Top Finance Concepts an MBA Can Teach You


An MBA in Finance offers a variety of opportunities for students in the world of finance, including careers in private equity, investment banking and management, and corporate accounting. MBA Finance covers various topics such as financial management, financial planning, cost of capital, corporate budgeting, and portfolio management.

Learn not only how to manage money but also how to get it. The MBA Finance curriculum equips students to analyze and forecast financial reporting and economic trends, manage and maximize investment portfolios, balance risk and return, and make stocks profitable. Therefore, we can say that an MBA in Financial Management not only teaches you how to manage money but also how to make it.

What are Finance Concepts?

The Master of Business Administration in Finance is a two-year graduate degree focused on financial management concepts. Many accredited associations offer an MBA in Finance. There are many concepts related to financial management that candidates need to know, such as accounting, banking and insurance, consolidations and acquisitions, and many more.

Main Finance Concepts an MBA Teaches You

Students with this degree generally focus on studying simple business theory to specialized studies and industry experience. Here are some important research areas.

Assets

These are the economic resources of the business and include products in stock, office furniture and materials purchased for use, and trademarks or copyrights owned. These assets count towards the company's value as they may be sold in tough times.

Bonds

Bonds, generally referred to as fixed-income securities, are essentially debt investments. When you buy a bond, you lend capital to a company for a specific period at a fixed interest rate. After that, you will receive interest periodically to recoup your borrowed portion on the bond's maturity date.

Cash Flow

Cash Flow is the total movement of funds through your business each month, including income and expenditures. Companies track their overall cash flow to determine long-term solvency. One can determine a company's cash flow by approximating the cash at the beginning and end of a given period.

Compound Interest

Investing or saving is the interest earned on the amount deposited plus the interest stockpiled over time. Interest is charged on the original loan amount when you take out a loan, plus interest added to the overdue balance over time.

GDP

The term Gross Domestic Product (GD–†) is sometimes mentioned in the news. For example, sum up all the money a country develops through goods, services, and taxes from various sectors such as agriculture, manufacturing, IT services, restaurants, and small businesses.

Equity Shares

Equity shares give individuals partial ownership of a company in which they invest. The number of shares you own gives you the authority to vote on decisions that affect the company's health. The bigger the share in the company, the more voting rights.

Inflation

Inflation is a vast topic that needs an entire article, but in simple terms, inflation is defined as a decrease in the purchasing power of a currency per unit.

Financial Reports

Financial Reports are comprehensive statements of the company's transactions and expenses and are designed to give the company an overview of its financial position.

Liabilities

This includes all liabilities accumulated during starting, growing, and maintaining a business, which includes bank loans, credit card debt, and money owed to vendors and product manufacturers. Liabilities can be divided into two main types: current liabilities related to immediate liabilities.

Net Worth

Net Worth is referred to as the amount by which assets outdo liabilities. In other words, it is the value of everything you own minus all your liabilities. Net worth is a concept that can be applied to both individuals and businesses to measure their real value. In the corporate world, net worth is also called book value or equity.

Credit Score

Over time, financial institutions have recognized the need to assess an individual's financial status more accurately. Even the smallest personal loans now require a credit check before being approved. A number is assigned from 300-900, with 900 being the highest score. The higher the number, the more likely you will get loan approval.

Rebalancing

Buying and selling securities over time to maintain the desired asset allocation. For example, suppose your target allocation was 60% equities, 20% bonds, and 20% cash, and the stock market performed exceptionally well over the past year. Your allocation may have shifted to 70% equities, 10% bonds, and 20%.

Shares

Shares, commonly known as stocks or shares, give one company ownership. When you buy shares, you become a company shareholder and are entitled to receive a portion of that company's assets and profits. There are two primary categories of shares: preferred shares and common shares. You can vote at shareholder meetings and receive dividends if you own common stock, but it's the lowest totem pole in the company's ownership structure.

The Time Value of Money (TVM)

The time value of money (TVM) is one of the most important concepts in finance. It states that all else being equal, a dollar today is worth more than a dollar tomorrow. This is because a dollar today can be invested and earn interest, while a dollar tomorrow cannot.

TVM is used to make investments, loans, and other financial decisions. It is also used to value assets, such as bonds and stocks. For example, when considering whether to buy a bond, TVM states that the present value of the bond (the price you pay today) should be less than the future value of the bond (the amount you will receive when it matures).

TVM is a complex concept, but anyone interested in finance needs to understand it. MBA programs typically cover TVM in-depth, teaching students how to use it to make sound financial decisions.

Conclusion

The scope of what a student will undergo during her MBA in Finance degree varies from working as a corporate finance adviser to working as a financial manager, asset manager, expense manager, and investment banker. In the government sector as well, in addition to private property, public property and state agencies need funds to function properly, so financial analysts or managers who can understand and manage finances are greatly beneficial.

Updated on: 21-Nov-2022

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