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Finance

Learn core ideas in financial statements, cash flows, valuation, business finance, saving, investing and risk.

For: Learners at different starting points, from curious beginners to people revisiting finance concepts.

After this page you can: Choose a learning path and explain how a basic finance concept connects to a financial decision.

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Part of: Business

About Finance

Finance studies how households, businesses and institutions make decisions about money, assets, liabilities and risk. Its core questions include how to compare cash flows across time, how to value assets, and how to understand financial choices and their risks.

A useful study route moves from basic financial statements and cash flows to valuation, business decisions and investment risk. Start with the area that matches your goal, then practice by interpreting a statement, comparing cash flows or explaining a risk concept. The sections below offer free resources for those routes.

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route

I want to understand investing and risk

Use an introductory resource to learn about investment products, risk, return and diversification.

Start with: Introduction to Investing

Learn the foundations

1.Read financial statementsPractice identifying what a balance sheet, income statement and cash flow statement can tell you.

Practice identifying what a balance sheet, income statement and cash flow statement can tell you.

Cash flow statement

A statement showing the exchange of money between a company and the outside world over a period of time.

Try it

A company has assets of 100 units and liabilities of 60 units. Using the accounting equation, what is its shareholders’ equity?

Shareholders’ equity is 40 units because assets equal liabilities plus shareholders’ equity.

2.Compare cash flows across timeUse a present-value exercise to compare a cash flow received later with one received today.

Use a present-value exercise to compare a cash flow received later with one received today.

Present value

The value today assigned to a cash flow received in the future.

Net present value

A valuation measure that compares the present value of cash flows with an investment’s cost.

Try it

A project costs 80 units today and has a present value of expected cash flows of 95 units. What is its net present value?

Its net present value is 15 units: 95 minus 80.

3.Understand business finance decisionsPractice naming a financial question to ask before a business commits resources to a project.

Practice naming a financial question to ask before a business commits resources to a project.

Capital budgeting

The process of evaluating business investments and projects.

Cash flow

Money moving into or out of a person, organization or project over time.

Try it

Name one question a business could ask when evaluating a proposed project.

It could ask whether the present value of expected project cash flows exceeds the project’s cost.

4.Study saving, investing and riskCompare saving and investing concepts, then practice explaining the role of diversification.

Compare saving and investing concepts, then practice explaining the role of diversification.

Compound interest

Interest paid on principal and on accumulated interest.

Diversification

Spreading investments among different investments to reduce risk.

Try it

In one sentence, explain how diversification may affect investment risk.

Spreading investments among different assets can reduce risk, though it does not remove all investment risk.

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Books

Glossary

Every free Finance course and book on RedLectern

Free Finance online courses

  1. Advanced Urban Public Finance: Collective Action and Provisions of Local Public GoodsMIT 11.902 · Browse materials
  2. Analytics of FinanceMIT 15.450 · Browse materials
  3. Blockchain and the Design of Financial SystemsMIT 14.129 · Browse materials · Video
  4. Business Analysis Using Financial StatementsMIT 15.535 · Browse materials
  5. Consumer Finance: Markets, Product Design, and FinTechMIT 15.483 · Browse materials
  6. Early Stage CapitalMIT 15.391 · Browse materials
  7. Economic History of Financial CrisesMIT 14.71 · Browse materials
  8. Entrepreneurship Without BordersMIT 15.395 · Browse materials
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  1. Finance and SocietyMIT STS.002 · Browse materials
  2. Finance Theory IMIT 15.401 · Browse materials · Video
  3. Finance Theory IIMIT 15.402 · Browse materials
  4. Financial AccountingMIT 15.515 · Browse materials
  5. Financial and Managerial AccountingMIT 15.514 · Browse materials
  6. Financial CrisesMIT 14.09 · Browse materials
  7. FinTech: Shaping the Financial WorldMIT 15.S08 · Browse materials · Video
  8. Introduction to Financial and Managerial AccountingMIT 15.501 · Browse materials
  9. InvestmentsMIT 15.433 · Browse materials
  10. Practice of Finance: Advanced Corporate Risk ManagementMIT 15.997 · Browse materials
  11. Public Finance and Public PolicyMIT 14.41 · Browse materials · Video
  12. Real Estate Capital MarketsMIT 11.432J · Browse materials
  13. The Law of Corporate Finance and Financial MarketsMIT 15.617 · Browse materials
  14. Topics in Mathematics with Applications in FinanceMIT 18.S096 · Browse materials · Video
  15. Urban Public Finance in Developing CountriesMIT 11.487 · Browse materials
  16. Adaptive Markets: Financial Market Dynamics and Human BehaviorMIT 15.481X, 15.481 · Open on OCW · Video
  17. Advanced Topics in Real Estate FinanceMIT 11.434J · Open on OCW
  18. Entrepreneurial FinanceMIT 15.431 · Open on OCW
  19. Financial AccountingMIT 15.511 · Open on OCW
  20. Financial ManagementMIT 15.414 · Open on OCW
  21. Healthcare Finance (15.482x)MIT RES.15-005, 15.482x, 15.482 · Open on OCW · Video
  22. Mission & Metrics: Finance Training for Federal Credit Program ProfessionalsMIT RES.15-002 · Open on OCW
  23. Real Estate Finance and InvestmentMIT 11.431J · Open on OCW
  24. Topics in Mathematics with Applications in FinanceMIT 18.642 · Open on OCW · Video
How these courses are chosen

Listed as Finance courses:

  • those whose title contains “Finance” or “financial”, or
  • those tagged “Finance” or “financial” as one of at most 2 topic tags, or as the first of 3.

Free Finance textbooks and books

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