Introduction to Finance

Small Business Practice

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1.2 Why Study Finance?
7
longest recession since the Great Depression of the 1930s. While unemployment rates in the 
United States exceeded 10 percent in 2009 and remained above the 7 percent level as of the 
end of 2012, they were reduced to about 5 percent by late 2015.
The health of economies and fi nancial institutions and markets are linked throughout the 
world. European and other major foreign fi nancial institutions were caught in the 2007–2008 
fi nancial crisis and most foreign economies suff ered economic downturns near the end of 
the 2000s decade. Since then, European and many other economies have been slow to recover 
and some remain in recessions at the end of 2015. Even China, which had been growing its 
economy at a double-digit rate during the fi rst decade of the 2000s, has been characterized by 
slowing economic activity during the past couple of years. This has worldwide implications 
since many developed and developing (emerging market) economies are tied to demand for 
natural resources and other products manufactured by Chinese fi rms. Even as China attempts to 
move from an exports-based economy to a consumer-based economy, their economic slowdown 
has made it diffi
cult for many U.S., and other foreign companies to grow their sales in China.
We believe the analysis and understanding of past developments in economic activity and 
fi nancial markets are useful to governments, businesses, and individuals in planning their futures. 
By learning from the past, we may be able to avoid, or mediate, similar pitfalls in the future.
There are several reasons to study fi nance. Knowledge of the basics of fi nance covered 
in this text should help you make informed economic decisions, personal and business invest-
ment decisions, and career decisions.