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Finance is a field that deals with the study of investments. It includes the dynamics of assets and liabilities over time under conditions of different degrees of uncertainty and risk. Finance can also be defined as the science of money management. Finance aims to price assets based on their risk level and their expected rate of return. Finance can be broken into three different sub-categories: public finance, corporate finance and personal finance.

Personal finance

Questions in personal finance revolve around:

  • Protection against unforeseen personal events, as well as events in the wider economies
  • Transference of family wealth across generations (bequests and inheritance)
  • Effects of tax policies (tax subsidies or penalties) management of personal finances
  • Effects of credit on individual financial standing
  • Development of a savings plan or financing for large purchases (auto, education, home)
  • Planning a secure financial future in an environment of economic instability

Corporate finance

Corporate finance deals with the sources funding and the capital structure of corporations, the actions that managers take to increase the value of the firm to the shareholders, and the tools and analysis used to allocate financial resources. Although it is in principle different from managerial finance which studies the financial management of all firms, rather than corporations alone, the main concepts in the study of corporate finance are applicable to the financial problems of all kinds of firms. Corporate finance generally involves balancing risk and profitability, while attempting to maximize an entity’s assets, net incoming cash flow and the value of its stock, and generically entails three primary areas of capital resource allocation. In the first, “capital budgeting”, management must choose which “projects” (if any) to undertake.

Source: Wikipedia

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