Principles of Financial Economics and the Main Article

Finance is a branch of management that involves the application of economic theory to achieve a desired result. It covers all financial decisions that are applicable to individuals, firms and public entities and involves allocating resources to meet the goals that have been identified. Finance has four broad areas: company finance, personal finance, investment finance and government finance. Each of these areas has distinct advantages and disadvantages. Additionally, there are principles and strategies which are applicable to all areas.

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Principles of Financial Economics and the Main Article

Finance is a branch of management that involves the application of economic theory to achieve a desired result. It covers all financial decisions that are applicable to individuals, firms and public entities and involves allocating resources to meet the goals that have been identified. Finance has four broad areas: company finance, personal finance, investment finance and government finance. Each of these areas has distinct advantages and disadvantages. Additionally, there are principles and strategies which are applicable to all areas.

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Company finance is closely related to accounting, however, finance deals with the actual assets and liabilities of the company. Two distinct approaches are used to examine the worth of a firm. One is through cost based valuation, and the other is through profit valuing. Cost based valuation measures the value of a firm by using cost as the basis for comparison with similar companies in the market. On the other hand, profit valuing takes the model of the business in hand and considers cash flow as well as the level of assets. The principles of economics applied in this case are the same as with accounting.

Personal and business finance refer to the financial statements of an individual or firm and the strategies and techniques used to achieve those financial goals. These include savings, investment, estate planning and preservation, retirement plans and spending. The principles of economics which are applied are that demand and supply are dynamic, income is constant and price elasticity exists. An important advantage of using financial planning tools is that they make the analysis, interpretation and forecasting of future financial results much easier, as well as more timely.

Public finance pertains to the actions of governmental authorities and managers who determine the allocation of resources in terms of priorities for economic growth, budgeting and consumption. There are three major principles of economics that are mainly concerned with public finance: supply, demand and regulation. Public finance management is the study of taxes and revenue; the regulation of financial markets and the creation of policies that will ensure that the distribution of wealth is fair. Other areas of study include welfare, economic growth, business cycles and interest rates.

Real estate is a term used to represent the value of land or other real property. A crucial aspect of financing the purchase of a home, commercial property or any other type of real property is the current interest rates. Finance professionals use short term and long term interest rates in their analysis and projections of the financial markets.

Risk management refers to the control of risks inherent in the financial markets by controlling the institutions involved in lending and trading credit. An important aspect of risk management is that it deals with calculating the expected losses that occur in the future. Principles of financial economics also include principles of management of investment risks.

The main article in this series discusses various topics related to finance. This first article discusses the basics of finance and its relationship with business. Financial business is an umbrella term that includes finance research, economics, asset allocation, venture capital and private equity. The business cycle is the process by which a country’s central bank, Federal Reserve, creates and manages the flow of credit in the economy. International finance is the process of borrowing and lending by international banks and other institutions. This involves both public and private capital.

The main article in this series discusses taxation and its role in economic management. Governments levy taxes for the purpose of raising funds for their budget and other purposes, while households and corporations pay income and corporate taxes for the same purpose. Taxation of individuals is based on their ability to contribute to community development through their earnings and savings, while taxation of corporations is based on their ability to contribute to the support of the national economy. This indicates the vital role of taxation in ensuring that the economy runs on sound tracks.

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