Finance deals with the study of investments, credit, assets, liabilities, etc. All these components are a part of the financial system. Finance can also be described as the study of the management of money. Finance is divided into three categories: corporate finance, public finance, and personal finance.
Corporate finance is an important area of study in the field of finance and deals with the financial activities relating to the smooth operation of a corporation or firm. It deals with the capital structure and the various sources of funding of organizations or corporations. Apart from this, corporate finance also includes the actions taken by managers or executives to increase a firm’s value among the shareholders. It also deals with the analysis and tools that have been used to allocate financial resources. The corporate finance aims to maximize the assets of an entity. There are three types of corporate finance activities: capital investments, capital financing, and dividends & return on capital.
Capital investment is the process whereby the company decides which projects or acquisitions should it invest in. This is done to generate the highest possible risk-adjusted return. Capital financing enables the firm to decide how it should fund capital investment and to optimize the capital structure. The third aspects, dividends and return of capital relate to the decision as to how and when to return the capital to investors.
The public finances deal with the study of the finances of the government of the country or the states. The area of Public Finance is related to the issues as to how the government will raise resources to meet its expenditure. Thus, the aspects of public finance are government expenditure, effects of taxation, deficit financing and public borrowing. Public finance also relates to fiscal policies which need to be carried out in order for the government to achieve certain objectives. These objectives are the equal distribution of income, price stability, economic growth, etc.
Personal finance relates to the financial decision of a household or even an individual. The aspects that are included in this study of handling money are savings, earnings, spending, and investing. Banking is a part of personal finance as it includes savings and payments. Other aspects of personal finance are life insurance, home insurance, mortgages, various types of investments, paying for education, retirement savings, etc.
Fundamentals of Finance
Fundamentals of Finance plays a very important role in the present market-driven world. Starting from the process of production to distribution, the entrepreneur, as well as the company needs finance. The business enterprises, as well as firms, need finance to meet all of their short-term, medium-term and long-term needs.
• The long-term financial need is generally to make an investment in the fixed assets such as plants, machines and buildings.
• The short-term financial needs are generally for working capital management.
• The medium-term financial needs generally for a period of 1 year to 5 years.
Finance cover following important topics:
Raising capital: debt vs. equity
Managing financial risk
Companies Financial Report
World Capital Market
|Share capital or equity share||Preference shares||Retained earnings|
|Debentures||Bonds||Loans from financial institutions|
|Loan from state financial corporation||Loans from commercial banks||Venture capital funding|
|Trade credit||Commercial banks||Public deposits/fixed deposits for one years|
|Advances received from customers||Various short-term provisions|