Problem

Define the termsfinance and financial management, and identify the major sub-areas offinance. Finance: the study of applying specific value to things that we own, the services we use, and thedecisions we make.

Financial Management: the process for and the analysis of making financial decisions in thebusiness context.There are four major sub-areas of finance.They are:

1. Investments. This subarea involves methods and techniques for making decisionsabout what kinds of securities to own, which securities to buy, and how to pay theinvestor back in the form that the investor wishes.

2. Financial management. This subarea deals with a firm's decision in acquiring andusing cash that is received from investors or from retained earnings.

3. Financial institutions and markets. These entities work in different ways tofacilitate capital flows between investors and companies.

4. International finance. This subarea involves the use of finance theory in a globalbusiness environment.