||Business Finance India
Finance is a branch of economics that deals with the management of funds, financial resources and other assets. In broader terms, finance is raising or investing money either as equity or debt. Finance is a wide-ranging term which includes funding, investments, trading and risk management (through various types of insurance policies).
Finance involves investment of funds in financial assets, such as stocks, bonds, mutual funds and private equities for income generation. Financial institutions like banks play a major role in funding these financial assets. Investment in financial assets is generally extensive so it must be protected by risk management and risk transference organizations like insurance companies.
Financial institutions are government-regulated or private entities that offer financial services to their customers. These institutions control the flow of cash from an investor to a company and vise versa within and outside a country. financial institutions cater to clients ranging from individuals to big organizations, depending on their size and the services offered. Broadly speaking, financial institutions deal in the sectors pertaining to mortgage, automobile, homeowner, personal,business and corporate finance.
Commercial banks: These institutions offer services such as insurance, mortgages, loans and credit cards.
Credit unions: They are cooperative financial institutions, generally controlled by members who have accounts in the firm. These unions offer direct debits, direct deductions from payroll, cheaper insurance facilities and standing order facilities.
Savings and loan association: These associations offer loans, mortgages, insurance, credit cards and interest to their clients.
Stock brokerage firms: These firms help individuals and corporations invest in the stock market. Stock brokerage firms also offer insurance, mortgages, credit cards, securities, loans, check writing and money market services to clients.
Asset management firms: These firms manage various securities and assets, and offer fund management advice to help investors meet their financial goals.
Insurance companies : Insurance companies provide a cash cover in lieu of premium to policyholders. Services such as insurance, securities, mortgages, loans, credit cards and check writing are offered by these firms.
Financial Crisis, Credit Crisis, Credit CrunchA financial crisis is a sudden wide-scale drop in the value of financial assets, or in the financial institutions managing those assets (and often in both). A financial crisis may be triggered by a variety of factors, but the situation is typically aggravated by negative investor sentiment – fear or panic. A financial crisis often sparks a vicious circle where an initial decline sparks fears by investors that other investors will pull their money out, leading to redemptions and increasing declines. The global credit crunch of 2008 is an example of a financial crisis that resulted in such severe runs on the banks and other markets that investment banks such as Bear Stearns and Lehman Brothers, who have been around for more than 100 years, were bankrupted.