Research Paper: Finance and Financial System

Pages: 2 (867 words)  ·  Bibliography Sources: 5  ·  File: .docx  ·  Level: Doctorate  ·  Topic: Economics

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Finance and Financial System

Overview of Financial System

Finance is a commercial study concerning management of money and other assets through crediting, banking and investing. It is an outgrowth of economics and accounting (Houston & Brigham, 2009, pg 4). The inter-relationship between finance and these two subjects has brought about financial economics and financial accounting. Another related field is corporate finance that deals with financial management, capital markets and investments.

The degree of importance in financial economics is significant especially in the business venture. Business firms and other institutions have made tremendous contributions in upgrading the economies of their respective countries. Finance is also vital in shaping efficient markets hypothesis (EMH) and behavioral finance among its practitioners (Houston & Brigham, 2009, pg 49). Moreover, the field creates a lot of slots for employment. It is, therefore, important to comprehend the knowledge of financial economics and how it affects vital decisions around individuals. Most importantly, financial role of decision making impacts more in behavioral finance.

Finance and Decision-making

The phenomenon of finance in decision-making is intuitive. Finance is a great contributor to business decision-making and the development of strategic marketing decisions. The planning and implementation of vital decisions is dependent on the availability of a budget. The budget poses as a financial tool under which the decision can be analyzed. The analysis, therefore, becomes a basis for decision making. Finance in decision making acts as insurance of the assessment being asserted. Any impending set back that might be experienced is refrained from causing termination of the decision.

Finance plays a considerable by providing a foundation on which rational policies are made by individuals, practitioners, managers and the business markets (Deaves & Ackert, 2009, pg 3). Finance achieves this by designing goals to be accomplished by the latter. Certainty and uncertainty are confronted at all angles in fully bombarding the decision being made. Models of finance such as demand and supply chains also contribute in decision-making. Individuals and corporate firms optimize their ability by presuming fundamental assumptions. Assumptions are based on the outcomes of the decision, maximization of the decision's utility and profit and deriving relevant information that the decision provides (Deaves & Ackert, 2009, pg 4).

Financial System

A financial system is crucial is ensuring a healthy economy in a nation by regulating rates of inflation, unemployment and growth. The study of finance is apprehensive in how the system organizes and channelizes flow of money through the lender-borrower relationship. This relationship is a link up due to the difference in positions of some people or firms amongst themselves (Burton & Brown, 2009, pg 7).… [END OF PREVIEW]

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Finance and Financial System.  (2012, February 27).  Retrieved December 6, 2019, from https://www.essaytown.com/subjects/paper/finance-financial-system-overview/4479

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"Finance and Financial System."  27 February 2012.  Web.  6 December 2019. <https://www.essaytown.com/subjects/paper/finance-financial-system-overview/4479>.

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"Finance and Financial System."  Essaytown.com.  February 27, 2012.  Accessed December 6, 2019.
https://www.essaytown.com/subjects/paper/finance-financial-system-overview/4479.