What are Finances? Concept, types and importance

What are Finances? Concept, types and importance

Finance Definition Finance is a branch of economics that studies the management of money and capital of any economic agent (State, company, family or individual person). It analyzes the risks involved in the exchange of these financial resources between these economic entities. The objective of finances is to achieve a correct management of money and capital to achieve good control of its resources and achieve the goals proposed at the state, business, family or individual level. It studies the actions of saving, investment and spending to generate profits, taking into account all the variables that intervene in these financial decisions. These financial resources can be money, stocks, bonds, and capital goods. types of finance Public finances Public finances are responsible for managing the economic resources of a State, taking into account the following variables: GDP, investment, deficit and surplus. In addition, it takes into account the investments, taxes and expenses of public workers to assess their impact on the public economy. The goal is to manage your resources correctly to meet statewide goals. private finance Private finances are responsible for managing financial resources at a personal level. The money and capital used to optimize your finances can come from the individual or from the family. In other words, despite the fact that your planning consists of the correct management of money on a personal level, part of the source of your money may come from family money. Private finance considers the following variables: personal savings, retirement plan, personal loans, investments, and tax administration.

International finance is the one that studies the economy between 2 or more countries. It analyzes the financial variables that intervene at the international level to evaluate the economy of the countries with an economic relationship. It takes into consideration: the international monetary system, global financial system, foreign investment, balance of payments, exchange rates. corporate finance Corporate finance is responsible for analyzing the business variables that intervene in corporate spheres. The objective is to make the best decisions to increase the value of the company and, with it, that of the shareholders. Finance Features  * Finance focuses on obtaining and managing money and capital. * Analyze the risk that exists in any financial decision, minimizing losses and maximizing profits. * Study the means of acquiring capital, its use, and the returns it obtains for its investments. * Some of the key concepts of finance are: inflation, interest rates, opportunity costs, financial risk, economic profit, supply and demand. * Help from other disciplines such as mathematics, accounting, administration and statistics. * Optimizes the financial resources of any economic agent (State, company, family and person).

 

Importance of finances Finance helps the different economic entities to manage money and capital in a favorable way, in such a way that financial decisions bring benefits to the economic authors. It helps to meet the objectives that an individual or organization has as its purpose. It analyzes all the variables that intervene in a highly complex economic scenario, and understanding the relationship between them, provides a strategic plan to act in the most optimal way possible. It prevents the different financial agents from making wrong decisions when starting a process that involves money and capital, be it personal, family or business.

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