Introduction
Every person, business, and government organization is involved in finance on a daily basis. I found it though not just about providing financial solutions, but about managing, developing and planning financial resources to cater for a number of different requirements. Banks, credits, debts, investments and markets: these are the crucial aspects of any economy discussed in the field of finance. This article gives an easy to understand presentation of finance starting with personal finance, corporate finance and public finance.
What is Finance?
In a rather unsophisticated manner, finance refers to the management or procurement of funds. In banking, investment, and other related firms, there is always a process on how restless money will get to the place it needs to be for a single person, companies, or authorities. Finance can be defined as a branch of economics that deals with the proposition that money today is more than money tomorrow, otherwise referred to as the time value of money. This determines what a person will do as an investment, will power to save or take a loan.
Types of Finance
Finance can be categorized into three main areas:
Personal Finance
Personal finance means being responsible for handling people’s money. It entails putting capital aside, purchasing financial assets, using money to achieve particular goals, setting goals, and timing their achievement. For example, many interact with retirement planning which is part of personal finance since an individual will set some amount to save that will cater for his or her expenses once the individual retires and ceases from working. It will also cover such decisions as selection of a credit card, insurance policy or a mortgage loan. Personal finance assists people to meet the common and strategic financial needs and wants within a short time or in the long run, a given individual may need to finance something such as a home.
Corporate Finance
Corporate finance studies how companies deal with their money and what mechanisms they choose to finance their activities or obtain needed capital. Managers have to make strategic decisions for the company, such as if to issue stocks, to borrow or sell investment. This area also involves capital outlay in business growth and apportioning of funds for the future development. This paper underscores the importance of corporate finance for the sustenance of corporate finances and profitability for companies to support economic development.
Public Finance
It is the study of state and municipal finance whereby governments undertake a set of activities to organize their finances. It includes the taxes, expenditure, and the sale of gilt-edged securities. People pay taxes so that the government can create a budget out of it to finance public service delivery such as education, health amongst others. Using them, they also borrow funds targeting achievement of certain financial related objectives, enhance economic stability and provide social welfare. The fiscal policy is a crucial part of the regulation of the public finances so that societies can be stable and that people can live well.
The Bottom Line
It is crucial to understand finance whether it’s personal, corporate or public in order to be able to manage resources well. It goes further to affect monetary decisions of a single person and it is a very strong actor in economies. That is why if people understand the fundamentals of finance they are able to make financial decisions that improve their lives and the lives of others.
Enthusiastic finance professionals and learners are encouraged to contribute to our Write For Us Finance section, sharing unique insights and experiences to help broaden our community’s knowledge.
