All about finance and economics. Sectors of the economy: finance. Gene Callahan "Economics for Ordinary People"
For the occurrence finance As a sphere of economic relations, it is necessary for the emergence and coincidence in time at a certain historical stage of a whole set of conditions (or prerequisites), such as:
- education and recognition of individuals for goods, services, land, etc.;
- the existing system of legal norms regarding property relations;
- strengthening the state as a spokesman for the interests of the entire society, acquiring the status of owner by the state;
- the emergence of socially diverse population groups.
All these conditions arise under one general prerequisite: a sufficiently high level of production, an increase in its efficiency, growth and exceeding the limits necessary for biological survival.
The formation, distribution and use of monetary income is the main condition for the emergence of finance.
Financial interests are the interests of the owners of monetary income.
For the emergence of finance, a high level of development of the monetary economy, a constant circulation of money in large quantities, and the formation and use of the basic functions of money are also necessary. Finance- is the movement of cash income. Financial relations always affect property relations. These are not only monetary relations, but also property relations. The subject of economic relations must always be the owner. It is by distributing and using cash income, of which he is the owner, that each participant in economic relations can realize his interests.
Financial resources
No economic or political decision of any importance can be implemented without a preliminary assessment of the amount of monetary income required for this. The distribution and accumulation of monetary income acquires a targeted character. The concept of “financial resources” arises. Being monetary income, accumulated and distributed for certain purposes, financial resources are used for various social, economic, scientific, cultural, political and other purposes (Fig. 18).
Financial resources- These are accumulated incomes intended for specific needs.
Financial resources serve all stages of the movement of cash income from their formation to use.
Since finances are determined by the movement of cash income, the patterns of their movement affect finances. Income usually passes through three stages (stages) in its circulation (Fig. 19):
Finance, as we see, relates to all stages of the formation, distribution and use of monetary income. Primary income are formed as a result of the sale and distribution of proceeds from the sale of goods and services. Since the production process is, as a rule, continuous, it is necessary to allocate part of the proceeds at the stage of sales of goods to ensure the continuity of the production process.
Primary income is formed as a result of expanded commodity production and is serviced by finance.
Primary distribution is the formation of primary income based on gross receipts.
Secondary distribution of monetary income (redistribution) can occur in several stages, that is, it is of a multiple nature.
As can be seen from the schematic recording of the abstract production process (Fig. 20), any production ends with the primary distribution of monetary income, without which further economic development is impossible. And the distribution of money income ( D") is served by finance. The allocation of financial resources for the expansion of production takes the following forms: payment of current material costs, depreciation of equipment, rent, interest on loans, wages of workers employed in this production. After the primary distribution of monetary income, the processes of redistribution begin, i.e., the formation of secondary income. These are primarily taxes, contributions to insurance funds, contributions to social, cultural and other organizations.
Last stage distribution and redistribution of income - their implementation. Realizable income called final. Part of the final income may not be realized, but directed towards accumulations and savings. However, there is the following financial equality, which is not violated under any circumstances:
ΣA = ΣB + ΣС,
- A- primary income;
- IN— final income;
- WITH- savings and savings.
The distribution process is influenced not only by finances, but also by prices.
Since the process of selling any goods (goods, services, etc.) into monetary income is carried out at certain prices, then price dynamics has an independent impact on the distribution process. The more prices change (both up and down), the more money income fluctuates. These shifts occur especially sharply in conditions of inflation.
Financial resources as part of cash income come in various forms. For the real sector of the economy (production) this is part of the profit, for the state budget - the entire amount of its revenue part, for a family - all the income of its members, etc.
Financial resources- this is that part of the funds that can be used by their owner for any purpose at his discretion.
The process of distribution and redistribution of financial resources
Financial resources are offered on the market by a large number of business entities and the population. It is clear that potential users (consumers) of these funds are not able to independently establish business relationships with every business entity, with every citizen. In this regard, the problem arises of combining scattered savings into significant amounts of financial resources that can be offered for use by a large potential investor.
This problem is solved financial intermediaries(banks, investment and mutual funds, investment companies, savings associations and
etc.), which accumulate free resources, primarily from the population, and pay interest on these resources. Financial intermediaries provide raised resources as loans or place them in securities. Their income consists of the difference between the interest paid on the resources attracted and the interest received on the resources provided.
Owners of cash savings can transfer their funds to investment companies, or they can directly acquire industrial corporations. But in the second case, they will encounter intermediaries - dealers And brokers, which represent professional participants in financial markets. Dealers carry out transactions independently, on their own behalf; brokers act only on behalf of clients and on their behalf.
Timely financial market offers potential investors wide investment opportunities through the acquisition of monetary obligations of a wide range of business entities. These monetary obligations are called financial instruments. These include: promissory notes, futures contracts, etc. A variety of financial instruments allows money owners to diversify their investment portfolio, that is, invest their savings in the obligations of different companies and banks. These obligations will have different returns, but also different degrees of risk. If a company goes bankrupt, investments in other companies will remain. Diversification of an investment portfolio is carried out according to the principle: “you cannot put all your eggs in one basket.”
Financial relations as a sphere of economic activity
Financial relations- these are relations associated with the distribution, redistribution and use of monetary income.
The phenomenon of financial relations as a sphere of economic relations in society arises at the stage of distribution of primary income (Fig. 21).
Financial relations, arising in connection with money and servicing the circulation of money income, concern almost all individuals and legal entities. Main participants in financial relations are producers of any product (real sector of the economy); budgetary and non-profit organizations; population, state, banks and special financial institutions. In the course of their development, financial relations give rise to credit and exist with them in close relationship (Fig. 22).
Credit relations is part of financial relationships. Both are the result of monetary relations.
Credit relations arise in connection with the provision of money by one entity to another (individuals and/or legal entities) on the terms urgency, repayment, payment.
The main difference between financial and credit relations is the repayment of funds provided on the terms of urgency, repayment and payment.
Usually isolated three stages of income flow, reflecting the formation of primary, secondary and final income.
Primary income are formed as a result of distribution (work, services). The amount of revenue is divided into a fund for compensation of material costs incurred in the production process (cost of raw materials, equipment, rent), the employee and the owner of the means of production. Thus, during the primary distribution, the income of the owners is formed. In addition, the following circumstance should be taken into account: indirect taxes established by the state are included in primary income. Therefore, at this stage, government revenues are partially generated.
At the second stage, from primary income Direct taxes and insurance payments are paid, and assistance is provided to the disabled. From the newly created funds of funds, in particular, from various levels of government, funds are paid representing the expenses of workers in the non-material sphere, doctors, teachers, notaries, office workers, military personnel, etc.
As a result of this process, a new income structure is formed. It consists of secondary incomes formed during the redistribution of primary incomes.
But doctors, teachers, and employees, in turn, pay taxes and make insurance contributions. These taxes and contributions form funds intended for certain payments. As a result of such payments, tertiary income may be generated. The chain of their formation is almost impossible to trace. The movement of these incomes is a very complex process.
The result of this process, its third final stage, is the formation of final income. They are used to purchase goods and services. A certain portion of income is saved.
The amount of primary income for a certain period necessarily equals the amount of final income plus savings. Distribution and redistribution of income means the formation of a new structure. Moreover, this structure reflects the economic relations (connections) between economic structures and the state.
At each stage of income generation, funds of funds are formed, i.e. finance. Consequently, it is finance that mediates the processes of distribution and redistribution of income.
The result of the functioning of the financial system is a changed structure of income.
Distribution process added(newly created) cost through is shown in Fig. 1. As can be seen from Fig. 1, as a result of the distribution of primary income of owners (entrepreneurs and workers), the income of workers in the non-material sphere is formed. However, it should be taken into account that in reality distribution processes are much more complex than reflected in Fig. 1. Part of the income of workers in the material sphere is distributed in favor of workers in the non-material sphere directly through the consumption by the former of services provided by the latter. This is how the income of lawyers, notaries, security guards, etc. is formed. In turn, they pay taxes to budgets participating in subsequent redistributions of income.
Finance as monetary relations arises at the stage of distribution. But they are the most important link in everything and have the strongest influence on it.
Control function
Control function consists of constant monitoring of the completeness, accuracy and timeliness of receipt of income and implementation of expenses from all levels and. This function manifests itself in any financial transaction. All these operations must not only be economically feasible, but also not contradict current legal norms. The control function of finance is expressed in the formation of funds of funds (budgets and extra-budgetary funds) in accordance with the declared goals and according to the standards established by the legislature. This function involves not only monitoring processes occurring in the financial sector, but their timely adjustment in accordance with the norms of current legislation.
The practical expression of the control function of finance is the system. This control ensures the validity of the formation of budget system revenues and the expenditure of budgetary funds and extra-budgetary funds. Financial control is divided into preliminary, current and subsequent. Preliminary control is carried out at the stage of developing forecasts of budget revenues and expenses and preparing draft budgets. Its purpose is to ensure the correctness of budgetary indicators. Current control is responsible for the timeliness and completeness of the collection of planned income and the targeted expenditure of funds. Subsequent control is aimed at verifying the reporting data.
Stimulating function
Stimulating function finance is associated with the impact on processes occurring in the real economy. Thus, during the formation of budget revenues, tax benefits may be provided for certain industries. The purpose of these incentives is to accelerate the growth rate of technologically advanced products. In addition, the budgets provide for expenses that can ensure structural restructuring of the economy through financial support for high-tech technologies and the most competitive industries.
Finance, understood in the broad sense of the word, includes all monetary funds, including loans. Therefore, credit relations are part of finance. is the movement of the loan fund.
One can also define credit as a system of economic relations regarding the transfer from one owner to another for temporary use of values (including money). Credit relations have their own specifics. A loan is associated with the transfer of a fund of funds for temporary use on the terms of repayment, urgency, payment, and security. These conditions distinguish credit relationships from other financial relationships.
See also:A complex of economic relationships that arise during the formation and use of foreign currency funds. The emergence of finance is formed with the constant commodity and currency circulation of the state and its needs for production resources. The country, through the organization of finances (government state budget, district revenues, company revenues) redistributes an element of government earnings in accordance with the goals of financial and public policy.
The area of origin and functioning of finance is the second stage of the reproduction process, in which the price of a social product is divided according to the intended purpose and economic entities. Each of them is obliged to purchase their own part in the produced product. As a result, a significant indicator of finance, as well as a financial group, seems to be the distributional orientation of economic relationships. Finance is equally needed by the primary level - companies, inter-economic societies (associations, concerns), the national organization for managing the national economy.
One of the main features of finance is its currency model of formulating and expressing economic relationships through the real movement of foreign currency funds.
Income- this is an obligatory element of currency relations, their significance and role depend on the position of currency relations in financial transactions.
Finance differs from means, both in the area of content and in the area of produced functions. Finance is a general equivalent, with the support of which initially only the costs of the work of associated manufacturers are measured, and income is a financial mechanism for the distribution and redistribution of gross domestic product (GDP) and national income (NI), a means of controlling the formation and use of foreign exchange funds. Their main direction is to ensure, through the creation of foreign exchange profits and funds, not only the needs of the country and companies in foreign currency, but also to exercise control over the expenditure of economic resources.
Today, finance is an impartial economic sphere that reflects the concept of development, distribution, redistribution and application of currency funds of community entities. On the one hand, this area is represented by a financial group, and on the other hand, by an individual cost instrument of work.
From an economic point of view, finance expresses monetary relationships according to the process of production, distribution and application of gross domestic product and government revenue. These relationships are found in the formation and use of foreign currency trust funds by different financial entities (country, business entities, interstate organizations, individuals).
The object of finance represents economic funds, which are a complex of funds of foreign currency funds at the disposal of economic entities, countries, and households. Finance reflects the degree of formation of useful forces in individual states and the ability of their influence on macroeconomic movements in economic life.
If you are interested in knowledge about economics and finance and would like to develop in this direction, then a higher education will not be enough for you. If only because at university you get more theoretical knowledge. But you can’t go straight to practice either.
It is necessary to engage in self-education, take up studying literature on economics. There you will find information about economic history, liabilities and assets, as well as labor economics. In general, in such works you can find everything that interests you. The main thing is to know where to look.
List of the 10 best books on economics and finance for professionals
In this book, the author tells you something that you definitely won’t learn in textbooks on economics and finance. Here you will find information about what the real world economy is, how it works, and you will also understand what you need to do and how you need to work in order to take a good place in this niche.
“Kudrin system”, Evgenia Pismennaya
Quite an interesting book on economics, written in Russian. Unlike foreign works, this one tells more about Russian government and economy. You will learn about that side of Putin’s economic and political course that you didn’t even suspect about before. It is not for nothing that this work is included in the TOP books on economics on our list.
“Micromotives and Macrochoices”, Thomas Schelling
The author of the book received the Nobel Prize in Economics in 2005. Probably, this fact already indicates why this work is one of the main ones that should be read by everyone who is interested in the scientific side of economics.
“Getting to Yes,” Roger Fisher
Because of the title of the book, it may seem that this is another popular publication on management, but this is not at all the case. The author of this work is an economist who believes that the whole world is full of profitable deals that need to be concluded. The main thing is to learn how to communicate correctly with the right people and convince them to act in a way that will benefit you. And you will learn how to do this after studying this book.
“The Economy of Everything”, Alexander Auzan
The author of the book is a scientist and dean of the economics department at the university. In his work he talks about main economic problems that people have to face every day - why sometimes you need to pay bribes, why you can’t bargain in supermarkets, etc. He also tries to answer the question - how can one live in such a world, or can one only survive in it now?
“Behavioral Economics”, Dan Ariely
Quite an original book that will definitely help you learn more about economic planning . The author specialized in studying human behavior. The results of his research are quite interesting, and provide answers to questions such as why people buy this product and not another. Why do you sometimes give in to impulses and pay for some services that you could easily do without? Knowing all these secrets, you can use them in your business to attract clients.
“How to Lie with Statistics” by Darell Huff
This work is one of the most popular books about numbers. After reading this, you will understand how to properly evaluate numbers in the news, and also discover something new about the media that will help you promote your business through advertising.
“Capital”, Karl Marx
If you still don't know what book about economics to read , then now you have found the answer. This work caused a real revolution in economic science of the 19th century. However, it will be useful to read it even now, since there you can find a lot of interesting and important information about the economy as a whole.
“Economic way of thinking”, Paul Heine, Peter Bouttke
This book explains the entire theory of economics. Due to the fact that the material is presented in a very simple and accessible form, the study becomes interesting and uncomplicated. Perhaps that is why this work is considered one of the best of its kind.
“The Hare and the Tortoise”, John Kay
The first few pages may seem like there are a few management stories being told here, but Kay knows a lot about economics and he has put that knowledge into this book. It is written in simple language and is quite easy to read.
The Best Economics Books for Beginners
“Economics for dummies”, Sean Masaki Flynn
This book is intended for students who are just beginning to study the subject. Here you can find information about the basic theories and principles of the topic, as well as understand how to use the acquired knowledge not only to create and promote your product, but also for your everyday life. An excellent piece that will definitely help you improve your understanding of economics.
"Freakonomics" Stephen Dubner, Steven Levitt
The authors of this work are already quite successful people. This book is completely different from the usual starter books on economics.She touches on more unusual topics and gives answers to completely, seemingly abnormal questions. To put it simply, economics talks about what needs to be done and how, and Freakonomics talks about why it needs to be done at all, and why it needs to be done this way and not otherwise. With this book, economics for beginners becomes a very simple task.
"Black Swan", Nassim Nicholas Taleb
This is another rather unusual book on economics for beginners, which does not talk about economics for dummies, but about some secrets, knowing which you can become more successful and be one step ahead of all your rivals. The author of this work is a successful mathematician who talks about some supposed accidents that, in fact, can be easily predicted and played to your advantage.
"Undercover Economist" Tim Harford
The author of this book is a famous journalist and freakonomist. In his work, he tries to help the reader learn to look at the world through the eyes of an economist. The book was written in a very simple and understandable language, perfect for both students and schoolchildren, and even for children.
“Sheep in Wolf's Clothing” by Walter Block
Another very original work in which the author talks about some things that most people prefer to remain silent about. He believes that not only new trends, resourceful entrepreneurs and creative approaches to work play an important role in the development of the economy, but also various drug dealers, prostitutes and loan sharks. Naturally, they are not saints, but you cannot take away from them what they invest in economic development. What exactly? The author described this in detail in his book.
“The Shock Doctrine”, Naomi Klein
If we summarize the whole essence of this writer’s book into one phrase, it turns out that he says that the world is completely controlled by money. Klein believes that states and peoples no longer have the right to choose, since everything always depends on the financial issue.
“How the Economy Works” by Ha-Joon Chang
You definitely will not find the information that this author provides in his famous work in standard university and school textbooks on this subject. He will talk about how the world economy works, how it works, and what needs to be done in order to achieve success in this area and learn how to make a good profit. One of the best books about the basics of economics for dummies.
This is just a small list of what you will need to read in the future to become true professionals in your field and achieve success in your career. But these books are the very foundation that every novice economist needs.
Which direction of study should I choose? What sector of the economy should I work in? What is happening today in the field of economics and finance? How promising is it to work in the financial sector? What competencies do future finance specialists need to develop?
What is the financial sector?
Financial sector is the area of economics that is responsible for capital management. All sectors of the economy are involved in the movement of finance; the economic condition of enterprises in each industry speaks about the efficiency of its work and the usefulness of the industry for the state.
Approximately 2% of the working population works in the financial sector. The sector includes activities of banks, central banks, non-banking financial institutions, insurance companies, stock exchanges, financial investment institutions, pension funds, etc. Primary activity sector enterprises - redistribution of free finance (received from individuals and legal entities) into loans for other individuals and legal entities in order to generate income. The presence of a developed banking network in the country makes it possible for every person to receive a loan to open and develop their business. The opportunity to obtain a loan for development is necessary for small businesses to start, large enterprises for ongoing activities and opening new directions. And even to the state - for the implementation of infrastructure projects or in case of financial difficulties. The financial system deals with the distribution of finances and the organization of monetary relations.
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What is included: banking, accounting, financial analytics, lending, insurance, audit |
Russian economy underwent restructuring in the early 90s. It is young, unstable, and dependent on prices for raw materials on the world market. Every economic crisis affects Russian financial institutions, so the sphere of economics and finance is subject to constant surges and changes. Specialists working in this industry have to constantly keep their finger on the pulse, control risks and make quick, informed decisions.
Sphere of economics and finance, despite its riskiness and intensity, is attractive as a field of professional activity: it is distinguished by a high level of salaries (4th place among industries according to Rosstat for 2017), intellectual work and office work (unlike, for example, mining and processing mineral). Economic and financial education provides a person with good career prospects not only in the financial sector, but also in other industries, and also helps in developing their own business.
The future of the financial sector
The face of the financial sector, like all other industries, is changing under the influence of automation and advances in the IT sector: for the convenience of users and optimization of banking expenses, banks are introducing mobile technologies and online services. There are already banks in Russia that do not have service offices - all operations are carried out online. The virtualization of monetary relations leads to the fact that banking personnel who communicate with clients are no longer needed: the number of operators, cashiers, and consultants is reduced, but the need for information security specialists and technical support specialists is growing.
Thanks to the introduction of technology blockchain- a method of verifying a payment using a chain of remote computers - the existence of the bank as an institution is called into question. A person will be able to transfer any amount of money to any country without the participation of a bank, without exchanging currency and in a matter of seconds (currency transfers currently require several days). And crowdfunding (raising money for projects) will become faster and easier than lending from a bank: money for a startup can be borrowed not from just one bank, but from the entire global community - according to the principle of “one piece at a time.”
Professions of the future:✔ Intellectual property appraiser (advises on the value of business ideas, inventions, new technologies)
✔ Manager of crowdfunding platforms (consults authors of business ideas to obtain crowdfunding financing)
✔ Developer of personal pension plans (helps to effectively use pension finances throughout life)
How to develop in the field of economics and finance
People who choose professions in this field are successful in financial management. They have the necessary financial literacy, understand banking products, and know how to plan a budget in order to gradually increase their own income. Working in the financial sector allows you not only to achieve financial well-being and build a career, but also to bring significant benefit to people. It is the specialists of the financial sector who create such financial instruments (loans, deposits, mortgages, insurance, shares) that provide every resident of the country with opportunities for financial growth and improving the quality of life.
If among your school subjects you are interested in mathematics, economics and social studies, and you beat everyone at Monopoly, then you should probably try your hand at financial and economic professions.
What will help you develop in this direction now:
✔ The best way to become a financier is to learn plan your own income and expenses. If you are given pocket money, try to write down your expenses and set yourself ambitious financial goals, that is, save for something expensive.
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Work and own business. It's no secret that now 12-year-olds can open their own startup and earn millions. If you haven’t yet found a brilliant idea for a business, then, in any case, you can try to work in the summer. Read our articles about ideas for legal summer earnings: here and here.
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Play strategy games(desktop or computer): various analogs of Monopoly that simulate the monetary relations of owners, and games that force you to generate ideas in conditions of limited resources.
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Read non-fiction books(for example, Niall Ferguson “The Rise of Money”) and subscribe to interesting online resources about economics and finance (for example, ILoveEconomics.ru).
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Attend specialized clubs and courses at universities: “School of Young International Economist”, “School of Young Entrepreneur”, “Economics and Mathematics School” (at M.V. Lomonosov Moscow State University), “School of Economics” (Higher School of Economics).
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Participate in specialized Olympiads:"Moscow Olympiad for Schoolchildren in Economics" (Ministry of Education and Science), "Young Economist" (NRU HSE), "Lomonosov" Olympiad in Economics (M.V. Lomonosov Moscow State University).
✔ To try various professions in the financial and economic profile, come to our career guidance camp "Professionals of the Future" on .
If you want to find out how suitable professions in economics and finance are for you, take our free Financial and Economic Profile test. It will help you assess your capabilities in financial sector professions.
If you want to receive the latest articles about professions, subscribe to our newsletter.
What is finance ?
Finance - This term refers to the totality of all material resources ( in cash- modern interpretation!), which are in the possession of an economic entity: an individual, organization, business or state.
Finance and money– closely interrelated concepts. If there were no money, the concept of finance would not exist. Thus, the term “finance” means “to supply with funds.” The word “finance” is often used in everyday life as a synonym for the word “money”.
Finance– a general economic term meaning both 1) funds, financial resources, considered in their creation and movement, distribution and redistribution, use, and 2) economic relations determined by mutual settlements between economic entities, cash flow, money circulation, use money". (Raizberg B. A., Lozovsky L. Sh., Starodubtseva E. B. Modern economic dictionary. 5th ed., revised and supplemented. - M.: INFRA-M. 2007. - 495 pp.)
Finance is an economic category that reflects the economic relations of funds of funds.” “Big Economic Dictionary” by N.N. Azriliyan (Publisher: Institute of New Economics, OMEGA-L, GROUP COMP ANIY, Int. new, ek., Institute new, eq., Institute of new e k., 2004) -
Finance(from lat. financia- cash, income) - a set of economic relations that arise in the process of formation, distribution and use of centralized and decentralized funds of funds. Usually we are talking about trust funds of the state or economic entities (enterprises). The most important concept in finance is budget.
There is also an economic science of the same name - finance.
Finance as a science
Scientific discipline finance studies money and socio-economic relations associated with the formation, distribution and use of material resources. Finance is an applied economic discipline.
Traditionally, finance is divided into public and private. The first group includes: state finances and municipal finances (local finances). In the second group there are:
personal finance and family finance;
small business finance, corporate finance (enterprise finance, business finance), bank finance (banking), finance of non-profit organizations.
For public finance, expenses are primary, since clearly regulated tasks and functions of public education are financed. For private finance, income is primary; all activities are aimed at generating income, which is subsequently used at the discretion of the person.
The general ability (and perhaps even the art) of financial management is studied by science financial management. Bank financial management is studied within the framework of science banking. Financial markets studies science financial economics. Financial statistics is studied within the framework of a small section of statistics of the same name. Applied mathematical science studies methods of processing financial information. financial mathematics. Control over financial flows is studied within the discipline financial control.
SUBJECT OF FINANCE THEORY
Theory of finance(Financetheory) in a broad sense is the science of how people manage the expenditure and receipt of limited monetary resources (i.e., make financial decisions) over a certain period of time.
Financial solutions(Financialsolutions) are characterized by the fact that expenses and receipts of monetary resources: 1) are spread over time and 2) as a rule, cannot be accurately predicted either by those who make decisions or by anyone else.
Financial decisions are implemented through the financial system.
Financial system(financial system) is a set of markets and other institutions used to conclude financial transactions, exchange assets and risks.
This system includes:
markets for money, stocks, bonds and other financial instruments;
financial intermediaries (such as banks and insurance companies), firms offering financial services (such as financial advisory companies);
authorities that regulate the activities of all financial institutions.
Financial intermediaries are firms whose primary role is to provide financial services and sell financial products. These include banks, investment and insurance companies. Their financial services include checking accounts, commercial loans, mortgages, insurance, and mutual funds.
The modern financial system is global in nature. Financial markets and intermediaries are interconnected through a comprehensive international telecommunications network, through which payment transfers and securities trading occur virtually around the clock. Thus, if a large corporation located, say, in Germany, decides to finance a new project, then it will consider any investment opportunities, including, for example, issuing and selling shares on the London or New York stock exchanges or obtaining a loan from a Japanese pension fund. Moreover, in the latter case, the loan can be presented in German marks, Japanese yen or US dollars.
Briefly we can say that finance science studies movement of cash flows in the economy and the formation of funds of funds from various economic entities. Depending on their types, they are distinguished:
macrofinance, i.e. cash flows of the state, which in turn are divided into blocks: balance of payments, budget balance, bank balance;
microfinance, i.e. cash flows of enterprises (corporate finance), non-profit organizations (public finance), banks (bank management).
Widelysense to theoryfinance include:
Theory of money, monetary policy, doctrine of central banks (according to the international classifier JEL (JournalEconomicLiterature) - section in group E - macroeconomics and monetary policy;
Theory of taxes and budget (according to JEL these are sections in group H - economics of the public sector publiceconomics),
Investment theory, portfolio theory, corporate finance theory (according to JEL these are sections of group G - financial economics)
Banking, financial institutions, pension funds, financial markets, financial accounting (according to JEL - group M - business administration)
International finance (according to JEL - section in group A - international economics).
SUBJECT OF MODERN FINANCE THEORY
If before the 19th century the theory of finance developed as a theory of public finance, then in the 20th century. it became a theory of capital markets as their importance for economic development increased dramatically.
For example, MacMillan's Dictionary of Money and Finance states that the main focus of analysis in modern finance theory is the operation of capital markets and the value of financial assets.” The new Palgrave Dictionary of Money & Finance. Ed. Newman P. Milgate M. Eatwell J. 1-3. Macmillan. 1992.
The tools of modern finance theory are actuarial mathematics (financial mathematics), financial (including banking) statistics, financial law, financial programming.
The reason is two trends.
Mathematization of the economy, i.e. the description of its laws in model form requires an accurate determination of its parameters, which, as a rule, have a monetary value form.
The use of theoretical results in the practice of managing economic processes (business administration) and in economic policy requires increasing the accuracy of the model description of cash flows and assessing the risks of using theoretical models.
EVOLUTION OF FINANCE THEORY
