1.2 : Areas of Finance

Finance is a broad field with several key domains, including business or corporate finance, investments, and financial markets.

Corporate finance deals with the financial activities related to running a corporation. It maximizes shareholder value through long-term and short-term financial planning and various strategies. The goal is to balance risk and profitability while attempting to maximize an entity's value.

Investment finance concerns the purchase of assets and securities. Often, individuals or institutional investors buy stocks, bonds, real estate, or other investment vehicles with the goal of earning a favorable rate of return. Key activities include assessing risk, determining asset value, and deciding how to combine investments to achieve financial goals and diversify risk.

Financial markets, which include capital, money, derivatives, and foreign exchange markets, are crucial for facilitating capital raising, enabling risk transfer, and providing liquidity in the economy. Financial markets are pivotal in determining the prices of financial instruments and thereby play a critical role in resource allocation within the economy.

Each domain interacts with others, forming a comprehensive financial system that aims to support economic stability and growth.