Finance is about money investment and financial management. Investments include risk and return, stock, bond, options markets. Beta stock usually use in short term investment and tells us the market movement and individual stock or portfolio movement. For example, beta below 1 usually are traditional industry such as oil company and it is lower return and risk. However, beta above 1 usually are high tech company or bank corporations and it is high risk and return and it all relate to the economic situation. Bond market usually issued by government or corporations and the interest rate is higher than the bank saving and low risk. It is for long term investment.
Financial management has two functions--business investment decisions and financing decisions.
Investment activity is capital budgeting which is to evaluate and analyze the investment project will make most return in a period of time. For instance, the method include NPV, payback period.
Financing decisions are about to determine which project for long term can finance the investment with equity or debt, whether or when issue dividends. For short term is to see how to manage cash and inventory.
Finance plan can help individual, company and government to manage money and investment.
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