Theory of finance. The concept and types of finance. Financial management

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:43

In the formation and development of the theory of finance, there are traditionally 2 stages. The beginning of the first is attributed to the heyday of the Roman Empire. It ended in the middle of the twentieth century. During this period, the classical theory of finance was widespread. The neoclassical concept began to develop at the present stage of the formation of human society.

In short, the essence of the first theory is to substantiate the key role of the state in financial management. In the framework of the second concept, on the contrary, the movement of funds is controlled by private producers, large companies.

Let's analyze some features of the classical and neoclassical theory of finance in the article, let's talk about the development of the cash management system in Russia.

General information

In the framework of the theory of finance, the concept of finance is revealed through a description of their key features and functions. Finance is the most important economic category. They participate in the interaction between business entities andconsumers, businesses and the government.

Within the framework of the theory of finance, socio-economic relations associated with the use, creation, distribution and redistribution of financial resources are studied. It is based on economic theory and, in turn, is itself the basis for such areas as taxation, lending, insurance, budget policy, etc.

Essence, structure and functions of finance

It should be noted that not all monetary relations can be recognized as financial. There are significant differences between them.

Finance is considered as an economic tool for the distribution and redistribution of GDP, a mechanism for controlling the formation and use of monetary funds. Their essence is realized in the following functions:

1. Distribution. It consists in providing economic entities with a sufficient amount of financial resources used in the form of targeted funds. Redistribution of profits is carried out with the help of taxation. Funds come from citizens, enterprises for the development of social and industrial infrastructure, investments in capital-intensive and capital-intensive industries with a long payback period.
2. Control. This function is related to the movement of the value of the product. Finance can quantitatively reflect the production process as a whole and its individual stages. Due to this, the economic proportions that arise in society are controlled.
3. Stimulating. Maneuvering tax incentives, rates, pen alties, changing the terms of taxation, canceling or introducingtaxes, the state creates conditions for the faster development of certain industries and industries and contributes to the solution of the most urgent social problems. With the help of financial instruments, the government stimulates technological progress, increases the number of jobs, invests in the expansion and modernization of enterprises, and ensures the rational use of financial resources.
4. Fiscal. With the help of taxes, part of the profits is withdrawn from the subjects and directed to the maintenance of the administrative apparatus, the defense of the country and the provision of non-productive spheres that do not have their own sources of income.

Thus, we see a close relationship between finance and other economic categories.

Classical theory: initial stage

Due to the fact that the formation of science lasted for a rather long period, it is customary to distinguish several intermediate stages in it.

The longest period was the unscientific state. It began in the era of Ancient Greece and Rome. Then the state was considered as an institution that accumulated funds to meet the personal needs of the rulers and public needs.

Government revenue came from several sources. The key one was land rent (payment for the use of territories). At that time, there was no need to organize a complex financial system, and there were not so many directions for spending funds.

Development in the Middle Ages

In the era of the Middle Ages, nosignificant developments in the framework of the theory of finance. Discipline, however, it is from the 5th century. began its active development.

A huge contribution to the development of science was made by Italian scientists. Among them are such outstanding scientists as D. Carafa, N. Machiavelli, J. Botero. In the works of the followers of the classical theory of finance, the key idea was to justify active government intervention in the economic life of society.

In the Middle Ages, the transition to the scientific processing of knowledge began. The work of Italian scientists gave impetus to the development of science in other countries. So, based on the works of Italian scientists, J. Bodin, a French scientist, for the first time systematized the sources of finance, highlighting:

• domains;
• war trophies;
• gifts from friends;
• tribute from allies;
• trading;
• import and export duties;
• taxes of subjects.

In the 17th century. in England, the idea of indirect taxation, stimulating economic activity through reasonable tax measures, etc. began to spread actively.

A turning point in the development of science

By the beginning of the 17th century. there was a rapid development of methods and means of replenishing the treasury. However, despite this, in many countries the science of finance has not yet been generally recognized. Only by the middle of the XVIII century. the understanding gradually began to come to society that the state economic complex should obey uniform economic laws. So18th century is considered by many scientists to be a turning point in the development and strengthening of financial theory. This century is considered the third period of the development of the classical discipline - scientific (rational).

One of the first representatives of the theory was the German figures I. Sonnenfels and I. Justi. They were specialists in cameral sciences. Among them were disciplines on the state treasury, generating income to meet state needs. Within the framework of financial science, which was also included in the list of cameral disciplines, data were accumulated on ways to make a profit for state needs.

New tax policy

The rules for its development were first proposed by I. Justi. Later they were successfully developed by the famous English economist A. Smith. According to the rules, taxes:

• should not harm industry and human freedom;
• should be even and fair;
• should be scientifically proven.

In addition, according to economists, it is not necessary to create a lot of cash desks and hire a large number of employees to collect payments.

I. Justi paid attention not only to replenishment of the treasury, but also to public spending. In his writings, he pointed out the need for competent financial planning and budget forecasting. The author, in particular, promoted the idea that costs should correspond to income and all property, benefit both the state and its subjects.

The final stage of the development of classical theory

The works of I. Justi are connectedthe work of I. Sonnenfels, who interpreted financial theory as a set of rules for collecting income in favor of the state in the most profitable way. At the same time, the author focused on moderation in collecting taxes from subjects.

Subsequently, by the end of the XIX century. thanks to the efforts of the followers of the German school, a completely unambiguous understanding of the concept of "finance" was formed, and the structure of financial theory was formed. At this stage, the design of the classical concept was completed, which included administrative and economic knowledge of managing the income and expenses of the treasury.

Specific features of science

Formed by the 19th century. classical theory had two features.

Firstly, within the framework of the discipline, finances were considered as funds belonging to the state (or public entities - municipalities, communities, lands, etc.).

Secondly, they were not regarded as solely cash. Any resources of the state, regardless of their form, were considered finance. In other words, they could be received both in the form of money and in the form of services and materials.

The beginning of the formation of neoclassical theory

The classical concept completed its development in the middle of the twentieth century. This was due to the changes that took place in the world economy on the eve of the Second World War, the decline in the importance of the state and public entities. There was a trend towards the development and internationalization of markets, the strengthening of the role of finance in the development of foreign economic relations. arosethe need for a theoretical rethinking of the value of resources at the level of a business entity.

Guidelines

Thanks to the efforts of representatives of the Anglo-American school of economics, the new theory was called neoclassical. It is based on 4 key theses:

1. Economic indicators of the state, the stability of the country's financial system largely depend on the economic strength of the private sector. Large enterprises and corporations are considered its central link.
2. The state minimizes its interference in the affairs of private producers.
3. Of all available sources of finance that determine the opportunities, timing, speed of development of large companies, capital markets and profits are recognized as key.
4. Due to the internationalization of markets (labor, goods, capital), the integration of the economies of different states takes place.

Examples of the implementation of the last thesis are the creation of a single monetary unit "euro", the development of uniform rules for accounting and reporting.

Structural elements

In general, neoclassical theory is defined as a body of knowledge about the organization and rational management of financial resources, markets, and relationships. The main branches of science are theories:

• Pricing in the options market;
• utility;
• arbitrage pricing;
• capital structures;
• portfolio and market pricing modelsassets;
• preferences for situations in time.

As world practice shows, joint-stock companies play one of the main roles in the real economy. Their share in the total number of enterprises with different forms of ownership may be small. However, their significance in terms of contribution to the formation of national we alth is beyond doubt.

Development of financial theory in Russia

In the Soviet era, the scientific community worked out mainly issues related to the theory and practice of public finance management. As for the problems of financial management in enterprises within the framework of neoclassical theory, they were addressed only at the end of the last century.

In Russia, the formation and development of science is associated with such prominent figures as G. Kotoshikhin, Yu. Krizhanich, I. Gorlov, I. Yanzhul, A. Bukovetsky and others.

As in Western countries, by the end of the XIX century. the classical direction of theory was formed in the country. Some elements of managing the financial resources of enterprises began to develop within the framework of the accounting system. Until 1917, there were 2 independent areas in the country: financial calculations (today they are included in the main sections of financial management) and balance analysis (it was carried out as part of the study of such a discipline as "balance science").

Conclusion

Theory of finance is an accurate reflection of various processes occurring in the objective world, their mathematicalinterrelation in the system of laws, categories and concepts. The concept explains the economic reality of the state and society, indicates areas of work, general methods of influencing business entities.

In the framework of the theory, the financial policy of the authorities is developed. Its implementation is controlled by the Ministry of Finance of the Russian Federation. It is this structure that is considered a key link in the system of distribution and redistribution of income.

The Ministry of Finance of the Russian Federation summarizes analytical and reporting data coming from the regions, studies monitoring data in various sectors of the economy. Based on these indicators, plans are developed for various time periods. The Ministry also controls the correct spending of targeted budget funds.