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What is Finance? Definition, Overview, Types of Finance

Finance is when we grant or give some funds and manage the funds for some individual, business, and government. It includes distributing the money and managing the finances for someone or lending the funds.

It is a widespread term which is defining two activities all together at the same time.

First is, that it’s the study of managing the money. And secondly, it’s the actual process of the funds required by some individual or business to get their work or business grow.

Or we can say, that finance is a field dealing with capital funds and credit funds invested in the business. It can be defined as planning, raising, managing and controlling all the money used in the business.

In simple words, Finance is the management of money which can include investing, renting, saving, lending, budgeting, etc.

It is giving its requirements for managing wealth and investing money. It is not just about shifting of money. But it is more about the management or control of money i.e. how well are we managing the funds. Because our main motive is to develop the business with a limited expense possible.

In business, a finance team’s work is to ensure that the company has sufficient resources to work in the best way possible and maximize productivity.

And also to check that the fortune which company has invested is used for the right purpose. And the company’s expenses and wealth are well managed.

What are the Different types of Finance

There are mainly three types of finance: –

  • Corporate (Business)
  • Personal
  • Public (Government)

Corporate Finance (Business) :

As the name suggests, corporate finance is the type of finance used from a business point of view.  The management of the funding of a company and its sources and uses of the capital. In contrast, the management of the profit the company has made, and the loss statement.

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In simple words, we can say that the financial activities are related to running a company with maximum growth possible. Because the main motive will always be the growth of the company.

The corporate finance professionals in the business have the responsibility of managing the company’s finances. It includes accountants, financial analysts, and the managers and executives such as the chief financial officers

Funding for company expenses simply means raising the financial position of the company. Corporate finance is about the capital structure and deals with the sources of funds and their transmission. Transmission directly related to the fund acquisition for resources and raising the company’s financial position. Besides, maintaining the balance between opportunities and risks is one of the top responsibilities of corporate finance.

The corporate finance professionals will always be essentially bothered with escalating the shareholder profit by the long term and short term financial planning

Examples: – Debt, Equity, Capital Structure, Return on Investment (ROI), Assets, Liabilities, Income Statement, Cash Flow , Cost of Capital, Balance Sheet, Revenues, Expenses, Profit.

Public or Government Finance

As the name ‘public finance‘ suggests that, this type of finance helps us deal with the public’s financial issues. It is the study of the revenue of the state and the expenses of the state. Moreover, it only deals with the government’s finances.

The public finance field consists of the study of the arrangement of the funds and their allocation between the various parts of the activities of the state and the state’s duties.

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From the government’s viewpoint, it includes the management of a country’s national budget, the central bank, the repository department, and other levels of government.

It focuses on collecting tax revenue from the public and using that money on national duties and other programs such as making roads, and hospitals, and increasing social security and more.

Examples:  –  Infrastructure spending (roads, hospitals, etc.), Income tax, Sales tax, Property tax, Inflation, Social security and insurance, Gross national product (GNP), Supply of money, International trading, Employment, National debt, National budget.

Personal Finance

From a personal point of view, personal finance is the management of someone’s income which he/she is earning, or of someone’s expenses, their investments they have made in the market, and obligations.

Moreover, individuals often work with a personal bank service, adviser for financing according to their needs, mortgage broker, and other professionals to manage their financial situation.

Or we can say that personal finance is the type of finance which we use on our personal level to manage our personal expenses. And business in which we usually work with personal bankers and investments to make our financial base strong etc.

Here are some of the examples of the types of items people deal with a personal level.

Examples: – Credit cards, Bank accounts, Lines of credit, Employment income, Taxes, Personal spending and expenses, Savings, Investments (bonds, real estate, etc.), and Mortgages.

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What are the other types of financing?

There are several other types of financing different than the 3 main types of financing which are discussed above. And that can be layered over personal, business and government finance.

Other types include

Behavioral

It depends upon the decisions made by the human whether it may be the social or psychical but when this judgment affects the investments. The impact individuals have on investment decision making includes biases, logic, and errors in cognition, fear, and greed.

Social

A philosophy of making and managing investments that have a social impact and social benefit on society (in addition to an economic benefit).

Non-profit

Non- Profits do not have stockholders and they do not require to create any kind of earnings or economic benefit. But they still require the same varieties of financial management as other for-profit companies.

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What are the financial services?

Financial services are different from financial goods, like financial service provided by any payment provider while it transfers and accepts the funds between recipients and payers. It involves account settlements through debit and credit cards, checks, or any electronic funds transfer.

The finance service sector plays an important role in the section of the economy. It is used to drive the economy of the nation with the help of the free flow of assets. Financial services involve various financial firms, such as investment houses, insurance companies, accounting services, banks, finance companies, lenders, and real estate brokers.

When the financial sector and the economy of a nation are strong enough, it raises purchasing power and consumer confidence. If the nation’s financial services segment fails, then the nation’s economy can drag down, and it can result in a recession.

What are the instruments used in finance?

A company or individual requires the financial instrument to avail of finance services. The financial instruments include monetary activities, and it is a contract that is made between two different parties. The finance instruments use for borrowing and lending purposes and investment purposes. The instruments can be classified as Derivative instruments and Cash instruments.

What do you mean by financial activities?

The financial activities are related to the government, individuals, and businesses’ transactions and initiatives to achieve specific economic aims. These are the activities that include the outflow and inflow of money. An example of it is selling and buying assets (or product), initiating loans, issuing stocks, and managing accounts. 

Whenever a company makes debt payments by selling the shares, both these activities are termed as financial activities. Governments and individuals are also included in the category of financial activities, like levying taxes and taking loans, that are further particular monetary goals.

Problems You Can Face During Finance Assignment :

  • English Proficiency
  • Referencing
  • Subject Knowledge
  • Formatting The Assignment
  • Plagiarism

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