What is Finance? Is it Art or Science?

by Banking Desk
What is Finance

What is Finance?

It is a term that is better described as the study of the system of :

  • Money
  • Investments
  • And other financial instruments.

Some people prefer to divide finance into three different categories:

  • Public Finance
  • Corporate Finance
  • Personal Finance
  • Social finance is an emerging field and
  • Behavioral finance aims to identify the cognitive (emotional, social and psychological) reasons that motivate people to take financial decisions that are sometimes unexpected or unpredictable.

A breakdown of “Finance”

  • Public finance comprises of tax systems, government expenditures, budget procedures, stabilization policy and instruments, debt issues, and other government concerns.
  • Corporate finance involves managing assets, liabilities, revenues, and debts for a business.
  • Personal finance includes all financial decisions and activities of an individual or household, including budgeting, insurance, mortgage planning, savings, and retirement planning.
  • Social Finance: It means investments made in social enterprises like charitable organizations and sometimes cooperatives. Instead of making a direct donation, these investments are more in the form of equity or debt financing. It gives the investor both a financial reward and social gain.

Whether Finance is an Art or a Science?

It is a combination of both in short words. As a field of study and an area of business, it has strong roots in related scientific areas like statistics and maths. Moving ahead, many theories of modern era resemble scientific or mathematical formulae. It cannot be denied that the financial industry has an art aspect to it. Like human emotions play a crucial role in the financial world especially financial decision making.

To summarise, Finance is not a limited field now. It is evolving and reinventing itself with the help of science. Its behavior is like the universe expanding always.

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