In its broadest sense, finance is simply a term used to describe those topics about the study, formation, and management of investments and money. In particular, it involves the questions of why and how an organization, business or government obtains the funds necessary – which are called capital in corporate business context – and what they do with or spend that money on. The concept of finance is not a new one. In fact, it is so old that in many ways it still has some useful qualities. Finance involves a combination of different factors like risk, profit and loss, time, money, market and financial instruments, investment, credit risk, and other financial risks. But despite these factors, finance still functions as the backbone of a large number of businesses and companies.
The subject of finance can be broken down into various levels and disciplines. There is management of finance, which focus mainly on the decision-making process, risk management, and budgeting of funds. Business planning and capital allocation are also parts of this discipline. Another discipline in finance is the investment banking sector. In this sector, there are two major divisions, namely investment banking and commercial banking. The latter is concerned with providing monetary, credit, and investment-related services to the companies and institutions that it serves, while the former deals primarily with investing and lending money. Business loans and financial products are the major focus in the investment banking industry.
Financial planning is the third discipline that encompasses all of these three subjects. It is basically the procedure used to make long-term plans, strategies, and projections for the financial and business growth and development. Financial planning aims to improve productivity and profitability through research and analysis. In addition, this is a discipline that considers current business conditions and trends in light of future goals and objectives. Financial planning also helps businesses make decisions about their long-term financial viability. It also involves the use of different financial instruments, such as financial policies and programs, financial planning techniques and financial institutions.
