Introduction of Finance
Study , management , credit , investment of money by individuals , businesses and governments is defined as Finance .
Key Takeaways of Finance
• Finance is study , management and investment of money.
• Budgeting, Borrowing , investing , saving and risk management are main activities in Finance.
• Finance has three core branches personal , corporate and public finance.
• Money moves in economy by financial institutions and markets.
What is Finanace ?
Finance means earning and spending , investment , management and study of money. It includes many activities like budgeting , saving , borrowing, investment etc.In short Finance is a science of money that helps people to achieve their financial goals for managing money related risks.
Importance of Finance
Finance is a core point of a ecomomy for money spending , saving and investment for financial risk management.
• Stretagic Financial planning helps in investing and saving money more efficiently for positive outcome.
• Finance helps in wise investment for economic growth which contributes in GDP , creation of jobs , improvement in infrastructure and different types of industries.
• Finance allows you in risk management , assets purchasing.
Types of Finance
1. Personal Finance
2. Corporate Finance
3. Public Finance
Personal Finance includes management of money like banking , credit card , savings , mortgages , tax , household expenses , budgeting , insurance .It involves strategies for household budgets , income , saving and where to spend them wisely.It depends on how many people are earning and how much they earns . According to these points personal finance plans are made.
Corporate Finance includes management of funds by businesses to create assets , make investment , liabilities , balance sheet , revenue , cost of capital , dividends. Corporate finance is used by businesses to invest , create new assets , invest in business growth , management cash flow. Corporate Finance source of finance are debt , retained earnings , selling bonds and equity.
Public Finance includes allocation of resources for public welfare , economic growth , making budget , infrastructure development , income and sales tax , social security , insurance , money supply , international trade by Government. As it is handled by government , it is obvious that government's source of finance is people's tax money , fines , import - export charges and govt securities and bonds .Taking loans from other countries or international financial organisation is also sources of public finance. Grants by central government to state government is most important finance source of state governments.
International Finance includes global investments , financial transactions between countries , foreign exchange .
Key Points and Terms of Finance
• Budgeting : This term expresses that how much money or funds will be spent on what things and how much will be spent.
• Investment : Money spent on something to gain. profit.
• Equity : Portion of a stock like 0.5% , 2% is equity or ownership in entity.
• Asset : Asset represents a value of something such as property , cash , bonds , stocks.
• Liability : Liability represents obligation to someone . For instance , our government have taken debt from organisations like world bank . So the debt is liability.
• Liquidity of money : Liquidity express how easily the assets or something valuable can be converted into cash money.
• Profitability : The return of investment that is more than the cost of investment for financial health .For example you invested 100cr and your return is 150cr then your profit is 50cr.
• Diversification of Finance : Investment in different assets to lower the financial risks.
• Cash Flow : The available and in-use money in market in current time.
Sources of Finance
Sources of finance means how individuals , corporate or government get from which sources.
• Grants : grants are provided by govt to help or assist to people , state or entities . For example government schemes provide grants to people.
• Subsidy : Government provides subsidy to individual and his family . It also a part of grants. Subsidy can be different for different schemes.
• Equity : By selling equities , seller get a investment by equity buyers.
• Bonds and Loans are also sources of finance.
Finance in our Life
General Use
• Budgeting : Making Strategies how the money will be used in daily life expenses and where and how much will it be used.
Savings & expenditure : Saving a portion of income for future plans is savings and Expending some portion of income is expenditure.
Business and economic use
Investment : Corporate or business invests in start-ups and other businesses to gain profit and grow their business.
Development : Government use finance in developing infrastructure and industries to create jobs.
Financie Career Opportunities
•Banking Sector
• Private Banks
• Commercial Banks
• Accounting
• Audit
• Insurance
• Equity , Bonds and Securities
• Mortgage
• Investment
Frequently Asked Questions ( FAQs )
Q. What is Finanace ?
A. In simple words , Finance is management of money for different purposes . How individuals , business and government use money and how they achieve their financial goals by investing , saving , spending and borrowing.
Q. How many types of Finance ?
A. Three main types Personal ( money managing individuals ) , Corporate ( investment and capital management by business) and Government Finance ( National Budget and Fiscal Policies for a financial year )
Final Thoughts
Money Management by investing , saving , budgeting etc is Finanace . Personal, corporate and public finance are main types of finance. Finance is very useful in our daily life . It helps us in budget making , saving and wisely spending money to achieve our financial goals and life stability.We must have the basic knowledge of finance for a stable financial life to avoid financial risks.
