Finance vs. Economics: An Overview
Although they are often taught and presented as separate disciplines, economics and finance are interrelated and inform and influence each other. Investors care about these studies because they also influence the markets to a great degree. It's important for investors to avoid "either/or" arguments regarding economics and finance; both are important and have valid applications.
In general, the focus of economics is a more big picture in nature, such as how a country, region, or market is performing. Economics also focuses on public policy, while the focus of finance is more company- or industry-specific. Finance also focuses on how companies and investors evaluate risk and return. Historically, economics has been more theoretical and finance more practical, but in the last 20 years, the distinction has become much less pronounced.
In fact, the two disciplines seem to be converging in some respects. Both economists and finance professionals are being employed in governments, corporations and financial markets. At some fundamental level, there will always be a separation, but both are likely to remain very important to the economy, investors and the markets for years to come.
在一些基本层面上, 两门学科总会有所区分, 但在未来数年内,两者对经济、投资者以及市场依然可能十分重要。
Finance in many respects is an offshoot of economics. Finance describes the management, creation and study of money, banking, credit, investments, assets and liabilities that make up financial systems, as well as the study of those financial instruments. Finance can be divided into three categories: public finance, corporate finance and personal finance.
Finance typically focuses on the study of prices, interest rates, money flows and the financial markets. Thinking more broadly, finance tends to center around topics that include the time value of money, rates of return, cost of capital, optimal financial structures and the quantification of risk.
Finance, as in the case of corporate finance, involves managing assets, liabilities, revenues and debt for a business. Businesses obtain financing through a variety of means, ranging from equity investments to credit arrangements. A firm might take out a loan from a bank or arrange for a line of credit—acquiring and managing debt properly can help a company expand and ultimately become more profitable.
Personal finance defines all financial decisions and activities of an individual or household, including budgeting, insurance, mortgage planning, savings and retirement planning.