Finance is the management of money, extending to activities and services that involve capital, banking, debt, and investments, among other things. It is a broad concept, and its various aspects and basics are covered in microeconomic and macroeconomic theories. Finance is an indispensable part of businesses and the overall economy, making its study crucial in understanding how industries work. Further, you will inevitably encounter finance-related terminology regardless of the field you choose.

Types of finance

Personal finance
This is limited to an individual and their personal decisions regarding money. Several aspects influence personal finance, including one’s salary, expenses, investment goals, lifestyle choices, and savings.

The concept involves elaborate financial planning, for instance, saving for retirement, house, education, and possessions, and this planning takes into account all the influencing factors. Individuals buy credit or debit cards and insurance and invest in different instruments to achieve their financial goals. Personal finance is moved through banking (using a savings or a checking account) and online payment modes.

Corporate finance
This type of finance caters specifically to a business’s needs. Companies and other organizations have a dedicated finance department that oversees financial transactions, business needs, and investments. Several decisions are under this department’s control, including the type of financing.

For instance, for a startup that has just received funding from an angel investor, the organization will strategize and decide how to utilize funding needs to be utilized in what goals and projects and what can be invested into business development. These plans will be discussed with the finance department, which will handle the funds accordingly, offering advice on the formulation of future plans. When the business grows and wants to go public, i.e., sell its shares through an IPO (or initial public offering), the same department will help in this process and decision. These decisions are made to ensure the company will be able to raise enough cash for its needs, and if the move is not in the interest of the startup, then the finance department will inform the owners. Several such examples involve corporate finance decisions that affect companies, their profits, losses, investments, bonds, and stock offerings.

Public or government finance
This type covers the government, its role, and its services. You can think of public finance as taxes, budgets, expenditures, and debt-issuance policies. These tools decide how the state or the government pays for the services it provides to the public. All these aspects are part of the fiscal policy. The government—state and federal—come up with strategies and plans to ensure that there is no market failure by developing policies that oversee the stability of the economy, how income is distributed, and how resources are allocated. The government receives yearly income in the form of taxes paid by the citizens. The country also borrows money from banks, investment firms, and other countries to fund domestic progress. These resources must be allocated, and the economy should remain stable as the effects also reach personal and corporate finance. If the government fulfills its fiscal and social responsibility to its people, then the market remains stable, the economy flourishes, and people can save and spend their money.

Financial services versus goods
Financial services allow people and businesses to acquire financial goods. These include the transfer of funds and offering advice on investments, and the management of capital. Financial goods are products like insurance policies, stocks, bonds, and mortgages. Financial services play a key role in keeping the economy stable as they can encourage smart spending and saving. Banks, investment houses, lenders, insurance companies, real estate brokers, finance companies, and accounting services are all financial firms that help keep the economy afloat. If these services fail to perform in a valuable manner, then the capital is in danger along with the whole economy, which can lead to a recession.

Common terms for businesses
Most companies use the following concepts to gauge their financial standing. Some of the common terms are:

Net Income:  When all the expenses, including taxes, are subtracted from the revenue, you get the income of the business. This net income is the total earning or the profit of the company.
EBITDA:  This is   earnings before interests, taxes, depreciation, and amortization. You can calculate EBITDA by subtracting the operating expenses from the revenue and adding depreciation and amortization to the operating profit. It is argued that EBITDA gives a better picture of the profits of the company.
EPS:  Earnings per share is a declaration that shows the earnings health of the company, especially to the investors. Once the EPS of a company is highlighted and announced, it affects the stock price of the company.