This video serves as an overview of what finance is generally used for, along with the history of finance.
- Before we get going with financial predictions, I think it's a good idea to briefly go over what finance is and what it's used for. You've surely seen the word finance before, maybe in your social media feed telling you how to increase your savings. Or maybe you see ads for getting your finances in order for a big purchase. Maybe you're in the market for a home or another car. Maybe you just remember taking a finance class in college. So what is this thing that you see popping up all over the place? What exactly is finance? Generally speaking, finance is the study of how to manage money.
There are a couple of different branches of finance including personal and business. Business is also known as corporate finance. Finance is heavily dependent on the collection and analysis of cash flows, assets, and liabilities. Assets are the things you own and liabilities are the things you owe. Even on a personal level, individuals and households that manage their own finances most effectively tend to be highly organized and precise in their record keeping.
Finance is necessary for several reasons. For example, if you're starting a business, you'll need to finance the purchase of assets, pay wages, and cover operational costs. If you're trying to grow your business, you'll need more efficient technology to cut average cost per unit. That way you can keep up with your competitors. You might want to invest a bit more in your business to develop new market products. R&D requires significant funding. To make all this work, you have to know how much money is available to spend on your business needs.
You need to be able to predict how much revenue will be generated. You have to be able to forecast future costs. To be able to predict the future, you have to know your past. This is where accounting can come in really handy. Accounting has strict principles that deliver accurate information about the past. Finance can then take that information and use it to help run a company, make long-term decisions, and ensure that things will keep running smoothly in the future.
- The four different types of financial statements
- Moving averages
- Seasonally adjusted trends
- Pro forma statements
- Sales forecasting
- Forecasting expenses
- Projecting cash flow
- Regression analysis