Finance is a broad term and can be defined as management of money, including activities like lending, borrowing, investing, saving and budgeting etc. We often use accounting and Finance together, and some even deem it to be similar terms, but there is a massive difference between both of them. In Finance, money is used to generate more money while tackling with risks and uncertainties. A Guide To Understand Financial Knowledge
To understand Finance, we divide it into three types:
- Personal finance
- Corporate Finance
- public/govt. Finance
What is Personal Finance?
When we say personally, it always means an individual and in personal Finance involves money managing or fund of an individual for achieving the desired goal by saving and investment. It is specific to individuals and all the planning, management and strategies depend upon the earning potential of that individual according to his desired goal and time frame. It may include investment in housing, education, assets like cars and real estate and life insurance etc.
Personal Finance includes:
- Safeguard against unforeseen situations and uncertain crisis
- Personal events
- Managing the taxes and cope with the additional charges.
- Plan after retirement
- Check n balance of your assets
- Long term expenses and debt payments
Building the capital structure of the company and funding the company expenses is known as Corporate Finance. It manages the funds and channelizes these funds for generating more sources to bring more value to the company by improving its financial position. A Guide To Understand Financial Knowledge
The ultimate goal of every company is to bring more value and always remain in demand for his product and services through planning and implementing management resources while maintaining a balance between risk and profit.
Finance Corporate include:
- Budgeting of capital
- Risk valuation
- Tax consideration
- Valuation techniques for employing standard business
- Identifying the relevant opportunities and objectives.
What is Public Finance?
The Finance, which is related to states, public institutions, municipalities and all the government required Finance, is called public Finance. It is the management of the country’s revenue, expenses and debt payments to run the country properly. It includes every investment decision in favour of public and factors like distribution of income, resources creating, and the stability of the economy in particular. A Guide To Understand Financial Knowledge
And all the money comes from taxes, bank loans and insurances and the financial strength and position of every country can be evaluated from these figures.
Public Finance includes:
- Estimate the required expenses for the public
- Generating sources for revenue
- Collecting revenue
- Budgeting process
- Issuing debt to the public
- Tax evaluation and management.
There are also two famous terms in Finance. These are microfinance and trade finance.
Microcredit is another name of micro Finance. You have seen many microfinance banks in the city. These banks work like private banks and specially designed for those individuals who do not have easy access to financial services. It provides services to unemployed and daily wagers, and the main motive is to make them self reliant.
The lenders grant the loan after knowing the better repayment plan from the borrower. They can deny the idea if feel unsatisfied because the repayment amount in such loans is higher than of conventional loan due to higher risk involved.
Micro Finance includes:
- Bank saving and checking account
- Learning the principle of investing
- Educational programs on self-finance
- Basis training on money management
- Understanding the concepts like interest rate, cash flow etc.
Trade finance is a general term which includes the financial services and instruments that enable and facilitate trade globally. It is ideal for international exporters and importers to trade freely in a less risky situation. It helps in reducing risk in global business by reconciling the divergent needs of an exporter and importer. This is used to minimize the uncertainty between both parties using the third party for transactions because the risks like currency fluctuation, non-payment and political instability are always there.
Trade finance includes:
- Credit agencies
- Trade finance companies.
These are some few help guide about finance. It will help you in different aspect of life.