Today’s financial world is very complex compared to before. Twenty years ago, knowledge on how to maintain a checking and a simple understanding of savings accounts at local banks and savings institutions might have been sufficient for financial transactions. In today’s world, almost everyone possesses knowledge about finance and stocks. In this article, the basis of finance and types of finance has been briefly explained by the reference of Broker.cex.io.
What is Finance?
Finance is defined as the management of money which includes activities such as borrowing, investing, budgeting, lending, saving, and forecasting. There are three main types of funding in finance:
- Personal
- Corporate and
- Public/government
The easiest way to define finances is by providing examples of the activities you include. Involving in financial activities can open to career paths and jobs with handsome money.
Below is a list of financial activities that one can opt:
- Investment of personal money in a bond, stocks, or guaranteed investment certificates (GICs)
- On behalf of a public company, borrowing money from institutional investors by submitting bonds.
- Lending people money by providing them with a mortgage to buy a house
- Use Excel spreadsheets to build a budget and financial model for a corporation
- Investing the earnings and personal money in a savings account that gives high-interest.
- Develop a forecast for public spending and revenue collection.
Fundamental Of Finance:
The word Finance is a broad term which includes events associated with banking, credit, leverage or debt, capital markets, money, and investments. In simple terms, finance represents the management of money and the process of acquiring the necessary and legal funds. Finance also encompasses the supervision, study of the money, creation, investments, and, banking, credit, assets, and liabilities that make up most part of financial systems.
The value of money in a period of time is one of the most fundamental theories in finance.
The time value of money, insights that a dollar today may be worth more in future and in contrast can also be worthless in future. It depends on the mere growth of the economy,
In the current scenario, consumers are able to differentiate between a wide range of financial products and services and along with their providers of those products and services.
Comprehensive understanding of credit issues such as the impact of compound interest and implications of poor credit account management etc., may not have been needed for the less indebted generation.
There is always a need in increasing awareness of consumers towards finance and how they can profitably and safely access it. Financial education and awareness are not just for investors. It is just as important, if not more so, for the average family trying to balance their budget and save for their children’s education and parents’ retirement.
There is a need to better understand the need for financial education for consumers at various stages of their lives and how financial education programs can be designed to better address these needs.
Acquiring knowledge on finance involves imparting aspects of the returns and risk of financial bodies and products related to finance. It is this knowledge that helps limit risks and maintain stability in the financial system. Financial Basics explains about bank accounts, online and mobile banking, debit cards, credit cards, checks, PAN cards, ATM awareness, loans, investments and insurance and taxes.
Basically, finance is divided into two types:
They are Stock financing and Debt financing.
Stock financing: raising capital by selling shares in a company. The share capital can be sold to third-party investors without existing participation in the business. Alternatively, equity financing can be obtained only from existing shareholders, through a rights issue.
Debt financing: an agreement between the borrower and the lender. A principal sum is borrowed from the lender on the condition that the amount borrowed is repaid in full, either at a later date, on multiple dates, or over a period of time. Interest accrues on debt and is paid regardless of the principal repayment schedule. Ownership or control of the company is not renounced.
