Finance Theory

Finance theory is the study of how individuals and organizations make decisions about allocating resources over time, considering risk and return. It explains how to evaluate investments, manage financial risks, and optimize wealth by understanding concepts like the time value of money, diversification, and market behavior. The theory helps explain why asset prices fluctuate, how to value assets, and guides firms and investors in making informed financial choices to achieve their goals efficiently. Ultimately, finance theory provides a framework for understanding and managing financial decision-making in a structured, logical way.