The first thing that comes across someones mind when the term finance is heard is money. However, there is a lot more the discipline. Finance can be defined as the management of money of a large amount, particularly by governments or large enterprises. Finance is the act of providing funds for an individual or corporation. An important thing that should be kept in mind when it comes to finance is that the time value of money, which says that a unit of currency today is worth more than that same unit of currency tomorrow or the next day.
Finance can be categorized into three variants. Each of them is described below:
- Personal finance : Personal finance may involve various things such as paying for education, financing durable goods (for example :real estate and cars), purchasing insurance, (for example : property insurance and health) investing and saving for retirement, etc. Some common questions that revolve around personal finance include :
- How people can protect themselves against unanticipated personal events and as those of the external economy. How family assets can best be transferred across the different generations.
- How tax policies (tax subsidies and/or penalties) affect the personal financial management
- How credit affects an individuals financial position
- How one can plan for a secure financial future in an environment of economic instability
The six key areas of personal financial planning, as per the Financial Planning Standards Board include:
- Financial position
- Adequate protection
- Tax planning
- Investment and accumulation goals
- Retirement planning
- Estate planning
- Corporate finance: Thearea of finance which deals with the capital structure of corporations and sources of funding as well as the actions that managers take to increase the value of the firm to the shareholders, and the tools and analysis used to allocate financial resources is termed as the Corporate Finance.
- Public finance: Public finance portrays finance as related to sovereign states and sub-national entities (for example countries, municipalities, states/provinces etc.) and related public entities (for example school districts) or agencies. Its related to:
- The Identification of the required expenditure of a public sector enterprise
- Source/sources of that enterprises revenue
- The budgeting procedure
- Debt issuance (municipal bonds) for various public works projects
Popular Topics in Finance:
The different opportunities of finance include:
- Investment opportunities: Investment can be described as the utilization of money for profit. Therefore investment opportunities are commitments of monetary resources at various times with an expectation of certain economic future returns. This can be done in various ways such as by :
- Creating physical assets with the help of money
- Undertaking business activities
- Obtaining financial securities
- Profitable opportunities: These are a vision where the enterprise uses its resources available most efficiently under the conditions of heavy competition in the market.
- Optimal mix of funds: The composition of funds should be established in such a way that there is no loss of profits. Funds can be of two forms, namely :
- Owned funds
- Borrowed funds
- Internal control systems: The set of rules/regulations that are framed at the beginning stag of the organization are termed as internal controls. Finance is concerned a good amount with the internal controls.
- Future decision making: Good finance is the result of fine decision making in the organization.
Top Universities for finance:
Some of the top universities to study finance are:
- Harvard University
- Massachusetts Institute of Technology
- London Business School
- Stanford University
- London School of Economics(LSE)
- University of Pennsylvania (UPenn)
- University of Oxford
- National University of Singapore
- University of Chicago
- University of Cambridge