Types of Finance
In the economist point of view, the study of assets and liabilities in investment. Investment is always about money management. An economist believes that before you can learn how to manage money, you must understand the rudiments of finance as finance itself is the study of how money is being managed or spent with maximum work done is a small amount of money. There are basically three categories of our main objective i.e. what does finance mean, which are the public finance, personal finance, and corporate finance.
Public finance is the study of the economy on how it is being controlled by the governments or simply means the role of government in the economic aspect. Public finance is a branch of economics which assesses how money comes into the government hands and also leaves i.e. government revenue and government expenditure respectively.
In public finance, how government money is being managed is studied. It focuses on how the government looks for money either by investing or getting money from the public through tax and also how they spend the money either on infrastructure or also on investments.
Personal finance: this particular category of finance deals basically on an individual. How an individual makes his money and how he also spent it. Many individuals engage in businesses to get money to take care of themselves and also to meet their basic needs and wants. An individual needs shelter, food, and clothing. To get all these done, an individual engages in many finance work to get money. He can get money through investment which has its reward as profit. Personal finance deals with individual revenue and expenditure.
Categories fall under Personal Finance:
- Tax advantage
- Social Security
How an individual holds his money either for the speculative reason (to hold money to buy goods and services when their value reduces), precautionary motive (for unforeseen circumstances) and Transaction motive (held for day to day transactions) are all studied under personal finance. The net worth of an individual which is calculated by subtracting the total assets from the total liabilities. According to the English dictionary, an asset is any property or object of value that one possesses while liabilities are the amount of money that is owed to someone and being paid for or returned in the future such as tax, debt, interest, and mortgage.
Corporate finance is a category of finance too that deals with the study of how money or funds are been sourced for in a company or corporation and how their capital is being structured (capital structure) in that company. Corporate finance is for the purpose of making maximization in shareholder values.
Unlike managerial finance that studies how the firm’s financial management is being studied alone, corporate finance studies the financial management of corporations alone. The main concept of corporate finance is applicable to the issues affecting the finances of all kinds of firms. Capital budgeting and working capital are the two main sub-disciplines in corporate finance. Capital budgeting discipline is concerned with how criteria are set about value-adding assets should have the investment funding and how to use the investment to build the corporations in equity. Working capital discipline has to do with the management of the corporation monetary funding that term operating balance of current assets and current liabilities.
Finance has some other subcategories like managerial finance, entrepreneur finance. Finance is in our day to day life and has been studied in some subjects like economics, accounting, office practice because finance helps us to learn how to manage our money properly.