Finance deals with the ways of taking care of an organization’s funds. It also deals with how to raise funds and how to provide funds along with the various risks involved in it. Basically, whenever you have surplus money in your hand, you will try to invest it in some other business or deposit it in a bank. This gave rise to the concept of finance.
When you deposit money in banks, you will gain some interest amount depending upon your capital. But how are banks able to give you that interest? Because they use your capital to give loans to other organizations and thereby generate funds. The interest rate paid to you by the bank will definitely be less than their loan interest rate.
Companies use various types of finance to generate funds. The most important of them are equity finance and debt finance. Equity finance involves selling the company’s share to interested people while debt financing involves borrowing money based on other assets that the company’s owner possesses.
Personal finance deals with how to generate and spend money for personal use. It may be for basic facilities like food, water and clothing or it may also be the money spent for educational purposes, etc. Personal finance also deals with repaying bank loans, repaying debts, etc.
Corporate finance deals with the ways of managing a company’s corporate activities. It also deals with the ways of maintaining a balance between profit and the various risks involved in achieving this profit. Generally, we tend to find ways to maximize profit while minimizing the risk factor.
From financial point of view, cash is the most important asset of an organization. Without money, a company will never be able to prosper. Money is the most needed asset as it can be used to pay for urgent transactions and it may also improve the reliability of an organization.
In the field of finance, mathematics also plays a vital role. The various theories and models that are covered in applied mathematics can be used to arrive at an approximate rate of a company’s stock.
More than managing an organization’s funds, it is the various financial decisions that affect an organization the most. Through proper analysis and experimentation, this decision making process can be improved to a great extent. Nothing can be inferred without trying anything. Experience will teach us a lot of things especially in the field of finance.