The 4 Major Areas of Finance

Finance is the method of channeling funds from borrowers and investors to entities who require it most. Borrowers and investors typically have available money that can make profits or interest if placed to good use. As such, it is very important that entrepreneurs know the basics of finance, so that they may apply its techniques in their businesses wisely.

The basic techniques of finance are money management, capital budgeting, investment, sales and pricing, and financing. All these techniques aim at providing a source of income for the investors. Entrepreneurs need to be able to apply all of these techniques in their businesses, so that they may be able to earn enough profits to support themselves and their dependents. Finance aims at meeting all these needs in the best possible manner. This is why entrepreneurs need to learn about the various techniques of finance.

The techniques of finance encompasses banking, borrowing, credit, corporate finance, mergers and acquisitions, leasing, financial systems, and monetary policies. All of these techniques are interconnected and interrelated; therefore, they cannot be separated from each other. Banking, for example, is closely tied to corporate finance, because the two are intimately related. In turn, all these techniques of finance aims at providing an efficient and effective source of income and finance to entrepreneurs and other small-scale businessmen.

The personal finance field includes three main subcategories: finance strategies, direct investing, and mortgages and debits. These subcategories are very closely linked with one another, so much so that the subcategories often speak about their own field. Examples of the subcategories are investment strategies, savings and investment plans, estate planning, and retirement plans. All these subcategories together provide small business owners with a wide array of opportunities to improve their wealth.

On the other hand, small business finance is made possible through angel investors, venture capitalists, and loans. Venture capitalists fund early-stage startup ventures in exchange for shares of profits and company equity. Angel investors, on the other hand, are usually wealthy individuals who are willing to lend small amounts of money for the chance to have a bigger stake in a small business. On top of angel investors are venture capitalists, who provide small business owners with bank loans, lines of credit, and other forms of capital.

Public finance, as its name suggests, deals with governmental organizations and other large organizations. Examples of public finance fields are postal funds, municipal funds, research and development funds, national security funds, and grants for the development of specific industries. Public financial companies include investment banks, money management firms, and securities firms, all of whom conduct transactions in the stock market, offer loans, and trade forex, among other financial products.

Business finance is an aspect of banking, finance, and economics that focuses on the role of businesses in creating economic value. Its study aids financial institutions in creating policies that will benefit businesses by minimizing risk, and creating investments that yield more income over time. This branch of banking includes concepts like working capital management, inventory banking, venture capital, financing the growth of the firm, and other strategies to improve the profitability of a business. The scope of business finance is not limited to the actual loans and investments made by financial institutions; it also encompasses the costs and transactions associated with business operations. Examples of such costs include marketing, human resources, and payroll.

Consumer finance refers to the business activities that deal with the provision of loans and credit cards. Examples of such business activities include credit card banking, personal loans, auto financing, and purchases on credit. A number of government programs, like the Federal Housing Administration and the Small Business Administration, provide funding for consumer finance. These programs, along with a great deal of state-sponsored direct financial programs, help the small lenders and corporations provide basic credit services to consumers.

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