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28 Of october 2016

Finance (from lat. financia - cash income) is the aggregate of economic relations arising in the process of formation, distribution and use of centralized and decentralized funds disinigrate. Usually it comes to the trust funds of the state or economic entities (enterprises). A key concept in Finance is budget.

Verb Finance means to provide the cash.

The word Finance often used in the home for a designation of money.

There is also the namesake of economic science in Finance.


Basic financial concepts


Financial activity (activities) is the application of a range of techniques and procedures that individuals and organizations use to manage their finances. Especially important as the difference between revenues and expenses and risk evaluation of investment.

If the benefits exceed the costs (i.e. there is a surplus, the difference can be placed in an interest-bearing debt or invested in any other business or buying property. This is the essence of financial activity - if there are available financial resources, they should be put on the case, to generate additional income.

If expenses exceed income (that is, there is a deficit), then you need to fill in the missing financial resources. This can be done by obtaining credit, or by issuance of shares or bonds on the stock exchange. In the modern world the borrower does not have to go and look for a lender, you can go to the Bank or to the stock exchange, and the related financial institution, for a Commission will find the lender. Or Vice versa, the lender can find a borrower. Actually, the essence of banking and exchange activities is to efficiently bind to the needy from those who have surplus funds.

As mentioned earlier, the Bank serves as an intermediary between borrowers and lenders. In practice, it looks like creditor (depositor) comes and puts his loose money on the Bank account (the so-called Deposit)to get from your contribution percentage. Then the Bank comes the borrower to obtain a loan. The Bank issues money depositor in a loan to the borrower at interest, and this percentage includes income for the investor, and the income to the Bank, and another plus a certain percentage for the insurance of the risk of non-return of credit.

The exchange also serves the purpose of connection of lenders and borrowers, but, unlike the Bank, does not have its own financial buffer», i.e. may not save money on the Deposit until the borrower. The exchange can associate of the creditor and the debtor only in the real time. The Bank may delay the funds, i.e. creditor (depositor) can go to the Bank today, and the borrower wants to take the money out of the depositor in the credit) can appear only in a month.

Moreover, the exchange trades deposits and loans in an indirect form. Who wants to take credit releases on the stock exchange shares or bonds. A share is a share holder in the company-borrower, and, consequently, also serves as the collateral for the loan. Note this is also the type of loan, but she, unlike shares, gives no right of ownership to the company-borrower, although it may provide some collateral. For shares and bonds can also paid interest (dividends). If the shares are not paid a dividend, it is assumed that the stock will go up in price, and the lender, who will protest, can receive the due profit only selling expensive action.



Functions of Finance


  1. Distribution - by means of Finance is distributed and redistributed gross domestic income, making money is deposited in the custody of the state, of the municipality;
  2. Control - is their ability to monitor the entire course of the distribution process, also the expenditure for the intended purpose funds received from the Federal budget;
  3. Regulatory - interference of the state in the process of reproduction through Finance (taxes, public loans, and so on). The state influences the reproductive process through financing private enterprises, realization of tax policy;
  4. Stabilizing - providing the citizens with stable economic and social conditions.
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