In a market economy, the role of finance has increased significantly, from financial position enterprise depends on its position in the market, competitiveness, survival and prospects.
The role of finance in the economy is diverse, but, nevertheless, it can be reduced to three main areas:
1. Financial support for the needs of expanded production.
It is expressed in covering the costs of producers at the expense of financial resources (own, borrowed, attracted).
2. Financial regulation of economic and social processes through the redistribution of financial resources.
It is enough to allocate financial resources and the pace of development of an industry or region accelerates, or vice versa, the cessation of funding can stifle any production.
3. Financial incentives for the efficient use of all types of economic resources.
Financial incentives for the effective use of all economic resources are carried out by various methods:
through the effective investment of financial resources;
creation of incentive funds (consumption funds, social sphere funds, etc.);
the use of budgetary incentives (the provision of tax incentives is always stimulating, an example is the exemption from paying many types of taxes for rural and farm enterprises in order to ensure their growth and development);
the use of financial sanctions (fines, penalties for late payment of taxes, concealment of income and property from taxation, failure to submit tax returns, etc.).
Finance is an integral part of monetary relations, therefore their role and significance depend on the place monetary relations occupy in economic relations. However, not all monetary relations express financial relations. Finance differs from money, both in content and in the functions performed. Money is a universal equivalent, with the help of which, first of all, the labor costs of associated producers are measured, and finance is an economic instrument for the distribution and redistribution of gross domestic product (GDP) and national income, an instrument for controlling the formation and use of funds of funds. Their main purpose is to ensure, through the formation of cash income and funds, not only the needs of the state and enterprises in cash, but also control over the expenditure of financial resources.
The modern economy cannot exist without public finances. At certain stages of historical development, a number of the needs of society can only be financed by the state. These are the nuclear industry, space research, a number of new priority sectors of the economy, as well as enterprises that are necessary for everyone (post, telegraph and some others).
Finance reflects the level of development of productive forces in individual countries and the possibility of their impact on macroeconomic processes in economic life. The state of the country's economy determines the state of finances. In the conditions of constant economic growth, increase in GDP and national income, finances are characterized by their stability and stability; they stimulate further development production of the life of the citizens of the country.
The specificity of finance as an economic category is manifested in their functional purpose, i.e. economic purpose. And in these functions, the common features and those features that connect and distinguish the category "finance" with the more general category "money" are manifested.
The question of the function of finance is one of the debatable ones. Many economists believe that finance has two functions - distributive and control. Although in the literature one can find statements that, in addition to these two functions, finances also have others: production (different authors call it differently), stimulating, regulating, etc. They also distinguish the function of forming monetary funds and funds and the function of using cash funds and funds. However, the last two, although they really exist, are more reminiscent of a mechanism for implementing a distributive function than an independent mode of operation of the category of finance.
Finance functions are carried out:
at all levels of management of the economic system (Federal, territorial, local);
in all areas public life(material production, sphere of circulation, sphere of consumption);
at all levels economic system(intra-economic - finances of enterprises, intra-industry - finances of complexes, inter-sectoral and inter-territorial - the state budget and extra-budgetary funds).
distribution function lies in the fact that through finance there is a distribution and redistribution of the gross domestic product (GDP) and national income between the participants in social production, sectors of the economy, regions, and between all members of society, as well as between the spheres of material production and the socio-cultural sphere.
The form of implementation of this function is the creation of primary and secondary income.
Primary, or basic, incomes are formed by distributing the national income among the participants in the process of material production.
Secondary, or derivative, incomes are formed by distributing the national income between the production and non-production (socio-cultural) spheres, regions of the country, industries, social groups.
The presence of secondary incomes is due to the fact that primary incomes do not fully provide a sufficient financial base for the development of priority sectors of the economy, the social sphere (science, healthcare, education), as well as inter-sectoral and territorial redistribution.
Accounting and control function finance is manifested in the fact that they are a universal tool for accounting and control by society over the production, distribution, and circulation of an economic product. Financial analysis, accounting and control make it possible to identify the imbalances that develop in the distribution of funds: untimely creation and receipt of financial resources at the disposal of various business entities, uneconomical and effective use.
The object of the accounting and control function of finance are:
At the micro level - the financial performance of enterprises, organizations contained in the accounting, statistical and operational reporting (profit, profitability, revenue, capital productivity);
At the macro level - GDP.
Financial indicators allow you to see various aspects of the work of enterprises and evaluate the results economic activity. On their basis, measures are taken to eliminate the identified negative aspects.
Depending on who exercises financial control, there are:
State financial control (Accounting Chamber, Ministry of Finance, tax service etc.);
On-farm financial control, which is carried out by the financial services of enterprises, institutions, organizations;
Public financial control;
Audit financial control.
The control function, objectively inherent in finance, can be realized to a greater or lesser extent, which is largely determined by the state of financial discipline in the national economy.
Financial discipline is a mandatory procedure for all enterprises, organizations, institutions and officials to conduct a financial economy, comply with established norms and rules, and fulfill financial obligations.
The distributive and accounting and control functions of finance are not carried out spontaneously, but in accordance with legal norms. The set of norms, rules, regulations, legal acts is designed to regulate financial activity and, thereby, the reproductive process. Thus, we can talk about the third function of finance - regulatory.
In order to regulate the economy, the state uses financial and budget planning, state regulation of the securities market, government spending, taxes, state credit.
The regulatory function is manifested at all levels and in all areas of the organization of financial relations, in the hierarchy of its construction.
In the conditions of market relations, finance must fulfill stabilization function. The stabilizing function is to provide stable conditions for all economic entities and citizens in economic and social relations. Special meaning at the same time, it has a question about the stability of financial legislation, since without this it is impossible to implement an investment policy in the production sector on the part of private investors. Achievement of stabilization is considered as necessary condition for the transition of a market economy to socially oriented economic growth.
Stimulating function consists in using the distributed income either for the expansion of production, or for savings and social needs. The state, with the help of a system of financial leverage, influences the development of industries and enterprises in one direction or another.
The levers of influence are:
Prices and tariffs
Export and import duties and tariffs
reproductive function ensures a balance of labor, material and monetary resources at all stages of downtime and
expanded production. Promotes the development of production through the growth of investment.
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Finances express economic relations related to the provision of sources of financing for the state, municipal and private sectors of the economy, spheres of production, circulation and households. The functioning of finance is aimed at effective development socially oriented economy. Finance contributes to the achievement of the overall goals of economic development, which requires their optimal organization.
An efficient financial system is the foundation of a well-functioning economy.
The main function of the financial system is to transfer the financial savings of individuals and companies into capital (fixed and circulating assets), i.e., the transformation of savings into physical assets (capital) that are used by other companies to produce products and services. The financial system provides the means and conditions by which a person who has money savings can transfer those savings to another person who has productive capacity and needs finance to use or grow.
Most Russian researchers point out that the financial system is designed to solve certain problems:
ь distribution and redistribution of the gross domestic product through the implementation of a complex of commercial, financial and fiscal operations, thus affecting the pace and direction of the economic and social development of a country or region;
L ensuring interaction between government bodies management, business entities and the population in the process of formation and use of centralized and decentralized monetary funds. Perekrestova L.V., Romanenko N.M., Sazonov S.P. Finance and credit. Publisher: Academy, 2010
Kutsuri G.N. argues that the main goal of the functioning of the financial system is the socio-economic growth of the state or region, provided by the optimal ratio of revenue and expenditure parts of the budget. Smyslov D.V. International Monetary Fund: modern tendencies and our interests. M.: Finance and statistics, 2007 p.45
The main function of any system is control. With the help of the financial system, the functions of the economic category “finance” are also implemented, which determine the purposeful use of finance in social reproduction. Thus, the main function of the financial system is to manage the totality of monetary relations of any nature. Thus, the financial system is a complex financial and economic entity within a given country, which is a set of spheres and links of financial relations, management and financial institutions, as well as economic relations between them.
The role of the financial system is reduced to legal regulation financial relations, that is, with the help of the financial system, it is possible to control the effectiveness and compliance of the legal form with the economic content. Also, the role of the financial system is to influence the pace and proportions of the socio-economic development of the country with the help of financial relations. Such influence is carried out through the financial and credit mechanism in two ways: financial support (state budget); financial regulation (tax system).
Thus, we can say that no other system in the country is as important and important as the financial one.
No one and nothing so painfully feels the cardinal changes in the economy as the financial system of the state. It is she who ensures the success or failure of the entire reorganization of the economy, determines the rise or fall of the political image of an independent state.
Essence and functions of finance
Financial business originated in ancient times. Already in the documents of Indian culture of the 4th century. BC e. you can find information about tax incentives provided to merchant sailors, caravan owners, to all those who settled new lands. The emergence of finance was the result of the transition from a subsistence economy to a regular commodity-money exchange and is associated with the development of the state and its need for resources.
The term "finance" itself appeared much later. Exist different points perspective on its origin. Some authors argue that this term arose in the XIII-XV centuries. in the trading cities of Italy, others - that the concept of "finance" was introduced by the French scientist J. Bodin, who in 1577 published the work "Six Books on the Republic".
Essence of finance
The idea of finance as an economic category has changed. Initially, the concept of "finance" was considered only in relation to the formation and use of monetary funds to meet government needs. Later, this economic category was called "public finance", which currently includes state and local finance (local government finance).
With the development of large-scale commodity production, the methods, ways of mobilizing, distributing and using funds among various participants in the reproduction process were improved.
The evolution of views on the essence of finance can be represented as follows. As for the definition, finance is interpreted:
In the world economic theory(economy) as a set of cost flows associated with the distribution and use of monetary resources;
AT political economy as economic relations in the process of creating and using cash funds (most common among Russian economists).
There are narrow, broad and broad understanding of the term "finance". In a narrow sense, finance covers only budgetary processes and includes only state (public) finances.
An expanded understanding of the term means that finance covers only a part of monetary relations. In the Russian economic literature, this point of view prevailed until recently. So, for example, in the Soviet period, finance included: the state budget; finance of material production; non-production finance. Since the 90s 20th century finance began to include: the budget system (federal budget, budgets of subjects of the Federation, local budgets); state off-budget funds; state credit; insurance; finances of business entities.
In a broad sense, the term "finance" covers the movement of all cost flows, including monetary and credit, thus finance includes: public finance; credit system; finances of branches of the reproductive process; household finance; secondary financial market; international finance.
Thus, almost all monetary relations in society, everything related to the movement of money, is classified as finance, and the concept of "monetary economy of the country" is identical to the concept of "finance".
AT foreign countries, and now in Russia, any specialist associated with money is called a financier, as well as all money, including the income of citizens, is called finance.
This understanding of finance is also reflected in modern foreign dictionaries: Finance is an art, function, profession associated with currency or money.
The condition for the emergence of finance is the presence of commodity-money relations in society. In the reproduction process, the movement of funds should mediate the movement of goods (Fig. 1.1).
Rice. 1.1. Movement of goods and cash
Based on the movement of funds, financial relations arise. A distinctive feature of financial relations is their connection with the distribution and redistribution of the value of a social product between various entities, each of which claims to receive a share in the product produced in accordance with the current legal norms or business customs.
An important feature of financial relations is that the process of distribution and redistribution of the value of a social product is accompanied by the creation of various funds of funds that have a designated purpose. Cash funds created at the level of the state, local governments are called centralized, and cash funds created at the level of economic entities, households are called decentralized. The formation of cash funds is strictly regulated.
The following can be distinguished signs of finance:
Monetary nature of financial relations. Money is the material basis for the existence and functioning of finance (they always have a monetary form of expression);
The distributive nature of financial relations. The area of origin and functioning of finance is the stages of the reproduction process, at which the value of the social product is distributed according to its intended purpose and business entities, each of which must receive its share in the product produced;
Financial relations find their material embodiment in centralized and decentralized funds of funds.
As an economic category finance- these are economic relations in the course of which the formation, distribution and use of centralized and decentralized funds of funds takes place in order to fulfill the functions and tasks of the state, ensure conditions for expanded reproduction, and meet the social needs of society.
Functions of Finance
The essence of finance manifests itself primarily through distribution function. The distribution process carried out with the help of finance is complex and multifaceted. It is characterized by multi-stage, generating different types distribution - on-farm, intra-industry, inter-industry, inter-territorial. finance serve different stages distribution of the value of the social product, participating in both primary distribution and redistribution. The financial distribution method covers different levels of economic management: federal, regional (at the level of subjects of the Federation), local (at the level of local governments).
In general, the distribution function of finance allows:
Create target funds of funds at the level of the state, local governments, business entities, and the population;
Carry out distribution between the production and non-production spheres and social groups, as well as intra-economic, intra-industry, inter-industry, inter-territorial distribution.
Along with the distributive function, finance is also characterized by control function. The basis of the control function is the movement of financial resources. Based on the nature of their movement, society has the opportunity to know how the proportions in the distribution of funds are formed. The information obtained allows us to evaluate the effectiveness and expediency of the costs incurred. In order for the information to reflect the real state of affairs, it must be complete, timely and reliable.
The use of the control function of finance in practice allows for financial control, which is a function of financial authorities.
Both functions of finance are connected - they operate simultaneously: distribution cannot be controlled and control without distribution is impossible.
The role of finance in the economy
The role of finance in the economy is determined by their leading position among other cost distribution categories and the possibility of influencing all stages of the reproduction process.
The relationship of finance with economic categories
In the process of cost distribution, finance actively interacts with price, salary, credit.
Price- this is the monetary expression of the value of the goods, services, which the buyer must pay to the seller when buying the goods. Typically, the price of a product is set by the seller in advance, based on the cost of producing and selling the product, and the desired profit margin for the seller.
However, price rarely equals cost. Under the influence of supply and demand, the price fluctuates relative to the cost. During the sale process, additional funds are transferred to the seller or buyer, which violates the distribution proportions and prepares the conditions for financial distribution, i.e. changing imbalances with finance.
If the price is higher than the cost, then additional revenue is withdrawn through finance (through taxes). If the price is lower than the cost, then the losses are compensated with the help of grants, subsidies, subventions, budget loans. The state can set low taxes and thus compensate producers for losses. Producers themselves can create reserve funds to protect against losses, conclude risk insurance contracts (and this is already a financial relationship).
With the help of finance, the entire value of the social product is distributed, and with the help of price, only a part, which consists of price deviations from the real values of goods. At the same time, price distribution is primary in relation to financial distribution and prepares the conditions for the latter.
Wage is the monetary value of the labor force. In the process of distribution of the social product, the consumed cost of labor power is compensated (ie, the cost of the funds necessary to restore the expended strength, mental energy, etc.). However, a free man cannot be forced to work only to cover his own costs. Funds are needed for the expanded reproduction of the labor force, the encouragement of additional labor. To do this, during the distribution, additional funds are allocated, a bonus fund is created and, consequently, financial relations arise. In addition, financial relations arise in the process of levying taxes on wages.
Credit in many ways can be an alternative to finance. On the one hand, there are differences between these two categories, and on the other hand, there is a close relationship. The difference lies in the fact that: finance covers the processes of distribution and redistribution, and credit - only redistribution; the source of formation of financial resources is the entire value of the social product, and credit resources are temporarily free funds of individuals and legal entities; in the case of a loan, funds are lent on credit on the terms of urgency, payment, repayment (properties of a loan), and in the case of financial relations, money is provided for a long period, as a rule, free of charge or at a low interest rate.
The relationship between finance and credit is manifested in the constant transformation of financial and credit resources into each other.
The impact of finance on the reproductive process
The objective prerequisites for the influence of finance on the reproductive process are embedded in the functions of this category:
distribution function allows the formation of financial resources and target funds in accordance with the needs of the development of social reproduction in general and its individual economic entities;
control function reflects through the movement of financial resources the course of economic processes in society.
The impact of finance on the economy can be quantitative and qualitative. Quantitative influence is characterized by the proportions of mobilized, distributed and used financial resources. Qualitative influence is characterized by the impact on the material interests of the participants in the reproduction process.
The possibilities of the influence of finance on social reproduction are connected with two circumstances.
First, finance has the potential property of directing and regulating economic processes, accelerating or slowing them down.
Secondly, being a category of distribution, finance serves the entire reproduction process as a whole, i.e. their sphere of influence is not limited to the area of value distribution, but also extends to other stages of reproduction.
AT sphere of material production finance, serving the circulation of production assets, contribute to the creation of new value. With the help of finance, the proceeds and profits of an economic entity are distributed, incomes, savings and deductions are formed, special-purpose funds are formed to meet the various needs of the participants in production and society as a whole. Through quantitative and qualitative impact, finance contributes to changing the structure and dynamics of production. The redistribution of financial resources between economic entities and territories can create conditions for progressive shifts and increase production efficiency, satisfy the material interests of participants in the production process, or have a negative impact on the course of economic and social transformations.
AT sphere of circulation finances actively influence exchange processes. Thanks to the distribution, target funds are formed among buyers and thereby conditions are created for carrying out exchange transactions. With the help of finance, the distribution of revenue and profits of trade organizations takes place, and on-farm funds are formed. Finance prepares the conditions for exchange transactions and completes the process of distribution of financial performance.
AT consumption finances influence the volume and structure of consumption of the social product, the development of the non-productive sphere, the satisfaction of social guarantees and the solution of social problems.
Essence and content of financial policy
The essence of politics is expressed by the relations between social groups, classes, nations regarding the establishment, retention, strengthening and implementation of state power.
The subjects of politics are individuals, classes, the elite, the state, parties, trade unions and other social communities. According to the chosen criterion, politics is distinguished: external and internal; economic, social, national, military, cultural; local, regional, national, international, world (global); strategic (long-term) and tactical (current).
Integral part economic policy is a financial policy that, by its specific methods and methods, contributes to the achievement of goals and the fulfillment of the tasks set by economic policy.
financial policy- activities of the state for the purposeful use of finance.
Development of scientifically based concepts for the development of finance;
Determination of the main directions of the use of finance for the future and the current period;
Implementation of practical actions aimed at achieving the set goals.
Financial policy receives legal registration in financial law. Financial law is a set of legal norms that regulate social relations arising in the process of formation, distribution and use of state and local government funds necessary for the implementation of their tasks.
Depending on the duration of the period and the nature of the tasks to be solved, financial policy is divided into financial strategy and financial tactics.
Financial strategy- a long-term course of financial policy, designed for the future and providing for the solution of large-scale tasks determined by the economic and social strategy, and concerning important major changes in the financial mechanism, the proportions of the distribution of financial resources.
Financial tactics is aimed at solving the problems of a particular stage in the development of society by changing the ways of organizing financial relations, regrouping financial resources. Financial tactics provides for solving the problems of the current period (within a year or less), is flexible and mobile. Typical example solving tactical problems - the country's budget, adopted for the next year.
The purpose of financial policy is the most complete mobilization and efficient use of financial resources necessary to meet the needs of society.
Importance of financial policy It is manifested in the fact that the correctly chosen financial policy:
Stimulates the growth of production, the rational distribution of productive forces throughout the country;
Increases the interest of the regions in the development of the economy, the use of local resources;
Contributes to the strengthening and development of economic ties with all countries of the world;
It leads to an increase in the material and cultural level of the population.
When developing a financial policy, it is necessary to take into account: economic and financial opportunities of the state; domestic and international environment; domestic and foreign experience in financial construction; history of finance.
The financial policy of tsarist Russia
The general concept of Russia's financial policy began to take shape in the middle of the 19th century. and by the beginning of the 20th century. has acquired a certain degree of maturity.
The initial principles in the concept of financial policy can be called the following: continuity, caution, budget balance, sustainability monetary system, centralization of funds.
The principle of succession was based on respect for traditions, for what was created by predecessors, both in the field of financial theory and in practice.
Precautionary principle did not allow to make serious changes in financial policy even in extreme conditions, for example, during wars and revolutions. Everything was done in order not to destroy the financial system created in Russia by the beginning of the 20th century. With the greatest work and tension. This principle fully corresponded to the spirit of Russia, its fear of reforms, its conservatism. In addition to certain benefits this principle brought obvious harm, expressed in the containment of economic development.
The principle of budgetary balance. The Russian budget made it possible to carry out the minimum necessary expenditures, which supported the existing system of economic relations. Budget revenues for each new fiscal year calculated on a deliberately low scale. The difference between real and projected revenues was budget balances, which, accumulating, formed the so-called “free cash of the state treasury” and served as an indicator of the well-being of Russian finances.
The principle of stability of the monetary system. Its implementation was carried out through the correspondence of the paper money supply to the gold reserve. The issuance of non-gold-backed banknotes was severely limited.
The principle of centralization of funds. The state budget of Russia received up to 85% of all funds, while in England - 54%, Prussia - 68%. As a result of such a financial policy in Russia, by the beginning of the 20th century. a certain financial stabilization was achieved, ensuring its economic growth in a short period of time.
Financial policy in the USSR
The construction of socialist finance began only after the end of civil war. The economic conditions were the most difficult: a devastated country, a complete decline in the economy. The main tasks of this period were, on the one hand, the revival of the economy, the restoration of industry and agriculture, even with the participation of capitalist elements, and on the other hand, the support of the public sector and the suppression of the private trader.
Therefore, the new financial policy was built on completely different principles. Economic and political conditions dictated the need for maximum concentration of financial resources in the hands of the state.
The state creates three main national funds of funds and, consequently, three groups of monetary relations associated with their formation and use.
The main national fund is the state budget, The main sources of income are taxes. Such a financial policy ensured the fulfillment of the tasks set by the state. Already by 1930, the state sector became dominant in industry. Collective farms and state farms became the main producers of agricultural products. Wholesale and retail trade is almost entirely concentrated in the hands of the state and consumer cooperation. Tax reform 1930–1931 provided a significant reduction in the number of taxes and payments, simplified the methods of their calculation and the procedure for transferring them to the budget.
A very high degree of concentration and centralization of resources was achieved through the state budget of the country. During the years of the Great Patriotic War(1941–1945) expenditures of the state budget of the USSR amounted to 1146.8 billion rubles, of which 582.4 billion rubles. was directed to cover military expenses (50.8%). In the expenditure side of the budget, the largest share of funds for defense was achieved in 1943 - 59.5%. This can be considered the limit of military spending, since, in addition to defense, funds are needed for the national economy, socio-cultural events, administration, and for other purposes. In the first post-war decades high level concentration and centralization of resources in the country's budget remained.
State in the 1980s carries out a number of activities related to the improvement of profit distribution methods, leaving the tax system unchanged. However, these efforts were not successful. The tasks of transferring the economy to intensive development methods turned out to be unresolved. The economy, by inertia, continued to develop largely on an extensive basis, focused on the involvement in production of additional labor and material resources. As a result, a gap appeared between social needs and the achieved level of production, between effective demand and its material coverage.
For the first time in 1989, the state budget was in deficit. It was already impossible not to recognize the serious deformation of all parts of finance - state, sectoral, regional.
By 1992, a change in political orientation had taken place in the country. The state proclaimed a course towards a market economy, which required a radical restructuring of the entire economy in general and finance in particular. Of great importance in this process was the denationalization and the emergence of economic entities of various organizational and legal forms and forms of ownership. On site state enterprises cooperatives, partnerships, etc. arose. Structural transformations caused a significant decline in production, the collapse of entire industries, and hence unemployment, social and political instability, inflation and other negative aspects of the transition period. Under these conditions, financial policy was unstable, often changed under the influence of the current moment.
The main characteristic of the economy is the social economy, which is supplemented by state regulation. Therefore, it is very important to understand the concept of finance. They play the most important role in the structural diversity of relations in the market.
What is finance?
The concept of finance is very important for the economic structure. Any money is a special resource, and rather scarce. Therefore, financiers must be able to save, form and spend them wisely. The financial system is such a specific structure that allows you to form, as well as spend money for a certain period of time. At the initial stage, when creating any state, this science belonged only to the category of income and expenses of only one state. They were distributed for the maintenance of the army, social assistance to citizens, observance of borders, administrative and judicial apparatus, and so on.
AT modern world, the concept of finance has become more multifaceted. Any state income is formed from tax deductions that citizens pay. Therefore, finance can be considered as a set of absolutely all cash receipts that are at the complete disposal of any state (any organization or enterprise, possibly a private person, individual). The management, formation, control and use of these funds is the responsibility of the respective ministries.
What is the financial system made of?
The concept of any finance is not limited to state structures.
They can be divided into 3 categories:
State;
Corporatism;
Personal funds (that is, the funds of a certain individual).
Therefore, any financial system is a community or a combination of absolutely all sections and spheres of the economy.
Finance - their role in the economy
The role of finance is in multiple uses and redistribution. With their help, you can direct cash flows in the right direction, consistently, depending on demand. Thanks to finance, there is a circulation of various social forms, as well as individual and production funds. Finance affects the quantity and quality of any production.
Financial impact stimulates community development, for example, the expansion of production, the control of social and economic programs, as well as the increase in the entire state welfare.
What are finances?
The function of finance is not only the purposeful distribution to secure and generate income. Financial assistance also includes material assistance. For example, a subvention and a subsidy. The first is provided on a gratuitous basis (subvention), the second - on a preferential basis.
These are funds that are transferred to any organization, enterprise or legal (private) person that do not need to be returned (in the case of a subvention), or partially reimbursed (in the case of a subsidy).
The state of finance can be characterized as the sufficiency of funds or, conversely, the insecurity of any enterprise with money. Each structure has certain parameters. For example, the state of the finances of an entire state, a firm or a single family can be analyzed by the resources that are necessary for the normal functioning of this structure. That is, the totality of all income that an entity, region, country or individual will need to function, conduct business, and maintain life in general.
Types and varieties of finance
What are the types of finance? In economics, there is such a thing as financial relations. They are divided into groups, depending on the subjects that are directly involved in them.
Finances are:
- State - that is, all the income and expenditure of the state. For example, schools, museums, cinemas and theaters, various universities, technical schools, as well as clinics and hospitals, and many other organizations receive funds from the budget.
- Corporate - means of commercial organizations, the main purpose of which is to obtain their own benefit from their activities. Such organizations are engaged in both the sale of specific goods and various market services.
- Public - this refers to various public organizations, for example, political parties, charitable foundations and many others. Income in the general part of state funds from such public organizations comes in the form of various membership fees, gifts, and the like. Since this is a fairly small unit, they do not play a special role (as independent financial entities).
- Personal - this group includes different kinds public finances. The basis of such income is made up of wages received by able-bodied members of society. This group also includes pensions and various benefits. The latter are allocated from public funds, which are regulated by special financial funds.
Basic functions of finance
If you explain in simple words, then such functions are the control and distribution of financial resources.
Distribution function - occurs with a proportional division of domestic resources and the total national income. For a better understanding, consider an example. The organization received some revenue from the sale of its goods. Such amount of money shall not be divided into component parts. For example, production costs, profits, wages for workers and employees, and so on. For a complete distribution of finances to occur, the following conditions must be met - tariffs, rates, various deductions, such as insurance and pensions, standards, etc., are determined.
Control function - there is control over all cash flows. Both of them are interconnected. The functions of finance are fully manifested only with full control at all stages of their creation, formation, distribution, and use.
How to manage finances?
The state has developed a whole financial structure in order to correctly distribute and manage capital. Any financial management can be characterized by the following parameters: assets and liabilities. It is the correct distribution and management of state and budget capital or personal funds that helps to reduce the necessary expenses and, accordingly, greatly increase profitability and profitability.
In order to best allocate funds, funding plans must be clearly presented and certain goals to be achieved must be outlined. Assets include all monthly income, liabilities - expenses. It is necessary to strictly observe their balance so that assets are always higher than liabilities. Only in this case, the budget will be positive.
Financial management is a whole science that not only a civil servant, but also an ordinary citizen should know. What for? To manage independently and competently own funds. Any family budget also has its assets and liabilities. Therefore, the laws of financing are relevant not only at the state level, but also for a particular citizen.
Financial Management Example
For a better understanding, consider the following financial calculation.
- The organization sold a certain volume of any product, and received the proceeds to its current account.
- Further, from the amount received, it must make certain deductions to the state budget, that is, pay taxes.
- At the next stage, this enterprise must allocate some part of the funds to maintain a continuous production process.
- Then you need to subtract another part of the funds, which will go to wages, pension contributions, to the insurance fund, and so on.
- The rest is profit.
From this example it can be seen that without the movement of certain funds, in this case of the proceeds received from the sale, neither the state budget, nor the workers, nor the pension fund itself - no one would receive their share. It is this movement of material values that provides financial resources.
What is finance made of?
The main task of the public finances of any state is to provide this state with funds. Therefore, they consist of the following structures, such as the state budget, various funds that are extra-budgetary structures, as well as state loans.
Financial systems can be divided into: the finances of enterprises, the state and the population. In turn, the finances of the state are also distributed - the state credit, the state budget and off-budget funds. The state budget is interconnected with the Ministry of Finance and the Ministry of Taxes and Duties. It should be noted that the tax system works to replenish state funds.
How can finance be valued?
Any financial enterprise assessed against certain criteria. In some cases, express diagnostics are carried out. Why is this being done and why is it needed?
Financial valuation is very important in economic terms. With early diagnosis and detection of violations in the activities of any financial structures, it is possible to take the necessary measures and thus improve the general condition. Analytical programs are used for express diagnostics. These methods help to monitor overall indicators, such as liquidity, capital intensity, the return of various funds and more. During analytical activities, you can explore the activities of not only your own enterprise, but also competitors. For extended study and analysis, more extensive calculations are carried out. Certain methods allow not only to understand what is the cause of any violations, but also to learn more deeply and in detail the cause of their occurrence. To carry out such diagnostics, statistics are used, which are open for free use on various government websites and in analytical databases.
Financing Example
You can consider the example of finance directly on the expenditure of the state budget.
The financial system is divided into two main parts:
1. Finance of enterprises, which, in turn, include commercial and non-commercial organizations, as well as financial intermediaries.
2. State and municipal finances, which are distributed to the budget system and state credit.
3. budget system can also be divided into several links: federal, territorial and municipal, or local budgets.
4. And also all budgets are distributed to: pension fund, fund social insurance, federal and territorial funds of obligatory medical insurance.
Thus, the concept of finance, their role and functions are the basis of the economy, both for the state as a whole and for individual members of society.