What Is Finance? Types of Finance.

What is Finance?

Finance is the management of money-like activities included investing, borrowing, lending, budgeting, saving, and forecasting? Finance is a term related to the management of money, creation, and study of money and investments.

Finance describes activities related to banking, debit, credit, capital markets, money, and investments. Basically, finance represents the management of money and the process of acquiring needed funds. Finance also encircle the creation, and study of money, banking, credit, investments, assets, and liabilities that make up financial systems.

Types of Finance:

There are three main types of finance: personal, corporate, and public finance.

Personal Finance:

Personal finance is also known as individual finance, household finance, or consumer finance. It is the management of a person's personal assets and debts. Personal finance is also defined as "the planning of money spending and saving, while also in mind the possibility of future risk".

It determines how you manage your income, pay off debt, budgets your spending, and invest in the markets. Personal finance also includes taxes, banking, credit, loans, and insurance.

It involves analyzing an individual's financial position, predicting its short and long-term needs, and make a plan to fulfill those needs according to an individual financial position.

Corporate Finance:

Corporate Finance can be defined generically as the science of managing money in a business environment. A more complete definition would emphasize that the practice of corporate finance involve five basic, related function, financing function, capital budgeting function, financial management function, corporate governance function, risk-management function.

Corporate Finance is telling about funding the company expenses and building the capital structure of the company. It deals with the source of funds and the channelization of those funds like the acquiring of funds for resources and increasing the value of the company by improving its financial position. Corporate finance generally focuses on maintaining a balance between opportunities and risk and increasing the asset value.

Corporate finance, also known as business finance, is related to commercial purposes' effective use. It determines how a corporation raises the funds for running the business, as well as determines that how it will reinvest its profits or distribute them to shareholders. Maximizing profitability is a primary objective for business finance.

Public finance:

Public finance deals with government expenditures and revenue. Public finance is related to states, municipalities, and provinces in short government-required finances. It includes long-term investment decisions. Public finance is the management of money for public use, as in government. The government raises revenue, generally through taxes, fees, and fines, and spends it on public programs and improvements.

A government may borrow money to meet its obligations, in this case, it must pay its debts. If a government has spent more than what it brings in, it is said to be in deficit, if it spends less than what it brings in, it is called a surplus. Through regulatory agencies, Governments can regulate financial activity. Public finance takes action like distribution of income, resource allocation, and economic stability into consideration. Funds are obtained majorly from taxes, borrowing from banks or insurance companies.

State and local governments also receive grants and aid from the federal government. Other sources include user charges from ports, airport services, and other facilities, fines as the result of breaking laws, revenues from licenses and fees, such as for driving, and sales of government securities and bond issues.