I have been asked by
potential finance students some questions about finance such as what finance is
and the difference between finance and accounting.
Accounting: Accountant’s (sometimes called: Controller)
primary function is to develop and provide data measuring the performance of
the firm, assessing its financial position, and paying taxes. The accountant is
responsible for preparing financial statements such as the income statement,
balance sheets, and cash flows. It is normally passive work, in the sense that,
the work has a very independent nature to it such as preparing forms and
financial statements. It is a good job for people who want to work
independently and are very organized (this is only a very brief description, if
you are interested in accounting, consult your accounting instructor for more
information).
Finance: The
financial manager or consultant places primary emphasis on decision making. It
uses the financial statements prepared by accountants to make decisions about
the firm’s financial condition and to advise others about possible losses and
profits. In some cases, finance is more a type of leadership position. A
financial manager has to deal not only with finance, but also with economics,
accounting, statistics, math, and management. For example, people working with
stocks and bonds have to understand and analyze how the underlying companies
are performing. How a given company is going to perform during recession? Should they sell or buy stocks or bonds. How a
decrease in the interest rate in England may affect the projects a
company has in that country. Finance also deals a lot with risk. Derivative
securities (options, futures, swaps, etc) are used to hedge against possible
increase in risk. Risk managers are in great demand everywhere. Most finance
majors find jobs in banks and other financial institutions, government, real
estate, consultant companies, insurance, investment companies, stock market exchanges,
fundraising, and any firm that needs someone to make financial decisions.
Description of
Finance
Students will find the major in Finance particularly well-suited for careers
in commercial and investment banking, real estate, corporate control and
treasury functions, and insurance organizations. In addition, finance is
important for generalists seeking careers in organization planning, management
consulting, general line management, and small business management. Students
seeking careers in the industries of health care, public and nonprofit
management will also benefit from a strong knowledge of finance
.
Analytical finance such as risk management, investment, and derivative
securities provide a more rigorous understanding of financial modeling, the
theory and tools that underlie modern financial practice (derivative finance is
sometimes called Financial Engineering.). International finance provides the
quantitative and analytical foundation for a career in financial analysis, with
an emphasis on the international aspects and economic foundations of financial
theory and practice. A thorough understanding of the theory of financial
markets is combined with institutional detail, hands-on experience with
financial analysis, and familiarity with financial applications.
What courses to take depends a lot on your own background,
interests, experience, strengths, and weaknesses. Having taken the finance core
will leave you with a solid understanding of the key building blocks of
real-world finance. The other core courses are crucial elements of this
foundation. Firm valuation, corporate finance, investment banking, and most
sell-side jobs require a real knowledge of GAAP accounting. Asset pricing,
portfolio allocation, and risk management are impossible without a real
knowledge of economics and basic statistics. Furthermore, your in depth exposure
to international finance give you a comparative advantage (maybe even an
absolute advantage) in understanding today's trends, tomorrow's changes, and --
in particular -- the impact of exchange rates -- that is, the
"international" in international finance. Going beyond the core,
applications and the more practical and more specialized courses give you
exposure to real-world experiences and a breadth of experiences. Business
courses are particularly relevant for integrating your finance knowledge into
the decisions of the firm -- finance is a crucial business input and firms are
a key financial environment. Everything is tied together.
I obtained the following information from the Internet
Banking Investment, Commercial, and Insurance and Real
Estate
Main Activities:
Valuation and company/segment analysis
for mergers, spin-offs, acquisitions, LBO's, and so forth.
Issuance and placement of securities such
as loans, bonds, and equity including corporate valuation, due diligence,
credit analysis, security design, and security valuation.
Risk management including security
sales and structuring, client advising, derivatives valuation, exposure
determination (say to foreign exchange fluctuations), VAR, and portfolio
allocation.
Research/Strategy/Analysis of sectors,
macro-trends, regions, or firms in support of the above activities.
Consulting (Strategic/Valuation)
Main Financial Activities:
Project, business-line, market, and/or
financial advice which all center around valuation exercises designed to help
the client make better decisions.
Management Consulting (and General Management)
Main Financial Activities:
Internal financing decisions involving
the allocation of capital as above, but also decisions on the capital structure
and the raising of additional capital, as well as in the overall allocation of
risk.
Money Management -- "buy side", because you
buy securities
Main Financial Activities:
Security valuation, risk/return
measurement, and portfolio allocation.
Risk management in support of the
above.
Research/Strategy/Analysis in support
of the above.
Sales and Trading -- "sell side" because you
sell securities
Main Financial Activities:
Same as above. "Trading"
typically is for the firm's own account and in support of their role of making
a market in that security. "Sales" is what it sounds like, except
that the product is often structured in response to the client's needs. Sales
often requires maintaining client relations.
Entrepreneur/Venture Capital
Main Financial Activities:
Valuation of firm, business line, and
market.
Fund raising.
International
Capital Markets and Banking
Cases in International Finance, International Banking,
Foreign Exchange Markets, Credit Analysis, Country Risk Analysis, National
Financial Markets and Capital Flows
Corporate Finance and
Valuation
Creating and Managing Value, Financial Strategies, Mergers
and Acquisitions, Topics in Financial Engineering, Financial Innovation and
Structured Finance, Managerial Accounting, Options and Derivatives, Financial
Modeling, Mergers and Acquisitions Law, Competitive Strategy, Alliance Strategy
Risk Management
Computer Simulations and Risk Assessment, Credit Analysis,
Country Risk Analysis, Options and Derivatives, Financial Modeling
Buy Side and Trading
Options and Derivatives, International Portfolio Management,
Fixed Income Securities, Hedge Fund Management, Foreign Exchange Markets
Sales
Transnational Negotiations, Financial Product Marketing,
Options and Derivatives, Fixed Income Securities, Foreign Exchange Markets,
Topics in Financial Engineering
