Finance is a broad term used for various things regarding the study, creation, distribution, allocation, and investment of funds. This includes all financial activities of the person involved such as saving, spending, borrowing, etc. In monetary terms, finance can be described as the process by which money is acquired, used, and disbursed. Money is the most important practical good in modern society. All aspects of our lives are affected by it such as production, distribution, and consumption.
Financial science deals with the methods by which individuals and organizations earn, spend, save, and handle their money. There are three main areas of finance namely asset allocation, income optimization, and risk management. All these areas are interrelated and have different aspects like savings, lending, risk, valuation, etc. The discipline of economics has many names e.g. Economics, Business Economics, Public Economics etc.
The word accounting is used for the measurement and reporting of financial transactions. The most popular area of accounting is bookkeeping. It involves recording the financial transactions of a business as well as their identification, recording, keeping track of, analyzing, reporting, and finally using for computing purposes. For instance, bookkeepers record the daily sales transactions, inventory, and payments.
The term corporate finance is used for the purpose of managing small and large businesses. There are many forms of corporate finance. One example is the venture capital business. Venture capital is used to finance early stage companies specializing in innovative products and services. Another common type of venture capital is from a group of people pooling their investment to fund a start-up company.
Budgeting, management, and financial accounting are aspects of accounting that are usually implemented together. Budgeting is used for determining the financial objectives of the organization and its relation to the short, medium, and long-term future plans. Budgeting is the process of working with a group of people to develop a budget that will be consistent with the company’s objectives, goals, and strategies.
Financial analysis is one of the three major disciplines that include finance, economics, and public finance. Financial analysis deals with models used to evaluate financial instruments such as bonds, stocks, options, derivatives, financial debt, capital, and bank liabilities. An economic model is a statistical description that produces expected outcomes by combining historical data with current economic indicators. A financial model can be used to generate an economic forecast or to evaluate the performance of a company’s or industry’s financial system.
