What is finance?

Finance is the management of large amounts of money, especially by governments or big corporations. It is also the process of raising funds or capital for any kind of expenditure. It involves investing, borrowing, lending, budgeting, saving, and forecasting.

It can actually be broken down into three categories – personal finance, corporate finance and public finance (government). 

Personal finance involves the analysis of an individual’s current finance position and to formulate financial planning strategies that are centred around an individual’s personal situation. This situation will involve a person’s socio-economic situation, living conditions, goals and earnings. It is ultimately a strategy for an individual’s future needs without financially constraining them, focusing on investing, saving, spending and income generation. 

Corporate finance involves the funding and actions of management of a corporation or business that aim to increase the value of the company, through its capital structure. Corporations can instil a number of methods to govern their corporate finance, such as investments and capital budgeting, capital financing and dividends and return of capital. It is of utmost importance that a company has a strong capital structure in place in order to maximise the value of their business. 

Public finance is the management of a nation’s revenue, expenditure and debt through government means. This includes spending, budgeting, taxing and debt-issuance policies that allow a government to provide public services to its citizens. Ultimately, the way a government collects tax, budgets, spends, shapes its deficit/surplus and national debt will shape its ability to provide social programs for its tax paying citizens and to maintain a stable economy.