Finance Overview ! Types Of Finance! Financial Activities & All About Finance
Whats does finance mean?
Finance, of financing, is the process of raising funds or capital for any kind of expenditure. It is the process of channeling various funds in the form of credit, loans, or invested capital to those economic entities that most need them or can put them to the most productive use.
What are the 3 types of finance?
The finance field includes three main subcategories: personal finance, corporate finance, and public (government) finance. Consumers and businesses use financial services to acquire financial goods and achieve financial goals.
1. Personal Finance
Personal finance is specific to an individual’s situation and activity. Therefore, related financial strategies depend largely on a person’s earnings, living requirements, goals, and desires. Financial planning involves analyzing the current financial position of individuals to formulate strategies for future needs within financial constraints.
For example, individuals must save for retirement. That requires saving or investing enough money during their working lives to fund their long-term plans. This type of financial management decision falls under personal finance.
Personal finance covers a range of activities, including using or purchasing financial products such as credit cards, insurance, mortgages, and various types of investments.
Banking is also considered a component of personal finance because individuals use checking and savings accounts as well as online or mobile payment services such as PayPal and Venmo.
2. Corporate Finance
Corporate finance refers to the financial activities related to running a corporation. A division or department usually is set up to oversee those financial activities.
For example, a large company may have to decide whether to raise additional funds through a bond issue or stock offering. Investment banks may advise the firm on such considerations and help it market the securities.
Startups may receive capital from angel investors or venture capitalists in exchange for a percentage of ownership. If a company thrives and decides to go public, it will issue shares on a stock exchange through an initial public offering (IPO) to raise cash. In other cases, to budget its capital properly and effectively, a company with growth goals may need to decide which projects to finance and which to put on hold.
All of these types of decisions fall under corporate finance.
3. Public Finance
Public finance includes taxing, spending, budgeting, and debt-issuance policies that affect how a government pays for the services it provides to the public. It is a part of fiscal policy.
The federal and state governments help prevent market failure by overseeing the allocation of resources, the distribution of income, and economic stability. Regular funding is secured mostly through taxation. Borrowing from banks, insurance companies, and other nations also helps finance government spending.
In addition to managing money in day-to-day operations, a government body also has social and fiscal responsibilities. A government is expected to ensure adequate social programs for its taxpaying citizens. It must maintain a stable economy so that people can save and be assured that their money will be safe.
What Are Financial Activities?
Financial activities are the initiatives and transactions that businesses, governments, and individuals undertake as they seek to further their economic goals.
They are activities that involve the inflow or outflow of money. Examples include buying and selling products (or assets), issuing stocks, initiating loans, and maintaining accounts.
When a company sells shares and makes debt repayments, it is engaging in financial activities. Similarly, individuals and governments are involved in financial activities when they take out loans and levy taxes, which further specific monetary objectives.
Why is the financial services industry so important?
Look at your local town or city. Your schools got built because the financial services industry created a bond offering and raised the capital necessary to build it. Same with your streets, roads, bridges, water plants, sewage facilities, airports, fire stations, colleges, universities, etc.
You might work at a company that is publicly traded. The financial services industry raised the capital for the IPO so that the company had the resources to expand and create jobs.
They also created the financing for the steel companies to build steel mills and provide their steel for your buildings, your bridges, your plants.
It just goes on and on. Life in this world cannot exist without creating and raising the capital necessary for us to exist the way we do. Where do you think Intel got the money to create the microprocessor, or for Microsoft to provide our operating systems, or Qualcom to build phone cpu’s, or for Ford and General Motors to build the factories to build cars?
Financial Services are crucial to doing business worldwide, in every industry.
What Is Personal Finance?
Personal finance involves planning, implementing, and managing financial activities that impact individuals. These activities can include earning an income, spending money, saving and investing, and borrowing.
What is the meaning of personal finance?
Personal finance is the financial management which an individual or a family unit performs to budget, save, and spend monetary resources over time, taking into account various financial risks and future life events.
- Personal finance is important for managing your money through budgeting, spending and savings. It includes long-term planning that considers potential financial risks, investments and how your financial situation evolves over a lifetime.
- Personal finance is a term that covers managing your money as well as saving and investing. It encompasses budgeting, banking, insurance, mortgages, investments, retirement planning, and tax and estate planning.
- Personal Financial Responsibility addresses the identification and management of personal financial resources to meet the financial needs and wants of individuals and families, considering a broad range of economic, social, cultural, technological, environmental, and maintenance factors.