In Any Given Economic Climate

The way to study and address the different ways that individuals, businesses, and organizations raise, allocate, and use monetary resources over a period of time while also taking into account the risks involved in projects is the realm of finance. Finance can incorporate the study of money, other assets, management, control of such assets, and profiling and managing risks associated with projects. It can also be interpreted as being a way of providing funds for a business.

When one thinks of finance, one thinks of the activity of applying a set of techniques that individuals as well as organizations use in managing their financial affairs and, in particular, finding out the difference between income and expenditure as well as the risks of investments. When income exceeds expenditure it allows the business entity to invest such excess income or lend it out. It may be used by individuals and is known as personal finance or by governments which is termed public finance and by businesses where it is called corporate finance. In addition, many other organizations such as schools and non-profit organizations also use finance. Using appropriate financial instruments allows each individual user to accomplish their goals.

Personally, it revolves around knowing how much money an individual needs in the future, what the source of such funds is, how to protect the funds against unforeseen events, how to transfer family assets across generations, and what effect taxes have on personal financial decisions. Also, personal money management would include paying for education, financing of durable goods, buying insurance, and investing and saving for retirement.

In business, it is a task that takes care of providing funds to drive the company or corporation’s activities and involves balancing risks as well as profit margins. Long term funds could be sourced by ownership equity as well as long-term credit, sometimes as bonds. Corporate finance also deals with investments through fund management. When the corporation or company invests money it acquires assets that it hopes will maintain or increase its value and investment management portfolio. When choosing a portfolio one needs to arrive at decisions concerning what, how much, and when to invest. This requires identifying relevant goals, aims, constraints, identifying the best strategy and whether it is passive or active, and hedging strategy. The corporation or company will also need to measure how well the portfolio management is over time.