Personal Finance

Financial planning involves analyzing the current financial position of individuals to formulate strategies for future needs within financial constraints.

For example, individuals must save for retirement, which requires saving or investing enough money during their working lives to fund their long-term plans.

Personal finance includes the purchasing of financial products such as credit cards, insurance, mortgages, and various types of investments.

 Banking is also considered a component of personal finance including checking and savings accounts and online or mobile payment services like PayPal.

Corporate Finance

Corporate finance refers to the financial activities related to running a corporation, usually with a department created to control the financial activities.

For example, a large company may have to decide whether to raise additional funds through a bond issue or stock offering.

Investment banks may advise the firm on such considerations and help them market the securities.

If a company grows and decides to go public, it will announce shares on a stock market through an initial public offering (IPO) to raise cash.

In other cases, a company might be trying to budget their capital and decide which projects to finance and which to put on hold in order to grow the company.

Public finance

Public finance includes tax, spending, budgeting, and debt issuance policies that affect how a government pays for the services it provides to the public.

The federal government helps prevent market failure by overseeing the allocation of resources, distribution of income, and economic stability.

Regular funding is secured mostly through taxation. Borrowing from banks, insurance companies, and other nations also help finance government spending.

In addition to managing money in day-to-day operations, a government body also has social and fiscal responsibilities.

A government is expected to ensure adequate social programs for its tax-paying citizens and to maintain a stable economy so that people can save and their money will be safe.

Capital Investments

Corporate finance tasks include making capital investments and deploying a company’s long-term capital.

The capital investment decision process is primarily concerned with capital budgeting.

Through capital budgeting, a company identifies capital expenditures, estimates future cash flows from proposed capital projects, compares planned investments with potential proceeds, and decides which projects to include in its capital budget.

Making capital investments is perhaps the most important corporate finance task that can have serious business implications.

Poor capital budgeting (e.g., excessive investing or under-funded investments) can compromise a company’s financial position, either because of increased financing costs or inadequate operating capacity.

Capital financing

Corporate finance is also responsible for sourcing capital in the form of debt or equity.

A company may borrow from commercial banks and other financial intermediaries or may issue debt securities in the capital markets through investment banks.

A company may also choose to sell stocks to equity investors, especially when need large amounts of capital for business expansions.

Capital financing is a balancing act in terms of deciding on the relative amounts or weights between debt and equity.

Having too much debt may increase default risk, and relying heavily on equity can dilute earnings and value for early investors.

In the end, capital financing must provide the capital needed to implement capital investments.

Short-Term Liquidity

Corporate finance is also tasked with short-term financial management, where the goal is to ensure that there is enough liquidity to carry out continuing operations.

Short-term financial management concerns current assets and current liabilities or working capital and operating cash flows.

A company must be able to meet all its current liability obligations when due.

This involves having enough current liquid assets to avoid disrupting a company’s operations.

Short-term financial management may also involve getting additional credit lines or issuing commercial papers as liquidity back-ups.

Understanding Operations Management

Operations management involves utilizing resources from staff, materials, equipment, and technology.

Operations managers acquire, develop, and deliver goods to clients based on client needs and the abilities of the company.

Operations management entails studying the use of raw materials and ensuring minimal waste occurs.

Operations managers utilize numerous formulas.

Supply Chain Management (SCM)

Supply chain management is the management of the flow of goods and services and includes all processes that transform raw materials into final products.

It involves the active streamlining of a business’s supply-side activities to maximize customer value and gain a competitive advantage in the marketplace.

SCM attempts to centrally control the production, shipment, and distribution of a product.

By managing the supply chain, companies are able to cut excess costs and deliver products to the consumer faster.

Human resources is the company department charged with finding, screening, recruiting, and training job applicants, and administering employee-benefit programs.

An HR department is an essential, if not critical, component of any business regardless of the organization’s size.

It focuses on maximizing employee productivity and protecting the company from any issues that may arise from the workforce.

HR responsibilities include:

Compensation and benefits, recruitment, firing, and keeping up to date with any laws that may affect the company and its employees.

Focused on quality, productivity and protecting the company.

Human Resource Planning (HRP)

Human resource planning (HRP) is the continuous process of systematic planning ahead to achieve optimum use of an organization’s most valuable asset—quality employees.

Human resources planning ensures the best fit between employees and jobs while avoiding manpower shortages or surpluses.

Having a good HRP strategy in place can mean productivity and profitability for a company.

Investing in HRP is one of the most important decisions a company can make.

If you have the best employees and the best practices in place, you can see the difference between slowness and productivity and can lead to profitability. 

Relationship between marketing and finance:

Maximize the value of stock in market by identifying good capital budgeting decisions.

As competition increases, the finance and marketing departments must work together to increase market share and improve the final result.

Marketing efforts are made to increase sales, more importance in their brand which generates more loyalty to maximize benefits that will increase the value of stock in the market.