Finance is the process of creating, moving and using money, enabling the
flow of money through a company in much the same way it facilitates global
money flow. Money is created by the sales force when they sell the goods or
services the company produces; it then flows into production where it is spent
to manufacture more products to sell. What remains is used to pay salaries and
fund the administrative expenses of the company.
When some element of the finance process breaks down companies go out of
business and the economy moves into recession. For example: If a major bank
loses a significant amount of money and faces the risk of insolvency, other
banks and corporate customers will stop lending or depositing money to the
problem bank. It will then stop lending to its customers and they will not be
able to purchase the goods or pay the bills for which they were seeking
funding. The flow of money throughout the financial system slows down or stops
as a result.
All facets of
the global economy depend upon an orderly process of finance. Capital markets
provide the money to support business, and business provides the money to
support individuals. Income taxes support federal, state and local governments.
Even the arts benefit from the financial process because they draw their money
from corporate sponsors and individual patrons. Capital markets create money,
businesses distribute it, and individuals and institutions spend it.
Done by Yue Yang
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