Financial Accounting – The Basic Elements


Financial Accounting – The Basic Elements

Financial finance is a broad term encompassing various things about the management, development, and measurement of financial assets and liabilities. It can also be called the science of money and banking. The word was first used in the eighteenth century, as a borrowing term from the Greek word logos, which meant logos or signs. A more common usage in financial circles today is as the term to designate financial planning. Financial science deals with the methods, theories, and tools for managing and analyzing financial resources.

There are many main types of financial services. Some of these main types include savings and investment, lending, commercial banks, central banks, securities markets, insurance companies, and public banks. All of these main types of financial services have differences, advantages, and uses that are distinct to their respective businesses. All of these have been made possible through the advancements of banking technology and the development of financial services over time.

One of the three main categories of financial services is interest income. Interest income includes interest earned on savings, investment, and loans. This category represents the largest portion of all financial activity, accounting for over two-thirds of all banking revenue. In order for an individual to benefit from this aspect of banking, he or she would need to have some form of a savings account, and be able to regularly make deposits into it.

Another of the three main types of financial services is investing. Investing refers to the buying and selling of financial goods or services on behalf of individuals and companies. Many of the activities in the financial services sector deal with equities, derivatives, the commodity market, and securities like bonds, stocks, and mutual funds. In addition, there are also a number of activities in the financial services sector that deal primarily with property financing. Companies that perform these types of activities are known as investment banking, financial services brokers, investment bankers, and investment management companies.

The third main category of financial activities is corporate finance. Corporate finance refers to those aspects of the financial activities of corporations that do not relate to their products and services, but rather to their ownership structure, capital structure, management, ownership structure, ownership goals and objectives, government aid and grants, long-term plans, acquisitions, divestiture, ownership structure changes, reinvestment, management restrictions, ownership goals and objectives of public companies, and ownership structure changes related to acquisitions. All the above categories are necessary in the overall management of a company’s financial affairs.

The fourth aspect of financial analysis that is important to understand is interest rate management. Interest rate management deals with controlling interest rate variance between long-term and short-term debt obligations. This aspect of financial analysis considers the identification of appropriate long-term interest rates that minimize the potential for negative amortization, as well as correcting for varying risk aversion. It is essential to maintain a consistent interest rate through all the processes of a business.