Updated on March 20, 2023
The broad meaning of the term finance refers to money management.
It can include various activities like budgeting and forecasting, spending, investing, saving, borrowing and lending. It holds good in various perspectives – for an individual, a corporation, a business and also the government. Finance encompasses broad fields of capital markets, banking, asset management, currency & commodity markets and more.
From the investment perspective, finances refer to the collection of resources and allocation of such resources towards different asset classes depending on the risk-return expectation of individual investors.
Classification of finances
Finance can be classified under three broad categories, namely,
1.Personal Finance (money management for the personal funds of an individual) – This includes creation of an personal budget, income managment, expense management, investing, wealth managment, retirement planning, tax planning and more.
2. Corporate Finance (Funds management for businesses or corporations) – This includes estimation of funds for various activities of the company, raising of funds based on the cost of capital, putting the funds to the best use based on the objectives of the company, and reinvestment of profits generated by the corporation.
3. Public Finance (management of public resources by the government or its agencies) – This includes generation of income by the governement by levying taxes such as direct and indirect taxes, etc. Then these funds are put into use based on various programs of the government.