The Areas of Finance

Finance is all about the management of money. The three basic areas are: public, corporate, and personal.

Public finance

This pertains to the collection of proper taxes and the proper allocation of the collected money to the appropriate channels. The amount of taxes collected from each person is dependent on the amount of monthly income he receives from his work or business. The higher the monthly income, the higher taxes will be collected. These taxes are meant to finance government projects to improve the living conditions. For instance, the money for making and improving road conditions are from tax payer’s monthly collection. The services that the government renders to the less-privileged members of the society such as the disabled are also from the collection of taxes. Thus, the collection of taxes is an important area so the government can pay various projects that are aimed at giving a better quality of life to the citizenry.

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Corporate finance

This pertains to the management of money within a corporation. There is a division in a corporation that mainly deals with the financial transactions of a corporation. The goal of every corporation is to increase its annual profit thereby increasing the cost of each share. This can be achieved through careful financial planning and strategies. The capital investment decisions and investment banking all fall under the area of corporate finance. Issues such as the amount of the dividends that a shareholder will receive, the types of investments to be made and forms of payment that the corporation will issue, are just some of the concerns of the finance department.

Personal finance

This refers to the money management of a family or an individual in order to make allocations for daily and unforeseen expenses, and savings. The individual will think of the services of various banking institutions and other forms of investments, such as the stock market in order to increase the current amount of his money. This area of finance is all about the individual’s preferences on how to spend his money and where to invest the money. Examples are money allotted for survival, for hospitalization, for leisure, among others. It can also be in terms of investing wisely in the stock market and learning how to play the game such as buying, holding, and selling shares in order to increase the amount of money he invested.  Handling one’s money well is also necessary so if loans are needed to be availed of, the individual is fully aware as to how much he can allot for monthly amortization.

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