finance

Four Facets of Finance - Explain It!

So, here you are, taking your first finance course. Congratulations, and

welcome to an arena that is not only a critical part of the global economy, but

also a crucial part of our personal lives as well. Now, if you are someone that

is already looking into finance as a career, it's pretty obvious why you're

here. However, for many of you, you may be saying, I don't plan to go into

finance. Well, it is certainly true that most people interested in business

choose to go into non-financial careers in marketing, IT, or even operations.

Hey, your gig may even have nothing to do with business. But I am here to

tell you that finance is not just a career choice. It's critical that you

understand money matters for your personal benefit, like how to pay for

college, buy a car, or even retire. So let's get started. I like to think of

finance as the study of the capital market and its many players. But what is

the capital market? Well, it's like matchmaking. Finance connects people with

money to entrepreneurs with a great concept or business idea. If it's a good

match, bingo, handsome profits. Let's start from the corporate finance side

first. Say you want to throw a party. In planning the party, you're going to

wrestle with three basic questions: Who's going to pay for the party? What

kind of party are you going to have? And lastly, when should you repay the

money? In finance terms, the financial manager at a company is responsible

for answering those three basic questions. The question of who's going to

pay for the party is called the capital structure decision. That means whether

you borrow the money or issue stock to shareholders. Once we get the

money for the party by issuing new equity, what should we eat and drink? Or

in the case of a company, what are we going to make? Should we start a

company from scratch or buy one that's already cooking? Okay, say we made

the right decisions along the way and we made lots of money. Do you pay it

out to the shareholders, or are you going to invest in those things that your

company needs to grow even bigger? That's the dividend decision, and we'll

have more on that later. So, how do you get the investors in the first place?

Why should anyone invest in your company That's where the financial advisor

comes in. They literally make it their business to know what's shaking in the

financial world. What's a person like you to do with your money? What's

going to make you a quick buck or, even better, make decent dough over the

long haul? Financial advisors also provide basic advice, like don't put all your

eggs in one basket, and can fill you in on different kinds of stocks and bonds

to put in your portfolio. An easy way to diversify is to buy mutual funds. A

mutual fund is a collection of different stocks or bonds. If you are good with

figures and have an eye for trends, then you might think about becoming a

research analyst for a mutual fund. They help the portfolio manager make

the right moves by studying everything that is going on in the market.

Another place that one can work as an analyst is in an investment bank.

Investment banks help companies raise money from investors by selling their

stocks and bonds. Since there are a number of careers in finance, most

business schools offer a variety of finance courses so students can be

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successful in the role that they go after. This introductory course will hip you

to the fact that finance has some pretty cool jobs you could pursue. So now

you're ready to learn more. In a corporate finance course, you'll learn how a

company raises, structures and spends its money. Investments will be the

course where you learn how to tell the good stocks from the bad, and the

sure things from the really risky. Another important course in the finance

curriculum is one that covers derivative securities. Derivatives are very useful

for both managing risk and for taking more speculative bets. Now remember

that finance is a global game, where currencies and interest rates constantly

fluctuate, so you'll surely want to study international finance as well. But

enough about finance courses. Let's come back to the simple fact that

finance affects us personally each and every day. Suppose you have your eye

on a new ride and the dealer offers you both a loan and a lease option. Which

is best for you? And what about that beach house you would like to have in

20 years, how can you eventually make that happen? Or what is the total

amount that you need to retire? This course will help you tackle exactly these

kinds of big life questions. So, I hope that I've managed to give you a bit of

motivation to dig into finance as either a player in the financial world or

someone who knows how to handle their own money. Good luck to you as

you begin this journey.

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