The Basics of Personal and Corporate Finance3 min read
Finance is a broad term encompassing various things about the financial management, development, and the analysis of financial investments and money. There are many fields in which finance is studied such as business, accounting, economics, investment banking, asset management, health care, real estate, savings and loans, etc. Finance is the branch of science that attempts to explain the effects of changes in resources (including human and material assets) in relation to their prices, time preferences, expectations, beliefs, etc. The field of finance is extremely important in the economic development of any country.
Accounting is one of the main branches of study that focuses on the recording of financial transactions, measurement of the financial results, and interpretation of financial statements or reports. Accountants are often called upon by accountants to give an opinion regarding the financial statements and reports prepared by their client. In order to become an accountant, you should complete a four-year bachelor’s degree program at an accredited university or college and obtain an accountant license. Business schools and professional colleges usually offer accounting programs as well.
A large number of countries have their own distinct and unique systems of accounting including the United Kingdom, Canada, Australia, New Zealand, and South Africa. Generally speaking, all countries have a government headed or controlled system of public accounting. This means that there are separate departments for maintaining financial records for businesses, non-business corporations, and individuals. These departments then come under the jurisdiction of the Revenue Service. In most countries, accountants are required to be licensed by the government in order to practice. Many countries also have their own private revenue service known as the prudential accounting practices commission.
Strategic and managerial finance refer to those aspects of finance that are responsible for the identification, assessment, prioritization, implementation, reporting, and control of the financial assets and liabilities of a business or organization. In its broader sense, strategic and managerial finance can also refer to the planning, organizing, management and the evaluation of the financial resources of a business. This broader definition is more applicable in the context of small businesses, where the scope of this discipline is much smaller than that of businesses with bigger operations. Therefore, small businesses must form a specialized unit for the purpose of accounting and financial review.
Cash flow management is one crucial aspect of strategic and managerial finance important for small businesses. Cash flow is the difference between operating cash or bank overdrafts and actual cash on hand. Poor cash flow can lead to poor cash outflow, which can lead to a financial crisis. Cash flow management helps to ensure that cash that is needed for daily operations is delivered, and also takes care of other costs associated with short-term financing, such as interest.
Another aspect of personal finance is asset protection. This protects the wealth or savings of individuals and families from loss due to sudden disasters (for example, natural disasters, accidents, theft, home invasion). It also ensures that no one concentration of investment will be affected by a disaster. Corporate finance and personal finance play a crucial role in corporate asset protection. The strategies used by corporations to structure their assets to help them to weather any storms in the market and weather adverse market situations.