why finance essay

why finance essay

The Importance of Finance in Today’s World

1. The Role of Finance in Economic Growth

Each of these two plays a specific role. Risks influence the velocity of money, so that the product of the nominal level of money and its velocity determines the real growth rate. Financial intermediation, by leading to a higher nominal level of money, also leads to a higher real growth rate. Analysis complements several other models in terms of producing realistic, succinct explanations about how finance influences growth. The model can alternatively be formulated in terms of familiar, microeconomic optimization problems that feature equilibrium prices for manufactured goods and interest rates. Mistaking the nature of financial imbalances is often one among responses to a boom, which leads to an overly-procyclical policy.

The importance of finance in today’s world, being what it is, is one factor that describes the need for learning about it and understanding the effects it has. Economists have been hard at work for many years in order to understand and predict the effects of investments and monetary policies. On the investment side, much of the focus has been on the effects on real economic growth. It has been shown that there is a strong positive long-run aggregate relationship between the level of investment in a country and the level of real value added per capita generated in the country. In addition, intensive research has shown that the prices of capital goods, such as plant, machinery, and equipment, are procyclical.

2. The Impact of Finance on Personal Wealth

At the heart of the process is your ability to create wealth by establishing goals and plans to generate the resources needed to achieve these goals. Our purpose of wealth maximization is to increase the total value of the wealth that we create for the benefit of its primary claimant – you. Individuals work hard to come up with the resources needed to build wealth. Unlike our fathers and grandfathers, we do not get our share of the wealth, traditionally land and other tangible assets. However, we have to work hard, make sacrifices, and face economic and financial risks in our efforts to achieve wealth and maximize it. Our capital structure plays a significant role in our financial success as we move towards the selected investment opportunities that will help our financial empire grow. Now, you and/or your financial advisor will have to determine whether passive investing or active investing is right for you. A good investment plan is needed to generate maximum return on your securities, given your needs and your choice of a portfolio. Given how well or badly the investment plan, your advisor or financial advisor has created for you, he or she will know how soon and how easily you will be tanning on that worldwide cruise. With the right investment plan, you will reach your financial goals sooner than your neighbor with the wrong or nonexistent investment plan.

To prepare the best financial plan for your personal situation, your financial advisor must become familiar with your current financial situation, as well as your future plans/goals. In turn, your financial advisor will use this information to produce a comprehensive financial plan designed to provide you with an extraordinary living of your financial goals. A good financial plan will serve as a guide as you work toward your goals and the coordination and management of your individual financial activities.

3. The Influence of Finance on Business Success

The sources of finance affect the nature, direction, and spirit of an organization’s rate of growth, the value of products sold, staffing levels, and profit margin. Thus, if a firm gains funds to buy several new products that would allow it to surge its sales volume by 5%, such a large increment in the number of new customers would have to be carried out using the number of staff members the firm already has. What does that mean? Reduced customer service and an inevitable decrease in the firm’s reputation. And one of the most important reasons why most companies do or do not engage in one or many mergers and/or acquisition activities is financial support or the lack of it. The same stands for restructuring activities. In many cases, such actions would not occur or would have to be performed later than earlier if there were no financial means.

First, finance has always been an essential business activity. There is no company, especially no for-profit enterprise, which is less successful because it has ready money to pay some of its liabilities or to invest in new equipment. The sole reason these companies exist and function is to provide goods and/or services to clients and, respectively, nicely. Furthermore, not being able to acquire certain other goods and services which are crucial for business productivity would also lead to a lack of competitiveness. Finance is required to utilize the firm’s resources and to meet the firm’s obligations as they fall due. Finance is always specific and always depends on the availability of liquid cash.

4. The Significance of Financial Education

Financial education can help in many ways and in many stages of an individual’s life. It helps young people develop critical abilities to pave the way for them to make informed choices, acquire financial responsibility, and face the challenge of managing their personal financial resources throughout their lives. It can also help older adults become more risk-sensitive. Having the ability to recognize potential financial abuse will ensure that older adults live a productive and satisfied life after retirement. Throughout the ages financial equality has incidental benefits, such as stress reduction related to money and better physical, as well as mental health. A financially literate society is crucial to the financial system—economic development, access to credit and capital, savings and retirement planning, investment management and the capacity to direct centralized economies toward a competitive market. For financial systems to function, individuals must have a basic knowledge necessary for sound financial decision-making.

An educated society is the backbone to the growth and success of any nation. The Republic of Cyprus could secure its future by empowering each and every one of its citizens to deal with a society that demands an increasing knowledge that leads to prosperity. Education is a basic good that develops the potential and capabilities of persons and is a key factor in achieving success. Access to high quality education democratizes the opportunities for knowledge and development that the rich have. High quality and effective education develops democratic values and practices, such as understanding and respect for other people, regardless of gender, social status, race, religion, etc.

5. The Future of Finance: Emerging Trends and Challenges

Zio’s thesis puts finance to the test through a large network of foundational concepts to mobilize, in almost 1000 pages, readers and researchers, students and professionals who want to deepen their transports in the multifaceted world of finance, face the challenges of the digital world, turn the gaps and the care in reflection and action, make debt securities, equity, or the stock offer launch, financial management that integrates the generation of short, medium, and long-term value, or meet the needs of the companies and the agents that act in markets less perfect, in networks with consequences at the level of the different economic sectors. Implied professionals are also called upon to meet supply and demand with accuracy. Data science, machine learning, blockchain, fee platforms, or dashboards – to highlight just some of the emerging skills that overcome and transform the field of financial operations – mark the rhythm of reflection, teaching, and experiments that support measures within the scope of government intervention. Other methods, whether negotiations, arbitration, or collective bargaining, require criteria and ethics. Are there capable acts of navigating, analyzing, and optimizing solutions?

Regardless of how one would define the concept of finance (in terms of financial management, finance or the cycle), Zio’s thesis states that its scope, objectives, and functions in today’s world are increasingly diversified. The implementation of the circle of finance results from the partnership between various professional bodies. It is not enough to condense inside it, from a multidisciplinary point of view, several areas of knowledge. It is required that each professional body acts as a bridge for such an interconnection, which justifies the title of the book: “Finance: Top Bridge, Connecting you with the World”. Our concern, as a reader, could be to know what environments we can connect if we cross financial engineering with fixed income, tax planning, or management accounting, for example.