Because long-term financial activities involve long-term capital, high risk and long-term stable income, which is similar to capital investment, it is called capital market.
Finance refers to the economic activities in which banks, securities or insurance companies raise funds from market entities and lend them to other market entities.
Broadly speaking, all capital flows generated by the government, individuals, organizations and other market entities through raising, distributing and using funds can be called finance. Therefore, not only the financial industry, but also the government's finance, the behavior of industrial enterprises and personal financial management are all part of finance. Finance can be regarded as three economic behaviors: fund raising and distribution (financing), investment and financing (borrowing money to buy stocks).
Basic meaning
The essence of finance is value circulation. There are many kinds of financial products, including banks, securities, insurance, trusts and so on. Finance involves a wide range of academic fields, including accounting, finance, investment, banking, securities, insurance, trust and so on.
Intrinsic characteristics
Finance has five elements:
1. Financial object: currency (funds). The currency circulation regulated by the monetary system has the characteristics of prepayment, turnover and appreciation;
2. Financial model: represented by the credit model of lending. The trading objects in the financial market are generally written proof of credit relationship, contract documents of creditor's rights and debts, etc.
Including direct financing: no intermediary intervention; Indirect financing: financing realized through the intermediary role of intermediary institutions.
3. Financial institutions: usually divided into banks and non-bank financial institutions;
4. Financial places: financial markets, including capital markets, money markets, foreign exchange markets, insurance markets, derivative financial instruments markets, etc.
5. System and control mechanism: supervise and control financial activities.
Relationship between elements: Generally speaking, each element is relatively independent and interrelated. Financial objects and financial places are the hardware elements of the financial system, financial methods, systems and supervision mechanisms are the software elements of the financial system, and financial institutions are its comprehensive elements.
Specifically, financial activities generally take credit instruments as the carrier, and through the transaction of credit instruments, they play a role in the financial market, realizing the transfer of the right to use monetary funds, in which the financial system and regulation mechanism play a supervisory and regulatory role.