Different Kinds Of Finance
. These come under the areas of business, personal and public finance.
When you deposit money in a bank, or in mutual or hedge funds, you are paid an interest on that money. Ever wondered how a bank manages to pay you an interest? The bank loans this money to individuals or companies, or even to governments and collects interest. Part of this money collected is handed to you as interest on your deposited money. This is how, when you have more money than you need, you invest in a bank and they pay you an interest. You take a loan from a bank- you pay an interest to the bank. The bank acts as an intermediary, and either way, the bank makes money.
Personal finance
Taking a loan for your home, car, education, insurance, investment and others comes under the personal finance category. You need to provide all the information- private or otherwise, and have all the necessary documents ready to hand over to the financial institution. The lender, in turn, is ready to help and advise you on to the best investment or in interest repayment, in case you are a borrower.
Corporate finance
Just like in the personal finance, but on a bigger scale, a company needs to first work out a plan for the use of funds it may receive, and have all the necessary documents about the performance of the company, etc. ready to hand over to the financial institution of their choice. Once the lender accepts the plan, the company then sells its stock to the bank, which in turn sells the stock to other investors or financial institutions. For this transaction, the company receives money from the bank which is used for expansion, or any debts the company may have accrued, or whatever else they need the funds for. This is called investment management. There are also long and short term funds provided by the lender.
Budget
This is where you make a list of all your expenses and savings. We all have used the words I have to stay within my budget or I have to plan a budget for my holidays. It is the same for companies- big or small. In other words, forecasting the future financial status of the company. Budget has different categories, such as project, marketing, revenue, sales and so on.
by: Joan Douglas
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