Trends in Finance Industry

Trends in Finance Industry

There are some things we encourage you to keep in mind as you study that trends in finance industry. These are things we have found to be helpful to our students and visitors of this post.

Financial Principles

This post was written with an overriding belief that if you understand the "first principles", you can solve every problem and issue using these principles. Essentially, we believe that if you understand the general, you can always apply that understanding to a specific situation. Once you understand the principles and the structure of the financial world, using those principles can be interesting and even fun.

Financial Jargon

When you first encounter a subject, you must learn new terms. Finance is no exception. It has its own language or jargon. When you learn a new language, it's better to add vocabulary in sequence, rather than try to learn all of it at once. A rich language has many terms for essentially the same thing, but each term has subtle differences that make it the "best" term to use in a particular situation. This richness provides more precise communication and is welcome in technical situations. However, it can be overwhelming at first.

Toward this end, we will help you avoid getting bogged down in terminology. For now, we'll keep it simple, concentrating on helping you understand the basic concepts rather than forcing you to memorize new terms. While the new terminology is essential, we will endeavor to familiarize you with the terminology of finance in a way that promotes your understanding of the basics. In the longer term, however, it's very important that you learn the language of finance. Unless you do, it can be very difficult to comprehend fully rthe more subtle concepts. 

Business Calculators

We recommend you purchase a good business calculator. You may have calculator that will add, subtract, multiply and divide or a "scientific" calculator with complex math functions. These calculators are good for balancing your checkbook or for courses in statistics, engineering, chemistry and the like. However, this is a finance course and we have written this book with a business calculator in mind.

Business calculators are necessary equipment in the business world. For convenience, we'll simply say "calculator" when we mean a business calculator. Such a calculator will also serve you well in other classes, in your professional life and in your personal investing and borrowing.

Finance Isn't Just for Finance Majors

Regardless of your major, we believe this will be an important and worthwhile course for you. The principles can be immediately used in your personal financial transactions, such as borrowing money or using a credit card. This course will also provide important preparation for additional study. Even if you are majoring in another subject, this course will provide you with the ability to apply financial principles in that field. If you are undecided about a major, this course will help you to decide. We are admittedly biased, but we encourage you to consider finance. 

We appreciate the opportunity to provide you the information about finance. We believe finance can enhance your professional and personal lives in many ways. We hope your finance studies pay for generous dividends.

Summary

• Finance is the field concerned with acquiring, investing and managing capital.
• The fundamental questions that finance address are (1) What assets should the company acquire? (2) How should the company be financed? (3) What operating and financial decisions are consistent with the goal of the company to maximize shareholder wealth?
• The three basic area of finance are corporate finance, investments and financial markets and intermediaries.
• There basic models of the company are (1) The investment vehicle model, which views the company from the viewpoint of stockholders, (2) The accounting model, which represents the company as a set of financial statements, (3) The set of contracts model, which views the company as a set of contracts among its various stakeholders.
• The corporate form of organization benefits from limited liability, permanency, transfer ability of ownership and better access to capital markets. A big disadvantage can be double taxation of income.
• The rights of stockholders include dividend rights, voting rights, liquidation rights and (sometimes) preemptive rights.
• Profit maximization suffers from vagueness, does not account for the time value of money and does not account for risk.
• Shareholder wealth maximization is the goal of the company in the investment vehicle view of the company. Shareholder wealth maximization means maximizing the value of the company to its owners.
• The field of finance has evolved in response to the major societal and economic needs of the times.
• Current significant trends in finance industry involve globalization, computerization and telecommunications and restructuring of the business environment and the workplace.