Finance is a broad term defined in the dictionary to mean affairs concerning the creation, management, accumulation, utilization, allocation, and distribution of wealth or resources. It refers to the application of strategies to achieve a financial return or advantage. Financial planning is a discipline concerned with the control and use of funds. It includes the processes by which money is invested either for short-term purposes (earnings) or for long-term planning (savings). It also involves the process by which cash is managed so that it provides the maximum return to the investor.
The process of earning profits or income, saving funds, disbursing payments, and withdrawal of cash is called accounting. The discipline of managing funds is called economics. Some people confuse economics with economics, which is the study of goods and services. However, economics is the study of the price system, the production and distribution of goods and services, and the role of markets in the processes of economic activity.
There are three distinct strands of modern public finance. Public finance concerns itself with the spending of public funds. Public good management is the process of putting a budget into effect for the funding of essential public services and programs. Public good policy is the regulation of non-excess spending by the government.
Corporate finance refers to the investment of corporate capital in the operation of businesses. Corporate investment in enterprises may be either private or public. In both cases, corporate finance is intimately involved with individual and public finance. In essence, corporate finance is nothing more than the methods, techniques, and principles that are used to acquire, manage, and utilize the assets of corporations in order to secure a reasonable return on the corporate investment. In this sense, corporate finance is the “base” of all other forms of public finance.
Private financial markets are those arrangements by which private lenders provide financing for the acquisition of certain securities, including equities in a corporation. The term ‘private financial markets’ refers to the marketplace for the borrowing and lending of money by corporations and other organizations. These financial markets are open to both institutional and corporate investors. They serve to diversify the sources of finance, and also help to insure a steady flow of cash into and out of the financial markets.
This article has presented a quick overview of the major concepts of modern day economics and business economics. I have mentioned only three of the ten most important areas of modern day economics and business economics. There are numerous other topics that are studied in depth in the modern day economic sciences. If you would like to read an in depth, detailed and accurate overview of all of the topics covered in this article, then you should definitely refer to a book written by one of the top authors, Larry Murphy, PhD. Larry Murphy’s latest publication, Managing Others: Leading Human Resources Experts Discusses Contemporary Issues in the Workplace is a quick and comprehensive guide to the most important issues that face today’s business executives and that will continue to impact the way that they lead in the future.