Question

When you think of finance, what is the one word that you think is the core topic of finance? Why? Finance is about what? Explain everything in a minimum of 150 words. An example can be included.

Answer 1

Finance is about analysing things which present itself with numbers and pure logic and common sense. There is nothing that is to be deemed as based on faith here. Everything would present itself ultimately in some quantitaive form of the other which can be analysed. However even after so much of number crunching, qualitative analysis should not be left behind. This is where the basic logic and common sense would come into play.

The one topic that i think is core in finance is the Markets where financial instruments are traded. Now why i say so is because of the following reasons:
1. Markets are one place where we can gauge the true worth of a company or economy in general.
2. I can say Point 1 because a mature stock or bond market signifies that the economy is in a health state. It also signifies that the companies are taking responsibility of being answerable to the general public from which it raises money.
3. Financial markets are also being considered as a projector of the future. This is because a lot of news and developments are discounted in the prices which follow.
4. Everything in the end i.e. the companys' financials, its performance, its qualitative analysis, economic shape, macro economics, micro economics, public sentiment, gdp, all the relevent financial data, global economy, forex, politics etc. everything has some impact on the markets which, if the markets are mature do help us gauge the public sentiment and the forecasted scenario.

Example:
The US economy was in the worst shape post 2007 recession. Corporates and the general economy was at its lowerst. The stock markets were at the lowest point. With the economy reviving now, the markets are indicating the public sentiment and the global sentiment as well. There is certainty with respect to the US future scenraio and the economy is stronger. Thus all the above points that we spoke of, all indices and figures and data, everything is in effect reflecting in the market data. Also i think that even if there is a correction in the markets, there should be no reason to worry. This is because it is ultimately a market where you would buy and sell. So normal corrections are healthy. But if you see from the long term perspective, one would get a positive view.