A Basic Understanding of Finances
Finance is a general term covering matters concerning the study, development, management, and accumulation of funds and securities. The study of finance has three general areas: personal finance, public finance, and business finance. In personal finance, individuals make decisions on how to spend their money. Public finance is concerned with issues that are related to how the government distributes resources.
Personal financial products include everything from savings accounts to retirement plans. Public financial products are for things that affect the general public. Business finance deals with how businesses get started, expand, buy, and sell. A good example of a business in this category is a bank.
In addition to these broad areas of finance, there are specific financial services sectors. Insurance companies provide a variety of financial services such as life, auto, and mortgage insurance. Banking, which includes commercial banking, investment banking, and retail banking, provides a variety of services such as checking accounts, personal loans, and overdraft facilities. The financial products and services provided by banks are classified into three main categories: banking products, banking services, and insurance products. All banking products and services can be classified into three main segments: financial goods, financial services, or nonfinancial goods and services. All financial goods and services are classified according to whether they are tangible or intangible and whether they are productive or nonproductive.
Broad terms that describe the world of finance our capital markets, banking, economics, and policy. Capital markets refers to the processes through which investors borrow funds in return for partial ownership of the targeted company. Banking refers to the process through which a bank loans money to an individual or group. Economics refers to the macroeconomic activities that affect the economy such as inflation, trade, investment, and growth.
Finance is complicated, because it is affected by numerous outside forces. For example, changes in general economic policy can have major effects on finance, and consequently on banking. Changes in public spending, government regulation, and tax policies also have a direct impact on finance. The term “corporation” describes organizations other than banks that do financial business. All other types of organization are commonly referred to as private financial companies.
All of the different types of organizations mentioned above have distinct roles and activities in the field of public finance. They all contribute to the general direction of finance. Public finance is an overall term that encompasses all of these different types of financial activities. Public finance includes tax payments, investments, borrowing, and the operation of the financial system. In addition, it includes indirect contributions made by corporations and individuals to the overall health of the economy.
