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What is Finance? Finance Definition

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Finance is defined as the management of money and includes activities such as investing, borrowing, lending, budgeting, saving, and forecasting. There are three main types of finance: (1) personal, (2) corporate, and (3) public/government. This guide will unpack the question: what is finance?



Examples

The easiest way to define finance is by providing examples of the activities it includes. There are many different career paths and jobs that perform a wide range of finance activities. Below is a list of the most common examples:


Investing personal money in stocks, bonds, or guaranteed investment certificates (GICs)

Borrowing money from institutional investors by issuing bonds on behalf of a public company

Lending money to people by providing them a mortgage to buy a house with

Using Excel spreadsheets to build a budget and financial model for a corporation

Saving personal money in a high-interest savings account

Developing a forecast for government spending and revenue collection


Finance Topics

There is a wide range of topics that people in the financial industry are concerned with. Below is a list of some of the most common topics you should expect to encounter in the industry.


Interest rates and spreads

Yield (coupon payments, dividends)

Financial statements (balance sheet, income statement, cash flow statement)

Cash flow (free cash flow, other types of cash flow)

Profit (net income)

Cost of capital (WACC)

Rates of return (IRR, ROI, ROA)

Dividends and return of capital

Shareholders

Creating value

Risk and return

Behavioral finance


Sources of Financial Information

To learn more about the industry, here are some of the most popular and helpful resources:


Google Finance (market data, stock prices, news, etc.)

The SEC website (company filings)

Bloomberg News (company and industry news)


Finance Careers

A definition of finance would not be complete without exploring the career options associated with the industry. Below are some of the most popular career paths:


Commercial banking

Personal banking (or private banking)

Investment banking

Wealth management

Corporate finance

Mortgages / lending

Accounting

Financial planning

Treasury

Audit

Equity research

Insurance


Additional Finance Resources

To continue developing and preparing for a career in the field, these additional CFI materials will be helpful:


Free Corporate Finance Fundamentals Course

Types of Financial Models

Interactive Career Map

Compensation and salary guides

The Analyst Trifecta® Guide


More Questions and Answers

CFI’s mission is to help anyone become a world-class financial analyst and has a wide range of resources to help you along the way. In order to become a great financial analyst, below are some additional questions and answers for you to explore further:


What are the Types of Financial Models?

What is Sensitivity Analysis?

What is Bookkeeping?

What are the Most Common Valuation Methods?

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