What is Finance
Study of finance covers most of the concepts from micro and macroeconomics theories. The basic and important concept of finance is Time Value of money which directly shows that today’s dollar value is higher than dollar value in future.
In a simple form, the definition of finance is a management of money or fund. But modern finance is a collection of business activities. Since it is mandatory to work for a person, business organization and government.
Therefore, finance is divided into three forms:
- Personal finance
- Corporate finance
- Public finance
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In all the above types of finance, there are few things in common. For example, investing wisely, providing loan on the low-interest rate, providing funds to account payable and banking. However, there are some special qualities in each of the types. For example, a person has to arrange his expenses after his retirement. Whereas a big firm has to decide that they have to arrange extra funds by issuing bonds or providing stocks. In the same way, the government has their own policies (E.g. fewer inequalities in income)
Personal finance is financial management that a person or a family does in order to manage their budget, savings, and expenses in the wake of various financial risks and future events like saving for retirement, planning a budget for household expenses which cover expenses on health, children’s education and personal desires etc.
Personal finance also includes buying a financial product like a credit card, mortgage loan and other savings for future.
Corporate finance or company finance is the area of finance which is related to funding and creation of capital. It is the area of work in which a big company manages their financial activities and they have to decide whether to raise extra funds by bond or stock offerings.
Start-ups can get funds from various sponsors by offering a certain amount of share of the company. And if a company wants to make themselves publicly available then it can be done by issuing shares in the stock exchange in initial public offering in order to raise funds.
The study of the role of government in an economy is called public finance. This is the branch of economics which evaluate the revenue and expenses of government. It also gives necessary suggestions to gain desired results and get rid of undesired results.
Public finance includes managing taxes, debts, budgets, and spending money on social welfare. These are sources funding which affects how the government pays for the services which are provided to the public.
In addition to it, government organizations also have a social responsibility which includes equally distribution of income for its citizen and work on the policies that lead to the social development and stable economy.