Finance is a concept that relates to balancing risk and profitability and can be exercised by an individual, organization or government. It normally involves a set of objectives and constraints designed to yield rewards. Today, finance most often relates to the “financial instruments” backing the value of goods or services. Financial instruments are bought and sold to provide a yield assuming risk is managed properly.
How financial instruments are valued is complicated and prone to market speculation.
Financial instruments come in a variety of forms, including stocks and bonds. When these instruments are owned, they are assets. They then are used to provide credit, which is used to invest in goods and services.
When risk isn't managed properly, financial instruments lose value. Governments regulate finance to protect the public-at-large from greed. Greed can also cause outright fraud, which is another reason for regulation.
by Ed Dickson
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