Finance meaning and types of finance

In general term finance means management of money for your expenses. In broad term finance is the science of funds management. Finance includes saving money and often includes lending money. The general areas of finance are business finance, personal finance, and public finance. Finance is also a money budget management. The field of finance deals with how money is spent and budgeted. It also deals the concepts of time, money and risk and how they are interrelated. Finance is used by individuals as personal finance, by governments as public finance, by businesses as corporate finance, as well as by a wide variety of organizations including schools and non-profit organizations. Finance is the need of the today world economy.

Types of Finance

There are mainly two type of finance found in the current economy.

1. Personal finance

In this finance decisions may involve paying for education, financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement. Personal financial decisions may also involve paying for a loan, or debt obligations.

2. Corporate finance

It is the task of providing the funds for a corporation’s activities. Corporate finance can easily categorized in two category. First one is Short term finance which generally involves balancing risk and profitability, while attempting to maximize an entity’s wealth and the value of its stock.

Long term funds are provided by ownership equity and long-term credit, often in the form of bonds. The balance between these forms the company’s capital structure. Short-term funding or working capital is mostly provided by banks extending a line of credit.

Another business decision concerning finance is investment, or fund management. An investment is an acquisition of an asset in the hope that it will maintain or increase its value.

Finance term and definition