Finance is a broad term referring to issues regarding the study, development, management, and distribution of financial resources. All aspects of business activity are covered under the scope of finance, including: personal property and financing, industrial activity, financial markets, the financial system, budgeting and payments. All areas of business are potentially affected by finance, with examples include: retailing/commerce, planning/administration, technology, information systems, venture capitalists, and private finances.
While the basic function of financing is to provide a source of funds that can be used to make future payments, the discipline has various aspects. In addition to providing a source of capital, finance effects how firms obtain credit, manage their debts and lend money. All financial systems are affected by finance in some way, whether it be managing debt, creating financial systems, or making and managing loans. This wide-ranging area of focus makes finance an interesting area of study for those who like to think about various different things.
One example of a discipline of study that falls directly into the realm of finance is asset management. Asset management deals with the collection, disposition, and evaluation of assets over a period of time. An investment manager would be responsible for determining when to sell an asset, for example, or when to retain it as an investment property. Again, this area of finance may have slightly different aspects than the investment field, but all areas share similarities with finance.
Another important aspect of finance is risk management. Risky assets such as equities, bonds, mutual funds, and other types of investment are part of the investment portfolio. When an investor is concerned with these types of funds, they are essentially concerned with how much of a chance something will lose and how much it could gain from being invested in that type of fund. The funds in question are placed in risk assessment departments at various financial institutions and insurance companies.
Investment is just one of many different types of finance. Another well-known form of finance is corporate finance. Corporate finance is concerned with the buying and selling of stock within an investment bank or corporation. Some investors choose to buy stock in companies where they already have a vested interest, while others are interested in purchasing shares in a company that is about to acquire another firm. In addition, there are also investment banks that specialize in giving business advice on specific investment funds.
Many companies use corporate finance to attract capital funds. They do this by issuing promissory notes, stock options, convertible debentures, or warrants for specific amounts of capital. The purpose of issuing the note is to raise enough funds to satisfy the financial obligations of the issuing business. For example, the note may be used to purchase additional equipment or to make payroll improvements. The purpose of the note is to secure future payments in the event that the company does not perform as it should.