Introduction

Welcome to the world of finance, where numbers tell stories and decisions shape destinies. Finance is the lifeblood of the modern economy, underpinning everything from your morning caffeine purchase to the global stock market’s fluctuations. At its core, finance is about managing money—how individuals, businesses, and governments raise, spend, and invest their resources. But it’s more than just dollars and cents; it’s a field that blends art and science, requiring a deep understanding of both human behavior and mathematical precision.

Imagine trying to launch a start-up, buy a home, or retire comfortably without understanding finance. It’s like trying to sail without a compass or GPS. Finance equips you with the tools to navigate the complexities of borrowing, investing, and managing risk. It answers critical questions: How do you evaluate the worth of an investment? What strategies can maximize your savings? How can companies optimize their capital structure to fuel growth? These principles are not just for Wall Street; they are integral to everyday life and long-term success.

This textbook will guide you through the fundamental concepts and advanced theories that define finance today, incorporating Microsoft Excel as a tool for analysis. From understanding the time value of money to exploring the intricacies of financial markets, you’ll gain a comprehensive view of how financial systems operate and why they matter. Whether you aspire to be a financial analyst, an entrepreneur, or simply someone who makes informed financial decisions, mastering the principles of finance will empower you to make choices that can shape your future and contribute to the broader economic landscape.

Each semester when we finance professors welcome our students to class, we are met with mixed emotions. Some students are excited at the prospect of learning the technicalities of finance. Others have heard finance is hard and wish they were in a PE class instead. Finance is kind of like spinach—it’s good for you, but not everyone likes it. As we wrote this text, we realized that not everyone is as intrigued by finance as we are. We’ve done our best to make this text as readable as possible, with a focus on applying the concepts we explain to everyday life. Some of the students who use this text are finance majors, but many of them are not. We’ve written this text with both groups in mind and with the hope that everyone will be able to learn from and understand this material.

In this first topic, we discuss three major issues that are important to understand before diving into the details of finance. First, we discuss the various disciplines within finance. In upper-level finance classes, the texts are written specifically about the various subfields in finance. We have intentionally written this text as a “principles of finance” text, laying the foundation for all the finance subspecialties. Second, we discuss the possible careers within the finance subfields. The finance universe offers many diverse job opportunities. Third, we discuss how corporate finance fits into business management in general.

So, let’s dive in and unlock the secrets of finance together with the tool of Excel!