Finance
The discipline of finance covers three key areas:
- capital markets and financial institutions
- investments and financial planning
- corporate finance.
Capital markets and financial institutions
Capital markets include the stock market, the debt markets and other asset markets. Financial institutions include banks, investment banks, brokers and financiers. In this area of finance the main focus is on the institutions that dominate the finance industry and the financial instruments they deal in. Activities are based around complex deals and transactions and the professionals working on them must use their understanding of finance and banking theory, legal and tax knowledge, awareness of client needs and their network of contacts in order to execute them successfully. Trading activities also feature in this area of finance and include foreign exchange, pricing money and bond market instruments, and share trading.
Investments and financial planning
The focus of this area is the pricing of securities (such as stocks and bonds) and the process of combining securities into portfolios. Employers include stockbrokers, banks, consultants, accounting firms and financial planners. Investments professionals advise private and institutional clients about buying or selling particular securities. They also analyse the performance and prospects of particular companies and assess the attractiveness of the securities they have issued. Derivative securities such as options, futures and swaps, may be used for both hedging and speculative purposes. At the retail level, financial planners advise individuals on retirement planning and superannuation.
Corporate finance
Corporate finance is concerned with the acquisition of funds and the efficient management of a company’s financial resources. This area has become and increasingly important contributor to business profitability and success.
Capital raising is a key aspect of corporate finance. The company must evaluate its options: should it borrow or raise money from its shareholders? How much? When? Another aspect of corporate finance is the best use of the company’s money: does it need more equipment? More inventory? Less cash on hand? Should merge with another company or take it over outright?