Various areas covered by the finance Services: The different field covered by the finance includes personal finance, corporate finance and public finance. Their pointwise description is given below:
Different Field of Finance Services
1. Personal finance
Personal finance refers to the careful management of the monetary savings and expenditure of an individual by considering the factor of future risk along with it. It involves the expenditure on education, spending on durable goods including cars, saving for retirement, real estate or purchasing insurance such as property and health insurance. It also involves paying off debt obligations and loan.
The essential terms associated with personal finance are saving, income, protection, spending and investing. Some points listed by the FPSB (Financial Planning Standards Board) are given below. They imply that an investor will learn a possibly strong finance plan (personal) after:
- Purchasing insurance against unexpected or sudden events to assure protection
- Enhancing knowledge on the management of self-finances and the outcomes of tax policies such as penalties and tax subsidies
- Checking out the results of credit on personal financial standing
- Making financing or saving schemes for large buyers (education, home, auto, etc.)
- Making out secure financial plans for the future in the condition of economic instability
- Checking and seeking for saving accounts
- Preparing for long term investments and retirement
2. Corporate finance
Corporate finance comprises of the capital structure of organizations, main sources of funding, the steps that head takes to surge the value of the company to the stockholders, and the instruments and financial reviews used for allocating monetary resources.
The working capital is generally termed as the short term monitory management. It includes inventory, cash and account management. The long term corporate finance usually entails profitability and balancing risk. It also helps to maximize an individual’s assets, the value of its shares and aggregate incoming money flow.
Capital resource allocation primarily deals with three important areas:
1) Capital budgeting– refers to the selection of the project for investment.
2) Dividend Policy– refers to the use of extra capital.
3) Sources of Capital– refers to the decision of the type of funding to be used.
The last makes the connection with security trading and investment banking, in which the money raised generically will include debt (that is equity, listed stocks and corporate bonds)
Corporate finance is different from managerial finance because the later examines the monetary management of all companies, rather than only corporations.
The concepts of corporate finance apply to all the financial problems faced by all types of firms. The financial function (economic accounting and accounting profession) means the recording of historical information related to finance. Whereas, financial management concerns with surging the firm’s stockholding value and enhancing their value of return on investment. So, one should not overlap these terms. Financial risk in this context refers to protecting the company’s market value using economic tools to handle susceptibility to risk ( market risk, credit risk) usually arising from the funding structure of the company.
3. Public Finance
Public finance studies the finance related to sub-national agencies (countries, states, municipalities, provinces, etc.), sovereign countries and public entities (e.g. districts schools). It generally comprises long-term views concerning decisions on investment that affect the public. These long term plans exist typically for five or more than five years.
Public Finance mainly involves:
- Calculating the expenditure required by a public sector agency.
- Causes of the entity’s revenue
- The process of budgeting
- Municipal bonds or debt issuance for projects (public work projects)
The Central banking institutions such as the Bank of England (in the United Kingdom) and the Federal Reserve bank (in the UNITED States) are firm players when it comes to public financing. They act as a firm influencer on credit and monetary situation in the economy.