What Is It And Why Is It Important?

Finance is a broad term encompassing all matters concerning the financial management, formation, growth, and preservation of funds and investments. All the three branches of finance are included in the broader field known as Finance. In common use, the term Finance usually refers to the study of financial activities concerned with making loans and buying securities. The fields of Finance include Business Finance, Public Finance, Personal Finance, and Social Finance.

Business Finance is the part of finance that handles the funding of businesses. It takes the form of private capital markets, corporate lending, venture capital, mortgage banking, merchant banking, financial markets, and government loans. In other words, all the three main components of business finance are involved here. This is the major source of business loans and employs a large number of people. Some of the companies involved in this field include Cogent Finance, Plummer & Co., Reebok, Key Bank, National Express, GE Capital, Generalibus, LLC, State Street, LLC, Wachovia Bank, Baringo, LLC, and Fleet Bank.

Public Finance involves the fiscal policies of governmental bodies such as state, city, and national level. This encompasses financing for day-to-day operations such as spending, budgeting, taxing, and borrowing. Public finance also includes non-profit organization such as universities, hospitals, advocacy groups, trade unions, and civic organizations. Among the various techniques used in public finance are direct taxes, indirect taxes, personal property taxes, sales taxes, estate taxes, and other indirect taxes.

Corporate Finance refers to the financial activities of corporations. The scope of corporate finance is global because it covers businesses of all countries. It is also diversified as it comes under many categories such as owner-financed, venture capital, credit, and mortgage banking. A few sectors in corporate finance are Real Estate, Venture Capital, Private Equity, Ownership and Management, and International Financial Operations. The Real Estate sub-category mainly handles financing for purchasing land or development projects such as apartment buildings, condominiums, and office complexes. Venture Capital is likewise included in the list of corporate finance, but it deals primarily with private investors.

Public Finance includes various strategies that governments implement in dealing with fiscal problems. Examples of public interventions include: centralizing budgeting, reducing budget deficit, raising tax revenues, and spending stimulus money. Centralized and Systemic Banking System is one strategy that uses a public bank to provide financial instruments such as negotiable securities, fractional securities, certificates of deposit, term deposits, commercial paper, etc. to meet financial obligations such as repaying debts, paying salaries and cost of services, buying real estate, and making business transactions. On the other hand, Systemic Banking System uses the funds of the community banks to make financial activities. Examples of these activities are opening and closing of savings and loans, borrowing from banks, creating enterprises such as credit unions, leasing industrial and commercial properties, creating financial resources for industrial investment, and buying the securities for trading.

Behavioral Finance deals with how individuals affect financial decisions. In the broadest sense, it is all of the ways in which people can use their financial position and knowledge to influence their behavior in financial matters. Some of the areas where behavioral finance plays an important role are: forecasting consumer demand, consumer fairness, corporate lending, financial markets, optimal hedging, inflation, risk management, financial transparency, political systems, and personal decision making. All these areas are very interrelated, and understanding them is the first step towards a sound understanding of corporate finance. Thus, corporate finance must be understood not only theoretically but practically as well.