Knowledge Of Finance Is Important For Proper Fund Management
The study of the process of allocation of people’s asset under certain or uncertain conditions is known as Finance. Time value of money affects the decisions. It is a very important point of finance. It states that today’s currency value is more than tomorrow’s currency value. Pricing of assets depending on the expected return rate and risk level is the aim of finance.
The categories of Finance
The three finance categories are personal finance, corporate finance and public finance.
Public Finance
Description of Finance in relation with related agencies or public entities, subnational entities and sovereign states is known as public finance. Its main concern is the process of budgeting, identification of a public sector required expenditure, the entity’s revenue source and the debt issuance for the projects of public.
Corporate Finance
The corporate or managerial finance is the process of fund production for the activities of the corporation. It generally refers to the involvement balancing of profitability and risk while attempting to grow the entity’s stock value and wealth. Three interrelated decisions are entitled by it generally. The three types of decisions are the investment decision, the financing decision and the dividend decision. The investment decisions involve undertaking of the best projects and capital budgeting of it. The financial decisions involve funding of the investments. The shareholders provide the capital here. The decision of distribution of profit among the shareholders or retaining it for future operational requirements and future investment is the dividend decision.
Fund management or investment is another decision in business. An investment is made in hopes of increasing or maintaining the value of the owned asset.
Personal Finance
Personal finance is the process of planning and financing for personal events. These personal events involve protecting of their own self during unforeseen events by the people or determining the best process for transferring family assets across generations. How is the personal financial decision affected by the tax policy? How the financial standing of an individual is affected by credit? How to keep financial future secured during the instability of the economy? These are the important questions of personal finance. Education payment, insurance purchase, financing goods that are durable, paying for a debt or loan etc. are the decisions about personal finance. The Financial Planning Standard Board suggests six personal finance planning areas such as financial position, adequate protection, tax planning, Accumulation and investment goals, estate planning and retirement planning.
Financial Economics
The part of economics that involves the study of interrelation between financial variables is known as financial economics. The financial variables include the shares, interest rates and the prices. Financial economics revolve on processes like decision making in circumstances of uncertainty of financial market. It also involves investing during certainty.
Financial Mathematics
The applied mathematics that relates to financial markets is known as financial mathematics. The numerical or mathematical models that financial economics suggest are extended and derived from financial mathematics. This field heavily overlaps with the computational finance field. The modeling of the derivatives is the main focus of this field.
Author Bio:
Austin Richard is an IT professional and instructs EMC Certifications. He likes to write for different blogs on different interesting topics. He is E20-533 Exam qualified instructor.
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Category: Investing
