Finance

● It represents money management and the process of acquiring needed funds.

Finance also encompasses the oversight, creation, and study of money, banking,
credit, investments, assets, and liabilities that make up financial systems.

There are many different career paths and jobs that perform a wide range of finance
activities.

● Investing personal money in stocks, bonds or guaranteed investment certificates

(GICs)
● Borrowing money from institutional investors by issuing bonds on behalf of a public
company
● Lending money to people by providing them a mortgage to buy a house with
● Using Excel spreadsheets to build a budget and a financial model for a corporation
● Saving personal money in a high-interest savings account
● Developing a forecast for government spending and revenue collection

Types of Finance:

● Personal finance – is specific to an individual’s situation and activity. Therefore,

financial strategies depend largely on the person’s earnings, living requirements,
goals and desires.
● Corporate finance – refers to the financial activities related to running a corporation
usually with a division or department setup to oversee those financial activities.
● Public (government) finance – includes taxing, spending, budgeting, and debt
issuance policies that affect how a government pays for the services it provides to
the public. It is a part of fiscal policy.

It is generally agreed that the field of finance has three specialty areas:
● Capital markets and capital market theory
● Financial management
● Investment management

A. Capital Markets and Capital Market Theory

The specialty field of capital markets and capital market theory focuses on the study of
the financial system, the structure of interest rates, and the pricing of risky assets.

The financial system of an economy consists of three components:

1. financial markets;
2. financial intermediaries;
3. financial regulators.

B. Financial management

Financial management, sometimes called business finance, is the specialty area of

finance concerned with financial decision-making within a business entity. Often, we refer
to financial management as corporate finance
Financial managers are primarily concerned with investment decisions and financing
decisions within business organizations.

Goal of the firm: to maximize shareholder’s wealth

C. Investment management

Investment management is the specialty area within finance dealing with the
management of individual or institutional funds. Other terms commonly used to describe
this area of finance are asset management, portfolio management, money management,
and wealth management.
Investment management involves five activities:
1. Setting investment objectives;
2. Establishing an investment policy;
3. Selecting an investment strategy;
4. Selecting the specific assets;
5. Measuring and evaluating investment performance.