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WHAT IS FINANCE?

"Finance" is broad terms that illustrate two associated activities: the study of how the money is managed and actual process of acquiring the needed funds. Because businesses, individuals and the government entities all requires funding to control, the field is often divorced into the three sub-categories: the corporate finance, personal finance and the public finance.

All these categories are concerned with the activities such as the pursuing sound investments, allocating funds for liabilities, obtaining low-cost credit and the banking. Yet each has its own explicit considerations. For example, the individuals need to the provision for the retirement expenses, which means investing the adequate money during their working years and ensuring that their asset distribution fits their long-term tactics. A large company, on the other hand, may have to choose whether to raise the additional funds through a bond issue or the stock offering.

Finance is a field personally related to the accounting that deals with distribution of the assets and the liabilities over time under the conditions of certainty and the uncertainty. Finance also applies and utilizes the theories of economics at some level. The finance can also be distinct as the science of cash management. A key point in the finance is time value of money, which shapes that purchasing power of one unit of the currency, can vary over the time. Finance aims to worth the assets based on their risk level and their predictable rate of return. Finance can be broken into the three different sub-categories: corporate finance, public finance and the personal finance.

ROLE AND IMPORTANCE OF FINANCE

Finance is vital to an organization as the firm has to know how feasible it is and balance the profit with costs.

1) The basic role of the Finance Department can be summarized: falling money.

2) Create and Prepare the financial accounts - such as Profit, Trading and the Loss Account and Balance Sheet.

3) To Keep and maintain the financial records -records of expenditure and the sales figures would be held by Finance department and used by the other departments also.

4) Plan and prepare the internal financial information - this would primarily be performed in case of a budget, which is a monetary plan and can help the managers take the corrective action.

5) analyze the current financial performance - how firms has done in expenses or trading would be analyzed mainly using the ratio analysis tools.

6) Pay creditors - The Finance Department would ensure that the bills are paid to people the firm owes the money to.

7) Pay employees salaries and wages - the running payroll system is another significant task for the Finance to undertake.

TYPES OF FINANCE

The venture capital is an area of the finance that specializes in funding the new companies and their development efforts. The trade finance makes the international trade possible by issuing the Letters of used to obtain the goods from the overseas companies. An LOC funds the manufacturing of the products when a company uses LOC as the collateral for a manufacturer's loan. The Bank loans help the finance accounts receivable, and

The credit cards help finance a company's travel and the entertainment operating cost. All this activity in turn serves to stay money flowing throughout global economy.

FUNCTIONS IN FINANCE

Finance is the process of moving, creating and the using money, enabling flow of money through a company in much the same way it facilitates the global money flow. The money is created by sales force when they sell goods or services a company produces; it then flows into the production where it is spent to the manufacture more products to the sell.

BENEFITS OF BASIC FINANCE

The flow of finance starts on the Wall Street with the making of the apital used to fund the business through issuance of the common stock to provide the capital, the bonds to lend capital and the derivatives.  The Public companies and the municipalities use this capital to help the fund their operations, and the banks use it to lend to municipalities, companies and the individuals to finance the purchase of services and goods.

SIGNIFICANCE OF THE BASIC FINANCE

When some element of finance process splits down companies go out of the business and economy moves into the recession. For example: If a major bank loses a important amount of the money and faces risk of insolvency, the other banks and the corporate customers will stop lending or depositing money to problem bank. It will then stop lending to its customers and they will not be able to acquire goods or compensate the bills for which they were looking for the funding. The flow of money throughout financial system slows down as a result.

CONSIDERATIONS

The all facets of global economy depend upon a tidy process of finance. The capital markets provide the money to support the business, and the business provides money to support the individuals.  The income taxes support state, federal and the local governments. Even the arts benefit from financial process because they illustrate their money from the corporate sponsors and the individual patrons. The capital markets generate the money, and the businesses distribute it, and the individuals and the institutions spend it.

ACHIEVING THE FINANCIAL GOALS

Every business owner has a dream for his company, and that dream is frequently manipulated by the managing and the prioritizing use of the financial resources. Given a set amount of the finances, your financial objectives and the anticipations will form how you expend your business funds. For example, your instant goal may be to increase the sales by the financing discounts, or you may have a long-term goal of the expanding your manufacturing capacity for the lower average costs. If you sketch the most of your finances from the loans, repaying principal amount and the interest should worry you. If you obtain the financing from your investors' money, giving them best possible income must be the key objective.

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