Finance Aspects
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Finance is a relatively broad term for various things regarding the study, development, and management of monetary resources and investments. Some sectors that are more heavily regulated by federal or state laws include insurance, banking, pharmaceuticals, and securities trading. Business activities in these areas tend to lean toward management accounting, because most business transactions involve cash or other assets of some kind. Understanding how different areas of finance work can be helpful to entrepreneurs, although many are already fairly familiar with most areas of business and finance.
Public accounting is almost as old as the country itself, having first appeared in bookkeeping in the 10th century. The public accounting profession includes governmental and non-governmental agencies such as the Internal Revenue Service, the Small Business Administration, and individual states’ financial regulators. In terms of risk management, this includes the monitoring of bank deposits and credit portfolios as well as identifying potential investment opportunities and creating financial plans based on current events.
Another branch of accounting that falls within the broader scope of finance is financial reporting, which is why it’s often referred to as accounting or business accounting. Financial reporting is an essential function in business and finance. Financial reporting helps managers, owners, and investors make better-informed decisions about their businesses and portfolios. Some of the different types of financial reporting that are included in the broader field of business and finance include:
Private equity. In private equity, financial accounting makes use of certain techniques to obtain information from companies that are public or private in nature. This includes obtaining balance sheets from publicly traded corporations or entities, such as partnerships. A private equity analyst in the banking industry can also analyze financial reporting documents for mergers and acquisitions and corporate reorganizations. These reports are used internally by management in the same way that they would be used for financing acquisitions, repurchases, and the funding of projects.
Public finance. This is basically the section of finance that deals with issues that fall outside the realm of the private sector. One example of public finance includes things like pension funds, worker compensation, health care benefits, the distribution of national currencies, the operation of national banks, and the issuing of treasury bills. Examples of aspects of public finance typically found within the banking sector include: loan rates, interest rates on loans, balance sheet improvements, and the purchase of financial securities, such as bonds, municipal securities, and commercial paper. A number of different aspects of public finance are regulated by federal laws and regulations. Examples of these areas include: insurance premiums, worker compensation, worker’s compensation premiums and benefits, pensions, health insurance, community colleges, and the financing of capital assets.
Money management. Finance scholars often debate the extent to which the study of finance is related to money management. While money management pertains to the day-to-day management of financial resources, many economists and finance teachers argue that money management refers more to the process through which capital assets are purchased, sold, and managed over time. For example, a manager might buy stock that is expected to increase in price over time. The purchase of this stock would then be considered money management because it allows the manager to purchase an asset that will subsequently increase in value over time.
