What is finance

Evaluation and consideration of investment opportunities

Individuals, organizations, and countries regularly consider how they can be able to utilize money and other resources for financial profits. They do this by committing available resources to the development of land, acquiring commercial assets, carrying out business activities like production and manufacturing or acquiring securities and bonds.

Maximization of profitable opportunities

Finance involves the utilization of financial opportunities in the most efficient way according to the available competitive markets. It emphasizes consideration of long-term gains and insists that they may not be compromised against short term profits.

Optimization and mixing of funds

Finance involves the study of how to conveniently mix owned funds and borrowed funds to obtain the desired results without causing any loss to the entrepreneurs by covering the cost of business without straining the pockets of the entrepreneurs.

Consideration of internal rules and regulation

The practice of finance involves the determination of the regulations that are set to standardize the practice of investing, funding, borrowing, and lending between customers and business enterprises. These regulations are set depending on the requirements of the market and the economic principles of the country or organization.

Forecasting and future decision making

Predicting future economic trends is the only way one can make calculated decisions on what investment decisions to make considering the amount of risks involved vis a vis the projected profit to be made. The practice and study of finance are divided into 3 categories, personal finance, corporate finance and public/government finance.

Personal finance

This category involves analyzing an individual's or a family's current financial position, forecasting the short term and long-term requirements that the individual or family will have and implementing strategies to fulfill those needs within the current financial constraints. Personal finance depends entirely on an individual's earnings and targets that the individual may have. The activities that are associated with personal finance are the purchase of investment policies, purchase of insurance, mortgages, acquiring of credit cards or checkbooks, personal checking and saving banking activities and setting up of retirement plans. Although personal finance is disregarded and mostly considered a matter of home economics, it is integral to the overall macro economical position of the nation. This is because policies are set according to information that is collected from the individual financial positions of the members of the society. Surveys that are conducted to establish the financial positions by assessing the cash flow or current average savings of the people of a society have. The percentages and types of investments or retirement planning methods that the members of a community have established can also be used to estimate the financial position of society.

Corporate finance

This is the practice or study of the transactions and money management by businesses, organizations, and corporations. Because it involves groups of people in different companies or organizations, corporate finance is a more detailed branch of economics than personal finance. Organizations and businesses obtain financing through a number of ways lie equity investments and credit arrangements with financial institutions or banks. Companies that are starting up often obtain funding from angel investors in exchange for percentage ownership or percentage share ownership of their companies. Correct debt management and accumulation of funds give businesses the financial muscle necessary to perform activities that boost production and multiply productivity.

Companies that grow and go public accumulate the funding necessary for these activities by issuing shares on a stock exchange called initial public offerings, IPO. Other companies or individuals are the welcomes to purchase dividend-paying stocks which give the organization enough revenue to boost production and become more profitable. These funding and financing activities within companies and organizations are what is known as corporate finance.

Public finance

These are the activities of the federal government that help prevent market failure. These activities include overseeing the allocation of resources, distribution of income for stabilization of the economy. Funding for public finance activities is through taxation, bank loans, reinsurance and grants from other governments. Public finance majorly involves the management of funds that have been received from user charges in the country's ports of entry, fines from law-breaking individuals, revenues from government licensing fees and the sale of government security bonds and issues. In summary, public/government finance is the management and control of the country's finances and oversight of their allocation and distribution in the various industries to ensure market balance and general economic growth.

There are other smaller emerging branches of finance like social finance which involve the management of the investments made by charitable organizations in the form of donations. The loans to small business owners by microfinance institutions that intend on boosting entrepreneurship in the communities also falls under the category of social finance. To learn more about finance please visit homework help