Finance is a main branch of economics regarded with resource allocation, resource management, acquisition and investment. To put it simple form, finance is a science which deals with markets and money.
Since oxygen is to human life, finance is to business world. It is a crucial tool that is employed by individuals, private organizations, public entities, business and other sorts of institutions such as schools etc. Finance is one of the most vital aspects of business management and involves decisions related to make use of and acquisition of funds for the enterprise.
The four main areas of finances are as follows:–
Corporate or Managerial Finance – It includes provision of funds for a corporation’s activities. It contains the task of examining company policy and managerial decisions. It deals along with monetary decisions that business enterprises make and the tools and analysis utilized to make these decisions. Maximizing shareholder’s value is one of its major goals.
Public Finance – It explains finance as related to sovereign states and sub-national entities (states or provinces, counties, municipalities, etc.) and related public entities (for example school districts) or agencies. It is mainly the revenue and expenditure of public authorities.
Personal Finance – It contains the application of the principles of finance to the monetary decisions of an individual or family unit. It addresses the ways where individuals or families save, obtain, budget, and spend monetary resources over time, taking into account several financial risks and future life events. Personal financial decisions may include paying for financing durable, education, goods like real estate and cars, buying insurance, for example health and property insurance, investing and saving for retirement.
Behavioral Finance – It is a comparatively new field in finance that combines behavioral and cognitive psychological theory along with conventional Economics and Finance. It seeks to describe the reason behind making irrational and biased decisions. It mainly studies how the psychology of investors or managers influences financial decisions and markets.
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