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$treet The Finance Forum of NITIE

INTRODUCTION TO
FINANCE

WHAT IS FINANCE?
Finance is the study of managing money to create value. It also entails the process of
acquiring funds. The need for funds and money management is essential to public,
government and corporations alike.
Finance plays an important and involved role in overall health of the economy
Companies and individuals alike, are faced with investment and financing decisions,
and having an understanding of finance helps make those decisions
Businesses need to make financial argument, to remain profitable and generate cash,
for funding their projects and managing budgets

HOW IS IT DIFFERENT FROM ECONOMICS OR ACCOUNTING


Accounting
Means to deliver financial information needed to identify the financial health of
companies.
Involves recording of transactions that entails record keeping.
Primarily deals with the past; dealing with historical information keeping a note of the
past events
Economics
Studies the production, consumption and distribution of goods and services,
explaining how economies work and how their agents interact.
Helps understand the potential ramifications of national policy and events on
business conditions.
Understanding economics can also gives the tools to predict
macroeconomic conditions and understand the implications of those predictions on
companies, stocks, markets and so on.
Finance
Uses the information provided by accounting for decision making
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Offshoot of economics, establishing a practical links to theoretical understanding


Informs business managers and investors on how to evaluate business proposals
and efficiently allocate funds
It is forward looking measure, dealing with the future. In doing it deals with risk and
uncertainty; which forms a major part of financial analysis
Finance = Analysis + Decision Making
Finance generally focuses on the study of prices, interest rates, money flows and
the financial markets.
Broadly, finance seems to be most concerned with notions like the time value of
money, rates of return, cost of capital, optimal financial structures and the
quantification of risk.

AREAS OF FINANCE
Financial Markets
e.g, Banks, Insurance Companies, Credit Unions etc.
Financial Market is a place where the buyers and sellers for the financial instruments
come together and financial transactions take place.
Types Of Financial Markets
Primary Markets: Primary market is one where new financial instruments are
issued for the first time. They provide a standard institutionalized process to raise
money.
Secondary markets: Secondary Market is a place where primary market
instruments, once issued, are bought and sold..
The Different Financial Markets
A financial market is known by the type of financial asset or instrument traded in it.
Capital Markets (Stock and Bond market): deals in long term financial
instrument
Money Market: deals in short term financial instruments. e.g, T-bills,
commercial papers

Foreign Exchange Market (also called the Currency Market).

Corporate Finance
e.g, all types of corporations making financial decisions regarding cash flows
Financial management of corporations
Involves efficient use of financial resources to achieve output
Financial Analysis & Planning: Focuses on identifying what is happening in the firm,
and forecasting the future. Prepares financial blueprint of an organization for its future
operations
Forecasts future under different business situations
Avoids business uncertainty and shocks
Helps in coordinating various business functions
Capital Budgeting: Focuses on how the firm decides what assets to buy or what
investments to make
Refers to investment in long term assets
Affects the growth, profitability and risk of the business in the long run
Large amount of funds are involved with risks involved having irreversible
decisions
Capital Structure: Focuses on how the firm finances its operations. It deals with the
decisions to finance the investment with debt or equity, identifying the optimal levels
so as to remain profitable and have sustainable growth levels
Working Capital Management: Aims to manage existing assets efficiently, focusing
on managing the day to day operations

Investments
e.g, Stock brokerage firms, Investment companies, Insurance companies, Mutual Fund
houses etc.

Financial decisions with the expectation to earn additional income or profit, by


individuals or corporations

It involves long term commitment to build wealth by directing money to financial


instruments. The investment or commitment made can be in different financial
assets like stock markets (equities), government securities

Financial Services
e.g, Financial Consultants, Auditing firms etc.
Design and delivery of financial advice and products to individuals, business and
government

APPLICATION OF FINANCE
Financial knowledge can be applied across industries. Ability to understand and analyze
financial statements to identify trend or forecast future is highly valued.
Financial knowledge in non-finance companies involve managing financials for day to
day operations, recording transactions and scenario modeling. Logistics financing,
setting pricing strategies or transfer pricing long been used in non-finance companies
require financial skill and knowledge.
Consultants with financial acumen and ability to communicate in financial terminology
are high valued. Corporate roles in finance involve financial planning and business
strategy aimed at maximizing corporate value. Banks and financial services companies
have plethora of roles having front office, middle office and back office exposure, from
sales & trading roles to risk management and corporate treasury to operations and
technology roles

CAREER OPPORTUNITIES IN FINANCE


A diverse set of finance roles are offered at NITIE. The finance roles offered are not
restricted to banks and financial services but extend to consulting and FMCG firms
Corporate Finance
Risk Management
Project Finance
Trade Finance
Bank Operation
Corporate Banking
Retail Banking
Financial Consultant