What is Finance?

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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?

Video Explanation of Finance

Watch this short video to quickly understand the main concepts covered in this guide. It’ll explain the definition of finance, provide examples of finance, and cover some of the common topics on 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 with 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
  • Behavioural 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

finance

economics

finance, the process of raising funds or capital for any kind of expenditure. Consumers, business firms, and governments often do not have the funds available to make expenditures, pay their debts, or complete other transactions and must borrow or sell equity to obtain the money they need to conduct their operations. Savers and investors, on the other hand, accumulate funds that could earn interest or dividends if put to productive use. These savings may accumulate in the form of savings deposits, savings and loan shares, or pension and insurance claims; when loaned out at interest or invested in equity shares, they provide a source of investment funds. Finance is the process of channelling these funds in the form of credit, loans, or invested capital to those economic entities that most need them or can put them to the most productive use. The institutions that channel funds from savers to users are called financial intermediaries. They include commercial banks, savings banks, savings and loan associations, and such nonbank institutions as credit unions, insurance companies, pension funds, investment companies, and finance companies.

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