In other words, finance comprises a broad spectrum of issues that address income maximization, and wealth accumulation and preservation. The field of finance can be broken down into two general areas. The first area is corporation finance which deals primarily with capital budgeting and capital structure decisions by corporations. Capital budgeting is the evaluation of alternative investment choices to determine which yields the highest return. Obviously, capital budgeting focuses on measuring the size, timing and degree of certainty for future cash flows of the investment alternatives.
Capital structure represents how firms or projects are financed.
Besides analyzing the mix of debt and equity used to finance a firm's operations, the study of capital structure addresses issues such as how and where to raise debt, what is the cost of debt relative to the cost of using the firm's own cash or issuing new stock, and what problems might be caused by issuing too much debt or equity. These are all issues important to corporate controllers, treasurers, accounting managers, cash managers, credit managers, tax managers and project analysts. The second main area of finance is investments . This is a broad area as well but it focuses attention on valuation and management of individual financial assets such as stocks, bonds, options and other derivative securities, and portfolios of those assets. Valuation requires knowledge of the way markets work, the economy and the different properties of alternative financial assets.