Fundamentals of finance: basic concepts and specifics, features

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:44

The world of finance is very large and diverse. But in order to carefully study it, it is necessary to qualitatively deal with the simplest. Namely, to learn the basics of finance. What are they? Where and how are they used? What should be invested in this concept?

General information

First of all, you need to understand the term base. Many people believe that the words "finance" and "money" are synonymous. But this is not true. Money is understood as paper and metal signs that perform the function of a measure of value and circulation. Whereas finance in the modern world is a broader category. What are they? In most scientific sources, the term "finance" is understood as a set of economic relations that arise during the process of creation and subsequent movement of monetary funds of various organizational structures and objects. That is, they cover not only the means of payment, but also the commodity sphere of activity of states, individuals and legal entities. There are financial relations at every level of production, as well as the exchange and consumption of products, works and services. They areboth intangible and ubiquitous, as they are part of any of the existing socio-economic categories.

On economic essence

Their emergence and development has a long history. The economic foundations of finance are an important category. Therefore, in order to reveal the topic completely, they must be considered from the point of view of laws. Financial, of course. So, if we talk about development, then in this case there are two main stages:

1. Pre-capitalist stage. At this stage, the formation of the state was carried out, the treasury was allocated from the totality of funds. Commodity relations were born.
2. The capitalist stage. At this stage, the main finances are collected in the budgets.

And on what, actually, laws are finances based as an economic category? It should be understood that this implies certain statics in the life of society. At the moment, laws are distinguished:

1. Costs.
2. Savings.
3. Redistributions based on labor costs.
4. Circulation of money.
5. Offer and demand.

Based on this, the following characteristic moments can be distinguished:

1. Financial relations are purely monetary in nature.
2. They always arise exclusively in the process of resource allocation.
3. Financial relations are closely linked with the creation of savings and circulation of income. Cash in such cases is called resources.

As an economic categoryfinance performs the following basic functions:

1. Form cash and funds.
2. Carry out the use and distribution of resources from paragraph 1.
3. Provide control over cash funds.

About financial resources

Without them any economic relations are not possible. Financial resources are the funds that individuals and legal entities, state authorities and local governments have. At the same time, they have certain sources through which funds are formed. Conventionally, three levels can be distinguished here:

1. Business entities. These are all organizations. Financial resources here are obtained through profits, depreciation, dividends, bank loans, interest payments, charitable contributions.
2. Population. At this level, financial resources are formed from salaries, bonuses, allowances, social benefits and other sources.
3. The State. In this case, resources are understood as the totality of all incomes that were received by authorities and municipal organizations from privatization, tax revenues, loans, subsidies, international economic activity and other sources.

Finance system

Here, not everything is as simple as it might seem at first glance. You can start with the fact that many people confuse it with the financial system. But in economic theory, a specific line is drawn between these terms. What's the Difference? The financial system is a set of monetaryeconomic relations, which are identical in nature, are engaged in the performance of a single function within the economic category. They are formed at different levels and can be classified depending on the place of reproduction, use and circulation of available resources. There are such systems:

1. Finances of states and local authorities. At this level, the budget system, their funds and resources are provided.
2. Corporate finance. Also called enterprise (commercial) funds.
3. International finance.
4. Banking and investment sphere and state credit.
5. The market for money, capital, securities. Moreover, the latter is of particular importance, because it is the most active link in the process of circulation of financial resources.

And what is their difference? The financial system is more mobile, it is distinguished by the constancy of development, it regularly generates innovative services and instruments for monetary circulation. It can be called a global category, because it connects intermediaries and markets, ensuring the movement of resources between areas. Let's look at it in more detail.

What is it?

So, the financial system is a set of institutions that function in accordance with the current legislation, as well as markets that unite its participants and allow for the free movement of resources and their distribution between different sectors of the economy. Its main elements are formed at three levels: international relations, the state;population and business entities. The peculiarity of the category "financial system" is that all its constituent parts are closely interconnected, so the stagnation or development of one has a significant impact on everything. At the moment, the activity is based on several principles:

1. The private sector and the level of its development has an impact on the well-being of the state economy.
2. The main sources of financial resources are capital markets (even borrowed ones must be taken into account) and profits.
3. The state influences the private sector to a minimum. That is, there is no tight control, and the rules are often determined by market participants.
4. Globalization processes are actively underway, which entail the integration of different financial systems.

Finance is extremely important for any state. They are in every sector of the economy. Even more - they are formed in them at different levels. The power and development of the state in the international arena depends on the availability of financial resources.

About financial and legal foundations

In fact, this is a set of existing legal norms, on the basis of which the regulation of social relations arising in the process of formation, distribution and final use of funds is carried out, which is necessary for the implementation of existing tasks. The main method of regulation is the issuance of state-power orders to participants in relations by structures acting on behalf of the state and endowed with appropriatepowers. In general, this is typical of all areas, but the legal foundations of finance have their own specifics. It lies in the specific content and range of bodies that are authorized for power actions. For example, the foundations of financial reporting are laid down by government agencies. They establish what forms should be used in the conduct of business, how the workflow should be organized, and many other points. It should be noted that not everything is regulated by authorized bodies. A lot of things, for example, the internal organization of the workflow (in all its aspects) is left to the will of the subjects that maintain it.

About the basics of financial literacy

Until recently, there was the Soviet Union, which built communism. Therefore, many aspects that are necessary and useful in modern life have simply not been studied. And what is now, in many respects remains at an unsatisfactory level. A lot of issues, for example, how to pay taxes, e-government and other very important issues receive very little coverage and attention. Although, fortunately, there is progress in this direction, albeit not as big as we would like. Opportunities are being facilitated to learn the basics of financial activity, for example, through the creation of individual investment accounts in 2015. Thanks to them, every citizen can try on the role of a rich man. True, not very big - for one year there is a limit of one million rubles, but nevertheless, this is already a good opportunity to advance in the world of investments.

If the basics of financial activity, organizing one's own business, working with securities are taught in the last few grades of schools, then this can have a positive impact on the state and position of the state in the future. After all, if you draw the attention of young people to the opportunities open to them, then the likelihood that they will come up with the right idea will increase. And then the basics of enterprise finance will be not just information from school, but very useful data for a successful start into adulthood. But older people should not be overlooked either.

Extensive training and implementation opportunities

It's no secret that now the Russian Federation is going through not the best moments of its existence. Therefore, the revitalization of economic life is very relevant. And in this now the main burden falls on the adult population. Since the influence of the Soviet Union, which basically had a completely different model of development and operation of the economy, is very strong, it is necessary to work to orient and push the population towards the current situation. Now there are quite good opportunities to start your own business. The only problem is that broad sections of the population are very poorly informed about this. For example, training is provided on how the basics of organizing the finances of organizations, processes in an enterprise, and much more are arranged. And this is done by both state bodies and public organizations. In addition, you can get financial support to start. To do this, you need to planactivities and organization of your enterprise for a year (or more), contact the state employment service. After a little training (a couple of weeks), you need to pass an exam and defend your plan. If everything worked out, then you can claim a certain amount of money. Keep in mind that you need to carefully prepare an explanation of what they are for. Without this, no one will give money.

On the activities of the state

Fundamentals of financial enterprise and so on are more in the private sector. And what about the state? Here there are differences in goals and objectives. For example, for state and local entities, their activities are financially related to the performance of certain functions. The impact on pricing when setting tariffs for gas, electricity, water, and the like - all this is a special case. But without them, the regulation and maintenance of the country would be problematic. What happens if, at one point, the water supply stops working? Thirst and unsanitary conditions, right? Therefore, it is necessary to work on the distribution of financial resources in order to ensure the operation of the water supply. It is necessary to maintain the system itself and gradually improve it. That is, to analyze the public sector, it is also necessary to master the basics of financial analysis. And also study forecasting. After all, the task of the state is to ensure the systematic accumulation of funds and direct them to the economy, the social sphere, ensure the security of the country and individual citizens, and also satisfy others.the needs of society.

Conclusion

All great things start with a small step. And the basics of finance are no exception. You can endlessly dream about how to improve your situation, but if there is no movement in this direction, alas, the situation is unlikely to change. Although the article turned out to be quite voluminous, a lot of information was not disclosed. As a basic basis, attention can be paid to the formation of deposit savings, an individual investment account and primary work with stocks and bonds, as well as many other points that can help increase the available funds. But at the same time, it is necessary to constantly improve the level of one's education. For example, deposits are a very safe way to keep your savings from inflation because they are insured. But securities are not. Therefore, there is a certain risk of losing funds. Although this is offset by a very good opportunity to earn, and much more than with a deposit. How not to lose? Diversification helps with this.