FINANCE — MEANING, TYPES AND REASONS

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Finance is the management, creation and study of money and other assets.

Finance can also be defined as the art and science of money management. 

It can simply be defined as the study of money affairs or money matters and other things related to money

At the personal level, finance is concerned with individuals decisions such as how much money should be spent, how much should be saved, how much should be invested.

At the business level, finance is concerned with businesses decisions such as how companies raise money from investors and how companies invest money in an attempt to get more money 

Types Of Finance

Finance can be divided into three sub-categories, namely: Personal finance, corporate finance and public finance

1. Personal finance: This is primarily concerned with how people use and manage their funds to achieve their financial goals and objectives.

It is concerned with how individuals maximize their earnings about their living requirements and objectives.

It involves paying for school, financing durable goods such as real estate and automobiles and repaying for a loan, among other things.

2. Corporate finance: This is concerned with the company's funding sources and capital structure.

It describes finance as it relates to running a business.

Corporate finance involves balancing risk and profitability while attempting to maximize an entity's assets, net incoming cash flows, and the value of the stock.

Because corporate finance is such an important aspect of a company, it is frequently separated into its department called the finance department.

3. Public finance: As its name implies, this is the finance of the government.

Public finance describes finance operating to sovereign states. It is usually long term, lasting for five or more years.

It encompasses budgeting, spending, and taxing decisions, as well as how they affect the government's ability to pay for and finance key development projects.

Because public finance is such an important aspect of every government, most governments usually have a separate department for it called the ministry of finance.

Reasons For Studying Finance

1. Necessary for everyone: we all have to make financial decisions about our money and investments daily.

As a result, we have to be well-versed in finance.

Finance enables us to better understand and manage our money. 

It assists us in keeping track of our finances and reducing unnecessary expenditures.

2. Help in investment decision making: Finance can be used to make decisions relating to the investment.

A person who wishes to invest in the stock market, for example, needs to be well-versed in finance.

3. Understand how money works: Money is a common commodity in today's world.

It's an irony that so many people don't understand how money works.

For example, the money given to you today is worth more than money given to you five years from now.

A good understanding of finance is very crucial to understanding every aspect of money management.

A good understanding of money will help you make decisions such as should I hold money? should I invest my money? Which credit policy should u choose? etc.

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