The Divisions of Finance - Business Finance - ثاني ثانوي

" Link (digip OXXO www.len.edu.sa FIGURE 1.2 The Three Areas of Finance 1.1 The Divisions of Finance Finance as a discipline is generally divided into three areas: financial institutions, investments, and business finance, as illustrated in Figure 1.2. There is some overlap between divisions. For example: ⚫ Investment decisions and corporate financing decisions are made within the current financial environment and its institutions. ⚫ Business finance is not independent of investments, as there must be individuals who are willing to invest in and buy new securities from the company.. Financial เพร Doondl 36Business Finance 1.1a Financial Institutions Financial institutions fulfill a range of functions, including the creation of financial assets such as bank deposits, markets for trading securities (for example, the Tadawul Saudi Stock Exchange), and the regulation of these markets. Financial assets are created through investment bankers and financial intermediaries (such as commercial banks, savings and loan associations, and insurance companies), when savings are transferred to those in need of funds. These financial assets can then often be traded as securities among investors, large and small, in the secondary markets, such as stock exchanges. 1.1b Investments Investment is the process of putting money or resources into a venture in the hope of receiving a greater reward at a later date. By investing in assets, for example, the investor will profit if the value of these assets rises. The range of assets owned by an investor is called a portfolio, and the portfolio is said to be diversified when it includes a variety of different asset types. The study of investments considers the analysis of individual assets and portfolios, as well as financial planning. The financial environment plays a role in the investment process, and a range of factors can affect an investor's decision to buy or sell specific assets.

-1-103194- How can investment help a business to grow and benefit the investor? 1.1c Business Finance The study of business finance emphasizes the role of the financial manager: • The financial manager is responsible for overseeing an organization's budgets, money going in and out of the organization, and for ensuring the necessary funds are in place for day-to-day operation. . In a large corporation, financial management is performed by staff reporting to the chief financial officer (CFO), whereas a small business must also make many of the same decisions, often with fewer resources to devote to the task. Financial managers and investors make similar decisions, although on a different scale An individual may have a thousand Saudi Riyals to invest, while a corporate treasurer may have millions to invest among a range of assets. وزارة التعليم CHAPTER An Introduction to Basic Finance 27

P ' 20 Business Finance ⚫ The financial manager may make more decisions involving physical assets (like equipment), while the individual investor is largely concerned with financial assets. ■ A range of factors in the financial and legal environments can affect decision making for both individual investors and financial managers. ■Individuals typically invest for personal benefit, while a firm's financial manager works within the framework of the business. Whatever occupation an individual works in, an understanding of the basic concepts of finance and the role of the financial manager can help to improve communication, analyze data for decision making, and integration among the various business components. Exercises Choose the correct answer. 1. The range of assets owned by an investor is called a/an; a. investment, b. account. portfolio. d. saving. 2. In a large corporation, financial staff report to the: a. chief financial officer. b. financial asset manager. c. accounting manager. d. chief management officer.