Finance is defined as the management of funds and the giving of monetary value to people, companies, and other governments. In both business and economy, the two key types of financial resources are human and financial. The main function of finance is to provide for the demands of market competition, and to ensure that the costs of production are minimized. Finance is a process of collecting, maintaining, using, distributing, and exchanging wealth. It involves the use of credit, creating institutions such as banks, enterprises, and insurance, creating standards of fixed exchange rates, and spending to improve the conditions of the supply of goods and services.
Finance is also used in the economy by micro level investors such as individuals and companies to use financial instruments such as bonds, stocks, currencies, derivatives, and financial portfolios to raise and lend money to other firms. Financial spread betting, options trading, venture capital, financial investing, merchant cash advances, and mortgage lending are some examples of the financial tools used by investors. Finance is an important part of the overall economic system. The impact of finance can be seen in the stock markets, interest rates, consumer confidence, the balance of trade, economic growth, and inflation, the quality of jobs and the incomes of workers, and political stability.
The primary objective of finance is to minimize the risk of investment in assets and to provide for the demands of market competition. The method of management of financial risk is to meet expenses with temporary savings and make capital investment decisions on the basis of expected profitability. The objective of long-term viability is to create a capital structure that facilitates the provision for short-term cash requirements. In other words, long-term finance seeks the long-term benefit of capital investment decisions by allowing the managers to meet the funding needs of their firms for a specified period of time. Finance is an essential aspect of any economy.