit]

There seems to be a lack of any section directly applicable to global finance; balance of trade, international trade and settlement, governance issues and other such areas. I intend to write one if there is no objection. prat (talk) 02:54, 20 November 2013 (UTC)

  1. ^ Charitytimes.com
  2. ^ Encyclopædia Britannica Online: britannica.com