Basic understanding of Finance
TAGS: accountingfinancepersonal finance

Basic understanding of Finance 

Why should one have a basic understanding of finance?

Finance is the management of funds and everybody has sources and application of money. If the person has a basic understanding of finance then chances of poor management of funds, liquidity crunch, and low hanging investments can be avoided. Adequate knowledge of finance will help anybody for optimum utilization of funds, good planning, investments, tax management, retirement planning. Similarly, for corporate professionals, it helps to understand financial statements, budgeting exercise, to understand nature of costs, cost savings, determine to price.

What is Finance?

Finance is the science of money management, it is broadly categories in public finance, corporate finance, and personal finance.

What is public finance?

Public finance is the study of finances of the government, it is about how government raises resources to meet the public expenditure.

What is the corporate finance?

It is the finance which consist of financial activities to run the corporation. The main object of corporate finance is to maximize shareholders value through long term and short term financial planning/strategies. 

What is personal finance?

Personal finance is the management of money of a person or family. The activities involved are planning, investments, tax management, retirement planning, and coverage of insurance.

Difference between finance and accounting

Accounting focuses on the recording of day to day flow (in and out) of money whereas finance is the management of assets, liabilities, income, expenditure, and planning of future growth.

Why is it more important for non-finance professionals to understand finance?

Finance is the language used in the boardroom, the decisions are made by the management are based on the financial performance of an organization. The non-finance professionals who are not comfortable with finance and the appropriate use of the financial language find themselves struggling to operate effectively. In contrast, those that do:

  • Are better able to focus on what is important
  • Succeed in making and taking better-informed decisions
  • Are more effective
  • Operate with more authority
Sanmati
Author

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.