PRIMARY AREAS OF BUSINESS FINANCE CONTENT WHAT IS

PRIMARY AREAS OF BUSINESS FINANCE

CONTENT WHAT IS FINANCE PRIMARY AREAS OF BUSINESS FINANCE CORPORATE FINANCE INVESTMENTS FINANCIAL MARKET FINANCIAL INSTITUTION FINANCIAL SYSTEM

WHAT IS FINANCE? • Finance is one of the most important functional areas of business and within a firm. It joins other functional areas like marketing, operations technology, and management as key areas of business. • Business owners and business managers have to have at least a basic understanding of finance even if they outsource certain areas of their financial operations.

PRIMARY AREAS OF BUSINESS FINANCE There are three primary areas of business finance, which include: 1. 2. 3. 4. 5. Corporate Finance Investments Financial Market Financial Institution Financial System

CORPORATE FINANCE Corporate finance is the area of finance that incorporates the actions of the company when it comes to making decisions about financing. In other words, every time a business owner buys something, they have to figure out how to pay for it. For instance, when a company buys inventory, the company has to figure out a way to pay for that inventory. Other areas of corporate finance include budgeting, managing working capital, financial analysis, financial statement development, and more.

INVESTMENTS Another area of finance is investments. Within a business, particularly a large business, the firm may invest in assets ranging from short-term securities to long -term securities like stocks and bonds. The business invests for the same reason individuals invest-to earn a return.

FINANCIAL MARKET Financial markets, such as the stock market, help facilitate the transfer of funds between savers of funds and users of funds. Savers are usually households, and users are generally businesses and the government. The stock market for instance, provides a seamless exchange of ownership of a company between one person or business and another.

FINANCIAL INSTITUTION The financial institutions work hand in hand with the financial markets. Financial institutions generally act as intermediaries that help make transfers of funds between businesses and savers (working as a broker or agent for the trade). For example, an individual might deposit money into a savings account. Then, the financial institution would take that money and loan it out to a business.

FINANCIAL SYSTEM A 'financial system' is a system that allows the exchange of funds between lenders, investors, and borrowers. Financial systems operate at national and global levels. They consist of complex, closely related services, markets, and institutions intended to provide an efficient and regular linkage between investors and depositors.