Finance is a broad term encompassing things regarding the financial management, development, and analysis of financial instruments such as stocks, bonds, debentures, private equity, real estate, and securities in mortgage. All these are related to the financing of ventures, where money is raised for specific purposes, including business expansion, purchases of assets, debt consolidation, and repayment of loans taken. There are many different forms of finance including financial engineering, financial economics, banking, and insurance, just to name a few. Some of the most common financial activities include: loan making, investment, ownership of stock and property, commodity trading, payments on debts and other financial transactions. There are also various fields of finance such as real estate, venture capital, merchant banking, and private equity.
Finance is a field that is concerned with the study of how money and financial markets interact with one another. These include such areas as the theory of value, taxation, economic growth, investment, financial institutions, market trends, portfolio management, financial markets, government finance, and non-financial enterprises. The recent global economic meltdown has shown how crucial it is to manage risk properly and become aware of any potential social finance issues. The study of these fields helps us understand how the economy as a whole works, allowing us to evaluate alternative approaches to solve problems and make informed decisions.
Finance is also closely associated with accounting and the bookkeeping services related to accounting. Accounting provides data on the financial facts of a company such as sales and expenses, inventory, and the movement of cash. Bookkeeping on the other hand, is concerned with the recording of financial transactions, particularly in the records of purchases, sales, and loans. It also involves the collection and disbursement of cash within the firm. These two aspects of finance form the basis of banking, the process by which the production of loans and payments is made possible through the use of financial instruments, banks, or financial institutions.
Another major part of economics is the macroeconomics, which is the study of national economies as a whole, analyzing its structure, role, and future prospects. The fundamental principles of economics, its nature, and its effects are essential for understanding inflation, economic policies, and the role of private and public finances. The theories of economics are used to predict the supply of money, determining the interest rates, the level of taxes, the level of employment, and the balance of trade. Economics affects the production, distribution, allocation, costs, prices, and growth of the economy. There are five key concepts in modern economics; micro, macro, capital, personal, institutional, and business cycles.
Public finance is the science of distributing the resources of the community through different financial activities. Public finance includes tax planning, spending, borrowing, and balancing the budget. There are three bodies in the US Government that help with public finance: the Federal Reserve, the Office of Management and Budget, and the Congressional Budget Office. The Federal Reserve System helps in setting the interest rates and conducting monetary transactions and collects the fees associated with those transactions. The OMB oversees federal financial activities, preparing the budgets and controlling the money supply.
Corporate finance is the process of managing the assets and investing in companies. Business enterprises raise money by issuing stocks and issue dividends. Capitalization, which refers to the building of financial capacity, is used to finance organizational activities such as buying property and equipment, paying debts, and making investments. Financing options include bank borrowing, working capital advances from other banks, borrowing from friends and family, selling assets, and entering into financial agreements. Private finance, which includes non-residential finance, encompasses items such as real estate financing, venture capital, and personal loans. Private finance also includes advisory services and management consultancies.