What is Finance?
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 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.
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:
Additional Finance Resources
To continue developing and preparing for a career in the field, these additional CFI materials will be helpful:
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 answersfor you to explore further:
FAQs
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.
What is the best definition of finance? ›
Finance, of financing, is the process of raising funds or capital for any kind of expenditure. It is the process of channeling various 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.
What is financing in simple terms? ›
Financing is the process of providing funds for business activities, making purchases, or investing. Financial institutions, such as banks, are in the business of providing capital to businesses, consumers, and investors to help them achieve their goals.
What does term finance mean? ›
Term Financing means any indebtedness or facility for or in respect of money borrowed or raised and which is either perpetual or having an original maturity of not less than 365 days of (i) the Issuer (and which shall, for the avoidance of doubt, include without limitation the Existing Senior Secured Notes, the ...
What is an example of finance? ›
Examples include buying and selling products (or assets), issuing stocks, initiating loans, and maintaining accounts. When a company sells shares and makes debt repayments, it is engaging in financial activities.
What is finance best defined as? ›
Finance is a term that broadly describes the study and system of money, investments, and other financial instruments. Finance can be broadly divided into three categories: public finance, corporate finance, and personal finance. Subcategories of finance include social finance and behavioral finance.
What is basically finance? ›
Finance refers to monetary resources and to the study and discipline of money, currency, assets and liabilities. As a subject of study, it is related to but distinct from economics, which is the study of the production, distribution, and consumption of goods and services.
How do you explain finance to a child? ›
How to Teach Preschoolers and Kindergartners About Money
- Use a clear jar for their savings. ...
- Set an example with your own money habits. ...
- Show them stuff costs money. ...
- Show them how opportunity cost works. ...
- Give commissions, not allowances. ...
- Avoid impulse buys. ...
- Stress the importance of giving. ...
- Teach them contentment.
What is the original meaning of finance? ›
The word finance also emerged in the 15th century but from Anglo-French finer, meaning "to end" as well as "to pay," and similarly in English referred to an end or payment. In the 18th century, the word came to refer to pecuniary resources and the management of funds.
Why is it called finance? ›
Finance is an umbrella term for all things concerning money. It includes the management, study and analysis of money and investments. Finance plays a very important role in today's society and economy. It helps in trade, economic systems and the allocation of resources.
This financing product provides a lump sum of money upfront that the borrower needs to repay over a fixed period with regular instalments. Unlike other financing options, term financing does not typically require borrowers to pledge collateral.
Can you explain financing terms to me? ›
The loan terms will include the length of time before the money has to be paid back (known as the date of maturity) and the percentage amount and kind of interest to be paid and when. There may also be collateral involved, which is something a borrower offers as a guarantee that they will pay the money back.
What is the real term in finance? ›
“In real terms” means the change in a financial number after correcting for the effect of inflation.
What is finance in your own words? ›
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.
What is the difference between money and finance? ›
You earn money (the paint) through your job. Finance (the brush) guides you on how much to save, invest, and spend to fulfill your dreams, be it buying a house (the masterpiece) or retiring comfortably (the ultimate artistic expression).
What is finance in everyday life? ›
Personal finance is a term used to cover the management of your money, including saving and investing. It also entails budgeting, banking, insurance, mortgages, investments, taxes, retirement planning, and estate planning.