Finance is the monetary relationship that arises between economic actors in the formation, distribution, and use of funds; In this article, we explain the three main functions they have funded and how important investment activities are.
The essence of finance
In Finance there is a special economic relationship, which occurs in the process of forming and distributing funds. The economic content of finance is money. They are the material form of financing. Without money, there is no finance. Learn more about investment by researching Unicredit and their successful practices.
Finance – are the monetary relations that occur between economic actors in the formation, distribution, and use of funds. Finance cannot exist without the subjects of financial relations, who perform the calculation between them in the form of money, because under financing they must have understood not so much for the money as for monetary calculation in the economy.
An economic entity is a legal or natural person that is subject to certain rights and obligations. To understand as many terms as possible, it is always advisable to check money management apps.
The interaction of economic subjects forms the market, which leads to the flow of money and the emergence of finance. Courses about business are also very important and helpful. The movement of money between economic subjects forms financial flows and financial funds. This movement embodies the financial relationships that are established with the formation and use of funds.
- Groups of economic subjects: economic subjects (enterprises, organizations, etc.), households, and the State.
- Types of financing: business financing, household financing, and public finance.
Financial relations of economic subjects (companies):
- The activity of economic entities in the creation of products and the distribution of their values in constituent elements (determination of production costs, revenues, taxes, beneficiaries, dividends, etc.).
- The activity of public administration bodies in connection with payments of various types (customs duties, taxes, duties, etc.).
- Activities of the banking system in obtaining and repaying loans, buying and selling securities and securities, deposit and term, etc .;
- Activities of insurance companies for all types of insurance.
In the Finance of economic enterprises and households formed from funds formed as a result of economic activity at the micro-level. These include consumption fund, accumulation fund, reserve fund, etc.
State funds are formed at the macro level. These include the state budget and extra-budgetary funds.
The main functions of finance:
The distributive function of finance is expressed through the process of using money, past accumulations, to meet the relevant needs and requirements of the economic system in terms of financial resources. This function forms monetary income and accumulates in the creation of the social product.
The function of financial control is expressed by the financial control of the quantitative and qualitative parameters of the processes of mobilization and use of financial resources. The important role of this function is the possibility to analyze aspects of the activities of the subject of management.
The cumulative function of financing is a process of formation (accumulation, mobilization) of funds necessary for the functioning of any economic system. This function can be manifested in the formation of the country’s budget, in the formation of total revenues in the budget of the company and the family.
Financial functions appear in each of the types of financing that exist: companies, households, and the public. The distributive function is visible in the use of money, which also favors various processes of redistribution of the economy, the control function is responsible for analyzing the effectiveness of funds, and the cumulative function creates the funds of the economic system.