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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