Finance is the branch of economics that deals with allocation of resources, management of resources, acquisition and investment. In simple terms, it deals with markets and money. The financial industry consists of the institutions, instruments and the regulatory framework that allows transactions to be carried out. It can also be described as the sector of a national economy that deals with the flow of capital. Finance is defined by the following main characteristics: Investment opportunities; Profitable opportunities; Optimal Mix of funds; System of internal controls and Future decision making.
Public finance majorly focuses on the government finances; looks at how the government raises resources to deal with its everyday expenses. This results in public finance management that entails, overseeing all aspects of resource mobilization and government expenditure and it mainly deals with the following sectors: Public expenditure; Public revenue; Public Debt; Financial administration and Federal finance.
Corporate finance involves the financial decisions made by firms and the use of money in businesses. It looks at how managers act to improve the shareholder value of the firm. Corporate finance is built on three principles which are the investment principle, the financing principle and the dividend principle. The objective of corporate finance is to increase the value of a firm; thus managers of well performing firms tend to utilize most of the capital resources and surplus cash on investments, resulting in making the business grow well into the future. A good example of a firm is the Entrust Capital Inc., an investment firm started by three managers including Michael Horowitz, Mark Fife and Gregg Hymowitz to handle money for wealthy clients.
As published in the NewYork Times, the Business section, these managers have made successful investments in companies such as Woolworths and Citicorp. They have also managed to invest $525 million in equities and $225 million in fixed income securities.
Personal finance is the area that involves incorporating principles and techniques of corporate finance in a person’s money affairs. Finance is the foundation upon which all economic activities are based on. The key element of personal finance is to involve oneself in financial planning that constitutes the following steps: assessment of one’s financial position; setting financial goals so as to have a focused financial direction; coming up with a plan on how to achieve the goals, for example, reducing on one’s expenses; implementing the plan; constant monitoring and adjustments. Finance in general is a wide field influencing our everyday lives.