What are the Types of Finance?

There are three main types of finance:

Personal
Corporate (Business)
Public (Government)

1. Personal Finance

From a personal perspective, finance is the management of one’s income, expenses, investments, and obligations. Individuals often work with a personal banker, investment advisor, accountant, mortgage broker, and other professionals to manage their financial situation.

Below are examples of the types of items people deal with on a personal financial level.

Examples:

Bank accounts
Credit cards
Mortgages
Lines of credit
Employment income
Personal spending and expenses
Taxes
Savings
Investments (stocks, bonds, real estate, etc.)

2. Corporate Finance (Business)

From a business perspective, corporate finance is the management of a company’s funding, its sources of revenue, use of capital, and the management of its profit and loss (P&L) statement. The professionals at a business who are responsible for managing this area include accountants, financial analysts, managers, and executives, such as the Chief Financial Officer (CFO).

Examples:

Debt
Equity
Cost of Capital
Capital Structure
Return on Investment (ROI)
Assets
Liabilities
Balance Sheet
Revenues
Expenses
Profit
Income Statement
Cash Flow
Dividends
Cash Flow Statement

3. Public Finance (Government)

From a government perspective, finance includes the management of a country’s national budget, the treasury department, the central bank, and other government agencies. It focuses on collecting tax revenue and spending that money on national services and programs such as roads, hospitals, and social security.

Examples:

Income tax
Sales tax
Property tax
Inflation
Infrastructure spending (roads, hospitals, etc.)
Social security and insurance
Supply of money
International trade
Employment
Gross national product (GNP)
National debt
National budget

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 of Finance Activities

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
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

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

Excel Modeling Skills

Across the entire industry, one of the most important and highly sought-after skill sets is financial modeling and the ability to create an Excel model that evaluates a certain situation. The screenshot below shows an example from one of CFI’s Excel modeling courses.

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 answers for you to explore further:

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