Understanding the 5 Main Components of Finance

Finance is a broad term encompassing various concepts and areas of financial activity. This includes all areas of banking, including corporate finance, deposit Finance, Commercial Banking, Mortgage Banking, Loan Accounting and Lending, Private Placement, Stock Market, Annuities, EFT, Structured Settlement, and Insurance. Finance can also encompass other special finance subjects like estate planning, charitable giving, trust administration, private equity, venture capital, entrepreneurship, commercial real estate, landlord and tenant, and international finance. Finance is therefore a very broad subject that encompasses a lot of subtopics.


Broadly speaking, the term “finance” can be split into two categories, one of which is the field of accounting. The other classification is that of investment banking. The field of accounting focuses on the preparation of financial statements used to calculate financial risk. It requires the calculation of expected returns from assets, liabilities, and assets and liabilities. The accounting profession further includes Risk Management, Valuation, Reporting, Organization, and Policy. These are just some of the different accounting subjects required to conduct an effective financial management.

Investing Finance is the process of creating new financial assets from existing assets and/or generating new income by buying, selling, or issuing securities for the purpose of investing in fixed assets, equities, derivatives, or mortgage-related securities. There are various methods and strategies used in the process of investing. Broadly speaking, there are two types of investng: productive and unproductive. Investing finance in productive means creating new wealth. This is done by making use of the existing resources, leveraging financial instruments, and getting minimum interest rates through rate derivative products.

There are many techniques used to create wealth. Some of these techniques include the following: using financial instruments, financial derivatives, borrowing funds, derivatives, financial investments, tax management, portfolio diversification, inflation management, asset protection, and insurance. The main objective of all the above is to create a situation that will lead to a net gain (income) from the sale, transfer, or investment of financial instruments. There are many ways in which to manage the risks associated with investments including the following: asset protection, inflation management, taxes, and insurance. All of these techniques help in reducing financial risk, or “risk” as it is often called.

Tax Management Financial Finance is an area of business accounting which deals with the issue of tax payments. Business taxation is an essential part of the day to day operation of small businesses. As such, accounting techniques which deal specifically with taxes are of great importance to all businesses.

Maintaining a positive cash flow is a crucial element of any business’s success. In order to ensure a steady, positive cash flow, management of the company’s monetary resources is a critical function of corporate finance management. The five elements of corporate finance are cash flow, financing, financial position, assets, and liabilities.