Finance Can Be Classified In Different Ways
The types of finance are then the subdivisions of the science that analyzes how economic agents make their spending, saving and investment decisions.
Four areas can be distinguished in finance, which we will explain below.
Table of Contents
Corporate finance is dedicated to studying how companies obtain and manage their resources. Thus, they cover several thematic areas, such as the following:
- Project evaluation.
- Decide between reinvesting the earnings or distributing them as dividends.
- Compare financing alternatives based on the term of the credit, the interest rate and other conditions,
- Define the level of financing with your resources and with third-party resources.
Personal finance studies how individuals or families obtain income or financing and manage these resources. Some of the topics it covers are:
- The choice of a professional career depends on the expected profitability.
- Income management, deciding how much can use for savings.
- Loan decisions, such as obtaining mortgage or vehicle loans.
- Investment decisions, for example, in mutual funds, stock indices, company shares, or starting a business.
Public finance studies how the State captures resources and how it spends or invests them. Among his areas of interest, we can highlight:
- Tax collection.
- Evaluation of projects or public works.
- Preparation of the public budget, determining the level of fiscal surplus or deficit. In the latter case, a financing mechanism such as the issuance of bonds would have to be sought.
Also international Finance Can Be Classified In Different Ways
International finance studies the financial operations that take place at a global level. Those dedicated to the study of the following topics:
- They are financing abroad (when a company or the Government seeks credit in another country).
- The effects of the exchange rate variation on the performance of financial instruments.
- Movements of capital from one country to another.
- Risks of investing in a particular country, for example, depending on the political situation or its macroeconomic indicators.
Use Of Credits
This is another of the basics of personal finance. They are an excellent economic tool to solve liquidity, but you have to know how to handle them. For example, the interest rate on a payroll loan is not the same as that on a mortgage or credit card. You have to inform yourself before using them!
Did you think that salary is the only source of money? The truth is that there are several types of income. Most are governed by the different types of currency (pesos, dollars, euros, etc.), but exchanges of species are also included. To distribute them correctly, the idea is that you start putting together your budgets and understand what assets make up your income.
There are several types of expenses in this financial classification as with income. The most feared are micro-expenses, also known as “ant expenses”. They are the minor consumptions that you make in a period, and when you add them up, they can affect your finances.
An excellent way to combat them is to keep a daily record, either manually with a monthly expense calculator or with one of the best personal finance apps.