Finance is a broad term encompassing all matters concerning the study, development, management and distribution of funds and other financial investments. In particular, it concerns the issues of how individuals, companies or governments obtain the funds necessary for their continued existence and how they use those funds. Thus, it also has important aspects including planning for the future, budgeting, allocation of resources, insurance and pension, investing, and the financing of social programs. All these are crucial areas of finance, because without these key aspects, the running of the business or the government would become difficult, if not impossible. Finance is thus an essential aspect of the modern state.
Finance can be subdivided into two major categories enterprise finance and financial risk management. The former refers to the management of financial investments and their performance; while the latter pertains to the measurement, interpretation and control of those investments, particularly their return. Enterprise finance is the area of activity relating to the creation, management and allocation of funds in terms of economic advantage, for the fulfillment of organizational objectives. Financial risk pertains to the provision of financial products or services to ensure their safe return to the investors. Both the enterprise and the risk are aspects of corporate finance.
The main objective of corporate finance is to create, manage and allocation of the financial resources of a firm. Its interrelationships are far-reaching and involve a number of different participants such as bankers, investors, borrowers and creditors, as well as employees of the firms. Through effective financial management, firms can enhance their competitive edge by ensuring the smooth operation of their business through sound investment and debt management. Finance thus encompasses a wide range of activities and involves a lot of interaction among various people and institutions. It thus forms the basic link between those involved in a particular market sector and those who make monetary decisions.
While the various elements of corporate finance are interdependent, there are specific interactions and relationships which are common to all such entities. For instance, decisions made by entrepreneurs involve assessment of risks, rewards and other factors. Business startups may receive capital from venture capitalists, angel investors or banks. Capital provided by government agencies and banks can be used for different purposes depending on their requirements.
The first and main article in this series covers the general concept of corporate finance. This includes concepts like financial markets, financial assets, liabilities, investment banking and personal financing. A company’s balance sheet is a reflection of its entire financial health including both current and long-term debts. The main article also covers how startup businesses receive cash flow, how venture capitalists use funds and what role investors play in corporate finance.
This main article on finance highlights the relationship between entrepreneurs and investment professionals. These investors may provide seed money for startups and may otherwise invest in the same company through a variety of channels. Startup companies that intend to generate large profits can attract investment from a number of sources, including angel investors, venture capitalists and other financial institutions.