Finance is a broad term that describes two related activities: the study of how money is managed and the actual process of acquiring needed funds. It includes the oversight, creation and study of money, banking, credit, investments, assets and liabilities constituting financial systems.
Many of the basic concepts in Finance come from micro and macroeconomic theory. One of the most fundamental theories of value of money in time, which essentially says that a dollar today is worth more than a dollar in the future.
From individuals, businesses and government agencies need funding all of the work in this field is often divided into three main categories: personal Finance, corporate Finance and public (state) Finance.
Financial planning typically includes an analysis of the individual or current financial situation of the family, and developing strategies for future needs in the financial constraints. Personal Finance is a very personal activity that depends largely on income, life needs, objectives and individual preferences.
For example, people should save for retirement expenses, which means investing enough money on the way to properly Finance their long-term plans. This type of financial management solutions fall under personal Finance.
Personal Finance involves the purchase of financial products like credit cards, insurance, mortgages and different types of investment. The Bank is also considered part of personal Finance including checking and savings accounts, and online or mobile payment services such as PayPal and venmo.
Corporate Finance is the financial activity associated with the management of the Corporation, usually with a Department or of the Department for supervision of financial activities.
For example, a large company can decide whether to raise additional funds through the issuance of bonds or sale of shares. Investment banks can advise on such considerations and help them market securities.
Startups can obtain capital from angel investors or venture capitalists in exchange for a share of ownership. If the company makes profits and decides to go public, it will list shares on the stock exchange in its initial public offering (IPO) to raise funds.
Another instance can be a company that is trying to budget their money and make decisions about which projects to Fund and which projects to put on hold to grow the company. These types of solutions fall under corporate Finance.
Read more the complete guide to corporate Finance.
Public financing includes tax, spending, budget and debt issuance policies that all affect how the government pays for the services it provides to the population.
The Federal government helps to prevent the failure of the market to control the distribution of resources, income distribution and economic stabilization. Regular funding is provided mainly through taxes. Borrowing from banks, insurance companies and other governments to help financially.
In addition to managing money for his daily activities, a government body also has larger social responsibilities. Its objectives include the attainment of a just distribution of income for its citizens and enacting policies that will lead to stabilization of the economy.