Finance is a broad term for things about the financial management, development, and analysis of various financial resources and investments. The discipline encompasses many areas including: taxation, public finance, economics, accounting, and marketing. Some of the well-known sectors in the field are finance, banking, insurance, mortgage, capital markets, and private equity.
The scope of finance is often cross-functional; meaning, it includes different branches of economics and accounting. There are two major journals of business finance. The leading journal, Business Economics, analyzes all the economic aspects of businesses, both domestic and international. Business Finance Strategy (BSST) is similar to Business Economics, but focuses on strategic and operational issues.
In addition, there are many aspects of finance that are not entirely economic. Finance has become intertwined with the business world. For example, it has been used to leverage financial resources to purchase company securities (stocks). Also, debt financing can be used for short-term purposes such as purchasing inventory or working capital. Finally, financial companies may use derivatives (futures contracts for cash flow) and other financial instruments to increase their value.
Finance is an important study outcome in the business and credit markets. The main areas of finance are: personal finance, banking, corporate finance, and capital markets. Each of these areas has different objectives and uses various financial tools. For example, bank loans are used for making long-term purchases; corporate bonds are used for making short-term purchases and selling them for a profit; and personal debt financing is used to make payments for goods and services that are bought on credit.
As you can see from the above examples, finance revolves around three main areas – the personal finance, corporate finance, and banking. It is important to understand each area and know its main purpose. By knowing the three main purposes of finance, you will be better able to understand the products and services that are offered through each area and what they specialize in. For example, you may want to consider using credit cards as a personal finance tool if your primary goal is to save money.
Corporate finance refers to the buy of securities by corporations in the stock market. This includes buying stocks and other ownership interests of a corporation. Stock market transactions can involve large sums of money, so investors who are attracted to these investments are serious about this form of finance. Other areas of financial activities commonly associated with corporate finance are commodity markets, foreign exchange, financial markets, derivatives, mergers and acquisitions, and private equity.
