The Essential Areas of Finance

Finance is a broad term covering many things regarding the financial management, creation, allocation, and appreciation of funds. The world economy has made great use of finance as it is the means of organizing the whole process of managing funds. Finance is the science of funds management and it deals with the strategic management of funds. There are various techniques of finance such as: financial planning, investment analysis, bank lending, asset pricing, financial reporting, risk management, etc.

finance|finance

The Essential Areas of Finance

Finance is a broad term covering many things regarding the financial management, creation, allocation, and appreciation of funds. The world economy has made great use of finance as it is the means of organizing the whole process of managing funds. Finance is the science of funds management and it deals with the strategic management of funds. There are various techniques of finance such as: financial planning, investment analysis, bank lending, asset pricing, financial reporting, risk management, etc.

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Financial Planning concentrates on future requirements and provides a platform for decision making. There are various types of financial planning such as budgeting, investment strategy, debt management, investment strategy, etc. Bank lending and capital markets are major areas of finance. Bank lending involves the use of banks for the purpose of raising needed funds to make investments or purchase assets. There are various banks such as commercial banks, savings banks, mortgage banks, credit unions, thrift associations, investor-owned banks, etc.

Financial Analysis focuses on financial modeling, evaluating, predicting, and projecting future results of financial activities. There are various methods and techniques of financial analysis like: actuarial, economic, statistical, financial, decision tree, forecasting, etc. actuarial is an example of statistical financial management which aims at the prediction of future cash flows. Economic modeling concentrates on the analysis of economic activities and their interrelationship. It applies macroeconomic concepts like market structure, inflation, business cycles, balance of payments, exchange rates, balance of trade, etc., to forecast economic performance over a period of time.

Personal Money Management is the process of regulating finances. There are various techniques of personal money management like: savings plans, investing in stocks and bonds, budgeting, saving plan for children and young people, etc. In business, finance is also dealt by finance. Finance deals with all types of financial activities like: borrowing, lending, trading, investing, servicing, and creation of wealth. Personal money management includes various techniques like: managing payrolls, insurance, retirement plans, estate planning and charity, tax planning and registration, etc.

Finance Decisions are made on the basis of macroeconomic theories and concepts. Some examples of these concepts are: interest rates, inflation, deflation, real effective exchange rate, national income forecasts, political economy, political environment, monetary system, fiscal policy, risk and valuation of assets and liabilities, portfolio diversification, portfolio optimization, and international trading. Finance is also affected by other factors such as time value of money, bank capital, financial sector, fiscal power, balance of payments, balance of trade, etc. The importance of finance in any country can be estimated from the gross domestic product (GDP), current account, trade balances, current international trade balances, and current account deficit. Growth of finance in any country can be further evaluated by looking into macroeconomic indicators such as: inflation, interest rates, balance of payments, credit risks, business cycle, business cycles, etc.

Corporate Finance There are several financial activities related to corporate finance. One of them is the International Financing which includes: fundraising for start up projects, securing long-term resources, merging with other companies, acquiring others, merging with foreign companies, etc. It is one of the most important sectors of finance. Many multinational corporations have their finance management departments.

Investment Banking In this process, financial managers of a firm to prepare and manage the financial statements of a firm. The financial managers prepare and issue corporate bonds, stock, debentures, and common stock. They also arrange for the issuance of securities in the foreign markets. Issuance of securities is largely dependent on demand and supply of the underlying security. Foreign exchange dealers provide the necessary financial information needed by the corporate financial managers. The major areas of focus of investment banking are: securities purchase, sale, refinancing, and international finance.

Commercial Finance involves the buying and selling of financial products between the firm and external sources. The major areas of focus of commercial finance include: purchasing property, equipment, and tenant loans; selling property; providing business loans; creating partnerships; etc. Real Estate Finance The real estate field deals with financing construction of buildings and development of land. It includes: property rental, construction, development, disposition of property, etc

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