Finance

Academic definition

Finance is the field of study concerned with the allocation of resources over time under conditions of uncertainty. It encompasses the valuation of assets, liabilities, and cash flows, as well as the management of financial risk. Central to finance is the concept of the time value of money (TVM), which holds that a dollar today is worth more than a dollar in the future due to its earning potential. Core areas include personal finance, corporate finance, and public finance. Mathematical tools often used include discounted cash flow (DCF) models, with the fundamental equation:

$$\text{PV}=\sum _{t=1}^N\frac{{\text{CF}}_t}{(1+r{)}^t},$$

where PV is present value, ${\text{CF}}_t$ is cash flow at time t, and r is the discount rate.

Simplified explanation

Finance is about how people and organizations manage money—how they get it, how they spend it, and how they invest it to make more over time.

References

• Finance (Wikipedia).
• Finance (Investopedia).

Related concepts

• Corporate Finance