Finance is a broad term encompassing various things regarding the science, creation, and management of funds and investments. The world of finance has a wide range of disciplines that are all important to understanding and managing finances. This includes such disciplines as accounting, economics, business, and financial theory. All of these fields help to describe and explain how people, businesses, and governments manage their finances. As such, when choosing which area to focus your finance degree in, you need to choose a field that you are interested in so that you can focus your degree towards the specific areas that you are most interested in.
One of the many different branches of finance is behavioural finance. In this branch of study, students focus on the habits, decisions, and reactions of individuals and groups in order to create, manage, and evaluate financial decisions. Behavioral finance also seeks to explain why certain decisions are made, which can help us better understand our own behaviour in making financial decisions. This sub-field of finance addresses such issues as why consumers choose to purchase certain products or pay for certain services. It also looks at why corporations choose to invest in particular areas, which could help them develop a more strategically-focused approach to investing in their future.
Another major field within the world of finance is banking. Banking can either be the study of banks and their activities, or the study of financial markets and how banking influences the economic environment. The study of banking is an important part of the wider field of economics, because it informs economic policies and decisions regarding banking, currency exchange rates, public banking, corporate finance, mortgage banking, economic growth, and many other aspects of the global economy.
Business finance is often seen as a subset of economics. However, the study of business finance encompasses many different topics. Different schools of thought in business finance analyze different aspects of business finance such as: working capital management, merchant banking, venture capital, short-term funding, buy-sell agreement strategies, financing purchases and sales, ownership growth, and mergers and acquisitions. There are many topics that fall under business finance, but there are four especially important ones. All of these topics are incredibly important to the health of the American economy and the well-being of the United States economy as a whole. They include:
Public Finance – The study of public finance relates to governmental institutions such as: state and local governments, corporations, labor unions, interest groups, homeowners, banks, renters, credit, insurance, and the money market. Public finance seeks to ensure that the distribution of financial resources is efficient and follows an adequate level of supply and demand. In addition, it is imperative to secure long-term funding for these institutions in the form of bonds, loans, or other investments that are guaranteed by taxes or other governmental mechanisms. Public finance experts are an essential part of all economic development plans.
Risk Management – The study of risk is intimately connected with the study of financial markets. The discipline of risk management seeks to minimize the possibility of loss by identifying and minimizing the adverse effects of financial risks. This discipline also seeks to maximize the return on investment by applying efficient and consistent risk management techniques. An area of great importance in financial risk management is efficient risk allocation. Some of the methods of allocation include: asset allocation, portfolio allocation, exposure management, and the adoption of balanced scorecards.
Accounting and Financial Accounting – These are two fields of the finance curriculum that play a significant role in the smooth functioning of the business and financial markets. The accounting process takes advantage of information that is provided by financial instruments such as financial statements, operating notes, and journal articles. Financial accounting uses a variety of methods such as information systems, bank reconciliation, and internal control as well as auditing and risk management techniques. On the other hand, financial accounting provides information needed by stakeholders and managers to evaluate the performance and value of the company. It is also used to provide information needed for the preparation of balance sheets, the reporting of financial information, and the preparation of financial forecasts and projections. Both processes have a profound impact on the way business is conducted both as a company and as an industry.
The field of Finance and Accounting can be subdivided into different areas. Finance refers to the processes and decisions made by individuals, institutions, and organizations to manage their financial resources. Accounting deals with the procedures and activities that help individuals, organizations, and financial institutions make economically and scientifically sound financial management decisions.