Most people believe that finance is like a puzzle not everyone can solve or understand this "but" that's not true we create an image in mind that we can't have the capacity to understand the subject like finance we think that only brilliant people can understand this.
Almost every common person on earth who is not too close to finance understood buying a cellphone on EMI is called finance 'no not all finance isn't about this' yes yes it's a part of finance.
Finance is defined as the management of money and includes activities like investing, borrowing, lending, budgeting, and saving
The major types of finance
Personal
Corporate
Public/Government
Examples of finance
Investment- a person who is investing money in shares or bonds and guaranteed investment certificates (GICs) is known as finance' a person can invest their money in their own business to earn more money in the future. Most of the corporate companies do this when it has a surplus budget it invest in a startup or in bonds shares to multiply company's wealth investment is a huge subject 'because of all these include money and risk people avoid these opportunities of investing and grow in future surprisingly maximum numbers of people only kept fear in the mind of losing money that's why investment is still not loving subject.
Corporate finance: a company that intends to enhance or establish a business in multiple countries but don't have enough capital so it issues coupon bonds for the public anyone can buy these coupon bonds 'coupon bonds are issued at discounted price investor buy these bonds and sell them on maturity date at original price' and hence company raise funds from the public.
Lending money: individuals and banks do this, this is a simple method of earning money you give money to the needy for short term you giving a loan to a person and charging sum interest on it like 4% to 6% it can go to 12% as your returns "whom you lend money " for small enterprises, student loan you lend money to the stuck person who is in sum issues like a medical or business loss. By lending money to others you earn interest income every situation has its legal percentage you cannot charge above that.
Famous financial guys in the world
Benjamin Graham: Benjamin Graham was a British-born American economist, professor, and investor. The famous book, of his "father of value investing", "the intelligent investor" these two books are highly influential you must read this book.
Warren buffet: warren buffet is an American business magnate, investor, and philanthropist and now he is currently chairman and CEO of Berkshire Hathaway, which owns more than 60 companies.
Dave Ramsey: Dave Ramsey is a personal finance personality, he owns a real estate portfolio worth $150 million by itself Ramsey started a personal finance counseling company called the lamp group.
What is financing on a credit card
Surprisingly you saw something unique & you wish to buy but you are out of cash hence people keep a credit card with themselves for buying things, every credit card has limited how much can customer spend sum card give you 50k limit or sum gives you 100k limit so you can spend only that much money and credit card give you finance in form of credit and they takes interest from you on every transaction and if you fail to pay with interest till maturity date you have to give more than double % so uses a credit card wisely most of the credit card company pretends they don't charge high interest but they are charging high interest from their existing customers. Credit card companies earn billions annually but they provide service too, that's how all finance of credit cards works
Don't let this happen that most of the salary is going to pay credit card bills, you need to understand how to use it for enhancing your credit score if you make a good credit history you'll get a low percent interest rate of loans from any bank.
How do new startups get finance?
There are two ways startup can raise capital from the bank as a loan or an investor if a startup goes to the bank and ask for financial aid bank put high interest on it and this cannot suit the company's financial structure or it can get finance from an angel investor, Angel investor are typically individuals who invest in growing companies and they seek passion and excitement of company's working professionals 'Angel investors being famous by investing in uber/WhatsApp/Facebook and tripled their income' basically Angel investor hold company's equity in exchange.
Venture capital- venture capital is a little hard to get because the venture capital is invested in huge money and always focus on high growth companies they focus in various option like 2 to 5 sector they are known as a strict forward investor.
Capital market in simple word
A capital market is a place where buyers and sellers come together for buying and selling financial securities like bonds, stocks, the buying and selling is undertaken by participants such as individuals and institutions.
There are four types of investment markets
- The money market.
- The bond market.
- The ownership market.
- The derivative Bond.
.Names of capital market instruments
- Bonds.
- Derivative.
- Preferred stock.
- Common stock.
Common shareholders have voting rights but common shareholders don't get dividends, if the company goes into bankruptcy so you are last to fat money back
Preferred shareholders don't have voting rights in the company but they eligible to get dividends
The derivative segment comes under future, options, currency trading, commodity trading, etc
A derivative is derived value out of something.
Types of assets
- Short term assets
- Financial investments
- Fixed assets
- Intangible assets
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