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What is Finance?
Finance is defined as the management of money and includes activities like 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?
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
There is a wide range of topics 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 statements, cash flow statement)
- Cash flow (free cash flow, other types of cash flow)
- Profit (net income)
- Cost of capital
- Rates of return
- Dividends and return of capital
- Creating value
- Risk and return
- Behavioral finance
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