What is Finance and Its Features?

What is Finance?

Finance is a crucial part of our lives without which it is almost impossible to manage our lifestyle and sustain the modern world. Let us take a look at the ways in which it benefits us in real life:

1. Helps in maintaining a budget to finance most activities in cost-effective manner.
2. Funds various projects and activities to ensure development and improvement in the system.
3. Improves the purchasing power of people while saving money for crucial times.
4. Helps in compounding the money without getting into the vicious circle of earning and saving money for long term. 
5. Enables people to gain resources and assets for their future. 

Features of Finance

The following are the features of finance:

1. Savings: It is one of the most fundamental objectives of finance. Through the basic knowledge of finance such as budgeting, you can save money. These savings can be further invested or used for different expenditures. 
2. Working capital: Through financial management, businesses can identify the amount of working capital they have. Working capital is the capital used for day-to-day business operations. 
3. Profits: Knowledge of finance helps businesses in earning and retaining profits. They can make financial decisions that can ensure less investment with positive ROI.
4. Investments: In the 21st century, the concept of investment has become extremely important. Most of us are trying to make money out of money. This is possible through investment which ensures that money is put into assets and activities that will make them profit over a period of time. Fixed Deposits, real estate, mutual funds and SIPs, share markets, stock bonds, gold are some of the forms of investments.

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Finance Applications In Your Daily Life

In daily lives, we use personal finance to make financial decisions that will benefit on an individual level. It is the individual level of financial planning and management. Through personal finance, one can manage, save and grow money for various purposes. It can be used for short term and long term financial goals. 

1. Short term goals: These are the financial goals that you have to fulfil in less than one year. These may include paying utility bills, credit card bills, school and college fees, grocery shopping etc.
2. Long term goals: These are the financial goals for health and financial emergencies, education, marriage and retirement funds. These are meant for the future. 

One of the important financial applications is budgeting. To efficiently manage personal finances, one may use different techniques such as 40-20-40 and 50-30-20 budget rule.

Where do we use finance? - Other real-world finance applications

There are three main areas of finance applications including:

1. For individuals: Personal finance is the area of finance that helps in financial management for individuals. These include budgeting, investment decisions, tax saving and building financial corpus.
2. For public: Public finance covers this area where government strategies, manages and applies monetary policy for the citizens of the country. Inflation rate, income tax, GST, bank rates, etc. are some examples of public finance.
3. For business: This area includes business finance. All financial decisions that impact and enhance the finances of an organisation form a part of corporate finance. Most organisations have a dedicated finance department and a finance manager who is responsible for looking after the financial matters of the company. 

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Who Should enrol in a Finance Course?

• Those who want to learn these life skills should enrol in finance course so that they can learn the skills that are practically useful in life.
• If you want to compound your money in the most efficient manners, enrolling in a finance course is extremely beneficial.
• With finance courses, you will gain the knowledge of finance so that you can make investments that will help you generate money.
• Without the proper knowledge,  our lives will become very fundamental with the barter system. 

Key Terminologies Used in Topics of Finance

1. Accounts Payable: It is the short or long-term monetary obligations that a business has to its creditors, lenders, and suppliers.
2. Accounts Receivable: It is the monetary obligation that others have towards a business.
3. Accounting cycle: It is a sequential process of recording, classifying, and summarising accounting information in an organized manner. It begins when financial transaction takes place and ends with the record of a transaction in a financial statement.
4. Asset: Tangible or Intangible resources that have value for a business that owns it. Cash, inventory, property or any other resource with the capability of liquidity is an asset.
5. Balance sheet: It is a statement that is used for fundamental analysis for evaluating the financial health of the business.  
6. Cash flow statement: It is a financial statement that reports on variations and movement of cash and equivalent in a specific time period.
7. Debentures: These are fixed-income investments issued by the companies and are traded on capital market to help them earn interest on their money.
8. Equity: It is the portion of money that the company owes to its shareholder. This share of money has to be returned to shareholders under specific conditions.
9. Financial statements: These documents record financial activities and business-related information in a structured manner. Income statements, Balance sheets, statements of equity and cash flow statements are types of financial statements. 
10. Repo Rate: It refers to repurchasing option or an interest rate at which banks borrow money from central bank. The RBI is the authorized body for deciding this repo rate for Indian banks.
11. Trial Balance: Accounting instrument that establishes a summary of financial status and operations that are carried out in a company during a specific period. Trial balance indicates the sum of credits and debits of different accounts and their corresponding balance. 
12. Working capital: Amount of funds required by the company for meeting short term financial requirements for day-to-day operations. There are several types of working capital that are used in a business.

Check out the common finance terms for every newbie

Jobs in Finance

The financial services industry as a whole is very broad and has numerous job opportunities. Each finance job requires different skills, knowledge, and interest. Those who have interest in this field can opt for the following finance jobs :

1. Commercial banking
2. Personal banking (or private banking)
3. Investment banking
4. Wealth management
5. Corporate finance
6. Mortgages / lending
7. Accounting
8. Financial management
9. Treasury
10. Audit
11. Equity research
12. Insurance

Popular Career Prospects in Finance

Let us now take a look at some of the most popular financial job profiles:

 Career Opportunities for Accounting Professionals

Accountant	Accounts Assistant
Senior Accountant	Senior Accountant - Commercial Finance & Accounts
Head - Accounts & Finance	Sr. Accounts - QuickBooks
Accounts Executive	Assistant Manager-Accounts Audit
Chartered Accountant	VP Portfolio Accounting

Career Opportunities for Bankers

Finance Job Salary

As per the data from AmbitionBox, different financial job profiles earn as follows on average:

How to Build your Career in Finance?

To start a career in finance, an aspirant can take the following steps:

1. Clear all the fundamentals of accounting and financial management concepts
2. Choose the desired field such as banking, financial agencies, corporates, government, NGOs, etc.
3. Get a degree in finance or related undergraduate/postgraduate programs
4. Qualify in profile-relevant finance exams such as CA, CS, CFA, JAIIB, etc.
5. Go for financial boot camps 
6. Gain knowledge of financial markets 
7. Take up popular finance certification courses (CFA, CPA, FRM, etc.)
8. Go for certified formal training in finance (Investment Management Certificate IMC) 
9. Gain work experience through internships and jobs

Who Can Start a Career in Finance?

A degree in finance or management is a prerequisite for most jobs in the financial industry thus students with a finance degree or certificate can easily start a career in finance. Also, since finance is a very broad industry with different roles, most of the professionals gain new skills to shift from one domain to another. 

Must-have Skills for Finance Professionals

As there are various career options for finance professionals, the skills for each job profile differs. Here, we will discuss common and the most important technical and soft skills for finance professionals:

Technical Skills

1. Accounting
2. Accounting software and databases
3. Advanced computer skills and MS Office
4. Bookkeeping
5. Financial practices, standards, laws and regulations
6. Knowledge of FX, MM, OTC Derivatives products like Commodity swaps, FX Options, Swaps, NDFs, IRS, Equity and Bonds
7. Risk Management
8. Financial modelling
9. Financial markets

Soft Skills

1. Leadership
2. Problem-solving
3. Communication
4. Detailed-oriented and analytical skills
5. Interpersonal skills
6. Mathematical proficiency
7. Organisation

Choosing the Relevant Finance Certification Courses

Those who want to build a career in finance can opt for certification that is relevant for their profile. To choose the most appropriate course, you can do the following:

1. Identify the finance domain/sector that you want to work for.
2. Check out the popular certification courses available for that profile.
3. Check the eligibility criteria and other course details.
4. Go through user reviews and career benefits of that course.
5. Apply for the certification course, qualify in the related exam and get certified.

Popular Finance Certifications and Courses

Certifications

Following are the popular finance certifications:

1. Chartered Financial Analyst (CFA) certification

1. For professionals looking to start a career in asset management and equity research
2. Time for completion: 3-5 years

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2. Certified Public Accountant (CPA) certification

1. For professionals looking to start a career in accounting
2. Time for completion: 2.5-5 years

Learn more about CPA

3. Chartered Alternative Investment Analyst (CAIA)

1. For professionals looking to start a career in asset management and hedge fund industries
2. Time for completion: 1-2 years

4. Certified Financial Planner (CFP) designation

1. For professionals looking to start a career in investment or wealth management
2. Time for completion: 4 years

5. Financial Risk Manager (FRM) certification

1. For professionals looking to start a career in risk management
2. Time for completion: Less than one year

6. Financial Modeling & Valuation Analyst (FMVA) certification

1. For professionals looking to start a career in corporate finance
2. Time for completion: Less than one year

Top Courses in Finance

Following are some of the best courses in finance:

1. Essentials of Corporate Finance Specialization
2. Corporate Finance Essentials
3. Financial Accounting
4. Risk Management in the Global Economy 
5. Financial Analysis and Financial Modeling using MS Excel

Most Important Topics to Learn in Finance

Here is the list of the most important topics to learn in Finance:

Conclusion

As you can see, the career scope of finance is vast and always lucrative. Financial literacy is not just essential for organisations and the society, but also for personal knowledge.