The Best Written Essay on Finance | Management and Globalization
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Finance is actually the process of channeling money from the savers and investors to the entities that need it.
It has different definitions depending upon the context where it’s been used.
In practical life, finance generally deals with why an individual, company, or government acquires the needed money (capital money) and how they spend or invest that money.
While in academia, it is the study of the securities, derivatives markets, and intermediate institutions that enable the flow of money through the economy.
It is also referred to as the study of how to determine the value of assets by extension of entire companies.
Is finance an art or a science?
Finance is an art as well as a science.
Finance has strong roots in related scientific areas like statistics and mathematics.
However, there is no denying the fact that it also includes non-scientific elements that make it to be an art.
What does finance involve?
In general terms finance incorporates;
- Financial services
- Investment management
- Securities trading
- Stock brokerage
- Investment banking
- Financial engineering
- Risk management
Areas of finance
Finance is majorly split into the following categories;
1. Personal finance
2. Corporate finance
3. Public finance
The first step towards success is always choosing the right career for yourself. However, success is having a career that you love.
Some of the financial careers are as follows;
- Commercial banking
- Personal banking
- Investment banking
- Wealth management
- Corporate finance
- Financial planning
Finance tools are crucial in every business whether it is a small or large entity. Such tools help organizations to progress and track their finances.
Out of many finance tools here are some of them;
- Accounting software
- Budgeting tools
- Payroll management system
- Agile billing
- Financial dashboard
- Cash flow analysis
- Inventory management
- Expense tracking
- Business credit card
- E-commerce solutions
Main types of finance
you guys should must include the types of finance before writing an essay on finance. There are two main types of finance and all the subtypes come under them. These major types of finance are;
1. Debt finance
Debt is the borrowed money that you pay back with interest within an agreed time frame it is also called a loan.
Commonly debt finance includes bank loans, overdrafts, mortgages, credit cards, and equipment leasing/hire purchases.
2. Equity finance
Equity is the ownership of assets that may have attached debts or other liabilities. Equity is measured by subtracting liabilities from the value of the assets.
Subtypes of finance
The subtypes that come under “Debt” and “Equity” are as follows;
Finance in other fields
There are some other disciplines that collaborate with finance and offer different subjects like:
- Financial economics
- Financial mathematics
- Experimental finance
- Behavioral finance
The financial intermediaries are the institutions or individuals that serve as a middleman between diverse parties to facilitate financial transactions.
Some common financial intermediaries are;
- Commercial banks
- Investment banks
- Pooled investment funds
- Stock exchanges
Best personal finance software in 2021
Financial software is special application software that records all the financial activities within a business or organization.
The best personal finance software in 2021 are;
- Overall: Quicken.
- Budgeting: Mint.
- Habit Building: YNAB.
- Zero-Based Budgeting: Mvelopes.
- Taxes: TurboTax.
- Investing: FutureAdvisor.
- Investment Advice: Personal Capital.
- Spreadsheet Management: Tiller Money.
Importance of finance
Finance is one of the most vital aspects of a business. A company either needs to generate funds or collect them from sources to manage and control its financial operations.
It is important to fulfill the short-term goals and achieve long-term goals as well. It is also important to face unforeseen situations and unexpected changes.
Financial statements are the formal records of financial activities. It is the position of a business, person, or any entity. The financial information that is relevant is presented in an easily understandable form and a structured manner in the financial statement.
Organizations use financial statements as a mode of communication. They communicate their financial information to the users through financial statements and reports.
Moreover, the financial statements contain summarized information about the organizations.
The financial statements can be;
- Income statement
- Balance sheet
- Profit and loss appropriation account
- Fund flow statement
Financial management is the area in an organization that is concerned with profitability, expenses, cash, and credit.
It also refers to the strategic planning, organization, direction, and controlling of the financial undertakings in a company. Moreover, it includes applying the management principles to the financial assets of a company, while playing an important role in fiscal management.
Types of financial management
There are three main types of financial management that are as follows;
1. Capital budgeting
2. Capital structure
3. Working capital management
Principles of financial management
Financial management works on five main principles. These principles are;
The goal of financial management
The main goal of financial management is to maximize the value of the organization to the owners.
However, the value of a publicly owned corporation is measured by the share price of its stock. While the value of a private company is the price at which it could be sold.
Objectives of financial management
The objectives of financial management in an organization are;
- Maximization of profit
- Maximization of wealth
- Proper estimation of the total financial requirements of the organization
- Proper mobilization
- Proper utilization of finance
- Maintenance of proper cash flow
- Survival of company in the long run
- Creating reserves
Basic functions of financial management
There are three basic functions of financial management that are;
1. The investment decision
2. The financing decision
3. The dividend policy decision
Importance of financial management
Financial management helps in the budgeting of income. It provides pathways to achieve the goals and objectives of the organization. In addition, it measures organizational efficiency through proper allocation, acquisition, and management. It also provides guidance in financial planning and assists in acquiring funds from different sources.
Financial analysis is the process of evaluation of businesses, projects, budgets, and other finance-related transactions. It determines the performance and suitability of the business. Typically, a financial analysis is used to analyze the stability and profitability of an entity. It analyzes whether the business is profitable enough to warrant a monetary investment.
Types of financial analysis
The types of financial analysis are;
- Horizontal analysis
- Vertical analysis
- Short term analysis
- Multi-company comparison
- Industry comparison
- Valuation analysis
Tools and techniques for financial analysis
The main tools and techniques for financial analysis are;
- Comparative statement
- Common size statements
- Trend ratios
- Average analysis
- Statement of changes in working capital
- Fund flow analysis
- Cash flow analysis
- Ratio analysis
Objectives of financial analysis
The objectives of financial analysis are as follows;
- To assess the earning capacity of the organization
- To assess the operational efficiency and managerial effectiveness of the organization
- To assess the short term as well as long term solvency position of the organization
- To identify the reasons for the change in profitability and financial position of the organization
Benefits of financial analysis
Financial analysis possesses many benefits. The financial analysis can help to determine and identify financial strengths, weaknesses, and relationships in a company. The financial analysis;
- Keeps current on debts
- Determines profit margins
- Tracks inventory
- Determines debt to equity
- Sees improvement over time
Limitations of financial analysis
There are some limitations of financial analysis. These limitations include;
- The use of estimates in the allocation of costs to each period
- The ratios are as accurate as of the estimates
- The cost principle prepares financial statements.
Globalization of finance
Globalization of finance is also called international financial market integration. It refers to the growing unification of financial markets globally. It also reflects growing links between developing and developed financial markets.
Advantages of globalization of finance
The advantages of globalization of finance are;
- Financial risk reduction
- Improvement in the allocation of capitals
- Reduced borrowing cost
- Brings opportunities to poorer countries
- Promotes working together
- Makes production more affordable
- Increases economic growth
Disadvantages of globalization of finance
The disadvantages of globalization of finance include;
- Financial crisis
- Unequal economic growth
- Lack of local businesses
- Exploits cheaper labor markets
- Increases potential global recessions
- Causes job displacement
The bottom line
Finance is a broader term that includes a variety of activities. Along with the activities it also includes different tools and instruments.
Without finance, it is very difficult for any business to function properly.
Now that you have plenty of information about finance you can easily write an essay on finance management or simply finance. In case you have a deadline and you are running late you can simply get finance essay writing help from websites like Case48.