Finance deals with the condition in which people allot their assets under different conditions of uncertainty as well certainty. A major policy in finance that affects decision is time value for money. This means one unit of any currency today is more valuable than same currency unit tomorrow. Categorizing finance results in three parts that is namely, corporate finance, personal finance and public finance. Each one has its own requirement and deals with different sectors of society.
More about personal finance
No one is ever aware of what is ahead of him. To protect themselves from unforeseen events, people go for personal financing. This decision may include things like payment for education, financing the durable goods like real estate, buying insurance, cars, etc. For example, property insurance, health insurance, saving and investing for retirement.
Personal financial decision involves loan payment, debt obligations, etc. The main areas in financial personal planning are mentioned below:
- Financial position- This deals with personal resources that are available by examining household cash and net worth cash flows
- Analyzing the ways of protecting household from uncertain risks. These risks could be categorised into property, liability, death, health and disability
- Income tax is known as the largest expense in any household. Tax planning is necessary. The incentives given by the government as tax deductions, credits, etc. can be easily used for reducing lifetime burden of tax otherwise there is always tax help available from different agencies
- Retirement planning is a part of the process which enables you to plan for distributing assets meeting income shortfall if any
- Estate planning includes planning for disposition of somebody’s asset after death
Need of corporate finance
Corporate finance means providing funds for corporation activities. This involves balancing profitability along with balancing risks. The three decisions are:
- Investment decision
- Financing decision
- Dividend decision
Other business decision related to finance is fund management or investment. Here one has to take the decision of how much, what to invest and when.
More details on financial services
Finance is something that is used as personal finance, by government, by businesses as corporate finance and also by other organisations that include schools, NGO’s, etc. The main goals of the above mentioned activities are achieved with the use of proper methodologies and financial instruments. Finance is the important aspect of business that includes decisions concerned with the use of funds for any firm or enterprise.
A look at the public finance
Public finance refers to that part of finance which is related to sub national and sovereign entities and other public entities such as school districts. It basically deals with:
- Indentifying the required expenditure for public sector
- The budget process
- Debt issuance for public projects
Central banks like Federal Reserve in United States and Bank of England are known as strong players of public finance. They act as lenders and have strong influence on credit and monetary conditions of the economy.
Role of tax in finance
Tax refers to financial charge imposed on a taxpayer by any state and the failure in pay is strictly abided by the rules which say punishment by law. Taxes include either direct or sometimes indirect tax that is paid in the form of money or labour equivalent.
In today’s taxation system, tax levy in money. Tax collection takes place by government agency like IRS in United States or HMRC in United Kingdom. When taxes fail to be paid then civil penalties like fines, incarceration are imposed on non paying individual or entity.
Few categories of tax include:
- Income tax
- Corporate tax
- Property tax
- Transfer tax
- Sales tax
- Service tax and negative income tax
Tax advantage for debt
In corporate finance, tax advantages of debt means it is quite cheaper to finance with debt in comparison to equity. Firms or enterprises are taxed on profits and the individuals are taxed based on their private income. Investors are now paying taxes on interest income.
Jenifer Merchant provides tax help to thousands of people now. With her experience in this field she is able to handle people for helping them out in tax issues and other tax planning in a very efficient manner.