Understanding Finance
What is Finance?
It is everything related to money. It involves activities like borrowing, lending, funding, budgeting, saving, investing, banking, debt, credit etc. It is mainly the management of money and raising money when needed, which can be through loans, borrowings or equity, etc. It also encompasses the oversight, creation, and study of money. Mainly the basic concepts of finance originate from Economics i.e. Micro and Macro Economics. Funding can be for personal needs for corporate needs and government needs. One of the most fundamental theories of finance is the time value of money i.e., the cost of a rupee today is worth more than its importance in the future.
Advantages:
Finance is useful for everyone in this world. If a person has financial knowledge, it can be very much advantageous for him/her.
- It helps to raise money whenever needed.
- It also tells which source of raising finance would be suitable for a situation and which will not be.
- It says what the benefits that a particular reference provides and what are its disadvantages are. For example, suppose a company wants to raise capital for its new project, so through finance will help it whether to choose debt or equity-based on their advantages and disadvantages.
Disadvantages:
Finance is the science of getting funds and using it in practical ways. It is based on a cause and effect relationship. In my opinion, investment has no disadvantages. But lack of financial knowledge can be disadvantageous.
- If a person does not have proper financial understanding, he may not know how to use their excess funds and lose their money.
- A company may fail badly if there is no proper financial knowledge.
Some people think finance is a bad thing, maybe because they lost their money in share markets or have massive debts on them, but these things do not finance, these are just parts of finance. So I don’t think the investment has any disadvantages.
Scope:
Finance has an extensive range in today’s world. It involves-
- Public Finance
This is mainly related to the government of every country. Like every business organization, governments also need to raise a considerable amount of funds, but they do it for non-profit goals.
- Securities and investment analysis-
This area of finance is for individuals and institutional investors. It covers mainly investments, risks involved, and returns on those investments.
- International Finance-
It studies economic transactions among nations, corporations, and individuals internationally. It is concerned with flows of money across international boundaries.
Conclusion:
I would say finance is the most crucial aspect of a business. Everyone should have proper financial knowledge if they want to be financially sound. Like Robert Kiyosaki said,” money comes and goes, but if you have financial literacy about how money works, you can gain power over it and start building wealth.”
