Essence, functions and the role of finance

 

 

 

 

 

 

 

 

 

  "Essence, functions and the role of finance"

 

 

 

                                                                       Prepared by: 

Nursadyk Azamat

Auelbaev Sultan

Group: FIN-121  

Checked by: Omarova A.S

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. introduction

 

Before we begin to reveal the essence of the topic , I would like to review the main concepts that relate to finance in general and to the topic of " essence and function of finance."

 

FINANCE (from the French finances - cash) , a set of economic relations in the process of creating and using the funds of funds. Yes they i.e. finance , with the regular commodity-money circulation with the development of the state and its needs for financial resources . The government through the Finance (state budget, local finance , finance companies ) redistributes part of the national income , in accordance with the objectives of economic and social policy.

 

FINANCE - The collection of funds of the state , enterprises, and their system of formation, distribution and use.

 

FINANCIAL SYSTEM - 1) a set of different areas of financial relations in the framework of the country. Under socialism, the original link of the financial system - finance socialist enterprises (associations) and economic sectors . 2) The set of financial institutions in the country . In a broad sense, covers and lending institutions .

 

FINANCIAL GROUP - the largest financial and industrial associations, which are based on the union of several families or groups. Emerged in the late 19th - early 20th centuries . At the end . 80s . in the United States about 30 financial groups in the UK and France, about 10 , in Japan for about 7 financial groups.

 

FINANCIAL REFORM - 1860 . in Russia , the transformation of the financial system : the concentration of public funds in the State Treasury , the centralization of financial control , the publication mural of government revenue and expenditure , the replacement of the wine excise repurchase , the establishment of the State Bank .

 

Since this lecture will be considered the nature and functions of finance , I would like to speak briefly about them.

 

SUMMARY - is the inner content of the subject , which is expressed in the unity of its many properties and relations .

 

FUNCTION ( from the Latin functio - design, implementation) - the activity duty work , the external manifestation of the properties of any object in the system of relations (for example : the function of money , the finance function ) .

 

2 . The need to finance

 

Finances are one of the most important economic categories , reflecting the economic relationships in the process of creation and use of funds. Their appearance was in the transition from subsistence farming to a regular money-commodity exchange and was closely associated with the development of the state and its resource requirements.

 

One of the main features of Finance is a form of expression of their monetary and financial relations reflected the actual movement of cash.

 

The actual movement of funds takes place on the second and third stages of the reproductive process - in the distribution and exchange.

 

In a second step the movement of value in the form of money is separate from the movement of goods and characterized by its alienation ( transfer from the hands of one owner in the hands of others ), or the isolation of the target (within the same owner) of each part of the cost . In the third step of allocating the cost ( in cash) is exchanged for the commodity form . Alienation value itself is not happening.

 

Thus, in the second stage of reproduction takes place one-way traffic of the money form of value, and the third - two-way movement of values ​​, one of which is in the form of money , and the other - in the commodity .

 

Since the third stage of the reproductive process occurring continuously committed exchange transactions that do not require a public instrument , the finance there is no room .

 

Area of ​​origin and functioning of finance is the second stage of the reproductive process , which is the cost of distribution of the social product for the intended purpose and business entities , each of which should get his share of the manufactured product . Therefore , an important sign of Finance as an economic category is distributive nature of the financial relationship.

 

Finances are substantially different from other economic categories that operate at the stage of cost allocation : credit, wages and prices.

 

The initial scope of financial relations are the primary processes of allocating the cost of the social product , when this cost is split into its constituent elements , and the formation of various forms of cash income and savings. Further redistribution of value between the entities and the specification of the target using it too is based on finances.

 

The distribution and redistribution of the cost of using finance is necessarily accompanied by the movement of funds , taking the specific form of financial resources. They are shaped by economic entities and the state through various types of cash income , deductions and income , and are used for the expanded reproduction , financial incentives for working , meeting social and other needs of society. Financial resources are the material carriers of financial relations , which allows to allocate finances of the general set of categories involved in cost allocation . This happens regardless of the socio-economic structure , although the forms and methods by which produce and use financial resources , varied depending on the nature of social change in society.

 

The use of financial resources provided mainly through monetary funds for special purpose , though it is possible and Unfunded form of their use. The advantages of the stock shapes include: the ability to be more closely tied to the satisfaction of the needs of any economic opportunities , providing a concentration of resources on the main directions of development of social production , the possibility of better link the public , collective and individual interests .

 

On the basis of the above, can be defined as : finance - is money relations arising in the process of distribution and redistribution of gross social product and part of the national wealth in connection with the formation and accumulation of cash income from business entities and the state, as well as using them for extended reproduction , financial incentives for working , meeting social and other needs of society.

 

For the functioning of Finance is the availability of money, and the cause of Finance is the need of business entities and state resources for their activities .

 

Finances are essential because they allow to adjust the proportion of production to the needs of the consumer , providing the economic sphere to satisfy the constantly changing needs of reproduction . This occurs through the formation of funds earmarked. The development of social needs leads to a change in the composition and structure of the monetary ( financial) funds established at the disposal of business entities.

 

With the help of public finance is regulated scale of social production in sectoral and regional aspects , environmental protection and meeting other social needs.

 

Finance objectively necessary, as determined by the need of social development. The state can , given the objective need of financial relations , to develop different forms of their use : to enter or cancel various types of payments , change the form of financial resources , etc. The government can not create what is not objectively prepared the course of social development. It only sets the objective manifestations of the pressing economic relations.

 

Without finance is impossible to provide individual and public circulation of productive assets on an extended basis , adjusted sectored and territorial economic structure, promote the rapid introduction of scientific and technological achievements , to meet public needs .

 

3 . The essence of Finance

 

Finances are the economic relationships related to the generation, distribution and use of centralized and decentralized funds of funds in order to carry out the functions and tasks of the State and to ensure the expanded reproduction.

 

Under the centralized finance refers to the economic relations associated with the formation and use of State funds of funds accruing to the state budget system and government extrabudgetary funds under decentralized finance refers to financial relations that mediate the circulation of funds of enterprises.

 

Finance - an integral part of monetary relations, so their role and value depend on what kind of money relations take place in economic relations. However, not all monetary relations express financial relationships .

 

Finances are different from money both in content and in the functions they perform .

 

Money - a universal equivalent, by which primarily measured labor costs associated producers , and finance - economic tool distribution and redistribution of the gross domestic product (GDP ) and national income , a tool of control over the formation and use of funds of funds . Their main purpose is to through the formation of monetary income and assets to ensure not only the needs of the state and enterprises in cash , but also monitor the expenditure of resources.

 

Finances express monetary relations that occur between :

 

• enterprises in the acquisition of material assets , the sale of products and services;

 

• enterprises and parent organizations in creating centralized funds of funds and their distributions ;

 

• State and enterprises for the payment of taxes to the budget system and financing costs;

 

• State and the citizens in making their taxes and voluntary payments;

 

• enterprises , citizens and non-budgetary funds when making payments and obtaining resources;

 

• the individual links of the budget system ;

 

• bodies of property and personal insurance businesses, the public upon payment of insurance premiums and compensation for damages when the insured event ;

 

• monetary relations that mediate the turnover of assets of enterprises.

 

The main material source of cash income and assets is the country's national income - the newly created value, or the value of gross domestic product , less consumed in the production of tools and means of production. National income determines the capacity to meet national needs and expansion of social production. It is with regard to the size of the national income and its separate parts - the consumption fund and the accumulation fund - are determined by the proportion of the economy and its structure . That is why in all the countries considered important statistics of national income.

 

Without the participation of the national finance income can not be distributed. Finance - the integral link between the development and use of national income. Finance , acting on the production, distribution and consumption, are objective . They express a certain sphere of industrial relations and refer to the basic category.

 

A modern economy cannot exist without public finances. At certain stages in the historical development of some of the needs of society can only be funded by the state. This is the nuclear industry , space exploration , a number of new priority sectors of the economy , as well as businesses that are necessary for all (post, telegraph, and a few others) .

 

Finance reflect the level of development of productive forces in the individual countries and their possible impact on the macro-economic processes in the economic life.

 

State of the economy determines the state of finances. With the continuous economic growth, the increase in GDP and national income finances are characterized by their resistance and stability, and they stimulate the further development of production and improving the quality of life of its citizens.

 

Under the conditions of the economic crisis , the decline in production , rising unemployment state finances deteriorated sharply , resulting in large budget deficits financed by domestic and foreign government loans , the issue of money , as well as an increase in the public debt and the cost of it. All this leads to the development of inflation , the violation of economic relations , increase mutual non-payments , the emergence of money substitutes , an increase of barter , with the mobilization of taxes , the inability to timely financing of public expenditure , reducing the standard of living of the general population . Therefore, the primary role in the economic and social relations belongs to the sphere of the real production.

 

Financial resources and financial policy .

 

According to its material content finances - is trust funds of funds, in aggregate representing the country's financial resources .

 

The main condition for the growth of financial resources - increase in national income. Finance and financial resources - are not identical concepts. Financial resources alone do not determine the nature of finance, do not disclose their internal content and public purpose . Financial resources are not studying science as such, but the social relations that arise on the basis of generation, distribution and use of resources, it explores the patterns of development of financial relations.

 

Although finances are a basic category, they are largely dependent on the financial policy pursued by governments

 

Finance - is primarily a distribution category . With them is the secondary distribution or redistribution of the national income.

 

In I960- 1990 . share of national income is redistributed across all parts of the financial system, has sharply increased to 35-50 % or more. On the eve of the First World War (1914-1918) it was 9-18 %.

 

Socio- economic nature of financial relationships is to study the issue - at whose expense the state receives funding and in whose interests is using these funds .

 

According to history of substance redistribution processes changed significantly. In the XIX century. in a highly productive operation of the broad masses of the people carrying the burden of financial exploitation .

 

Enormous development of the productive forces in the XX century. , Especially in the second half, scientific and technical progress, the expansion of the functions of the state , democratization of public life in the countries with developed market economies led to significant changes in the area of ​​public finance - a significant part of the funds mobilized by the government has redistributed in favor of the general population. First of all, this is a large proportion of the funds allocated for social purposes . In connection with the requirements of the scientific and technological revolution especially increased spending on education . In some countries , for example, in the UK, was nationalized health care, and created the National Health Service . Received a significant boost budget social funds .

 

However, the increase in social spending does not mean that the redistributive processes are carried out only in the interests of the toiling masses. In the leading capitalist countries, there are still a large military expenditures , interest costs and repayment of the public debt, in which recipients are the monopoly, the members of the military- industrial complex , insurance companies, banking monopoly , joint stock companies , etc.

 

The nature of the redistribution processes is largely determined by the level of militarization of the economy. In countries with high military expenditures expenditures for social purposes below , and in countries with low military spending higher social spending .

 

In the USSR, the post-war period was characterized by a high level of military spending , inefficient use of funds for financing the economy , a residual financing of social expenditures.

 

Distribution processes occur not only through finance, but also through the prices and credit. As you know , the price is the monetary expression of value of goods. Before a distribution of national income, the goods must be implemented . Price determines the amount of cash received from the sale of products to its owners, and serves the original basis for further distribution process . In the 90 years of hyperinflation in the Russian Federation has been a sharp rise in prices, and the redistributive function of the price has increased. Prices also regulate the supply and demand for goods and thus have an impact on reproduction .

 

Finance and credit.

 

Major redistributive processes are in credit relations. Finance and credit - related category. Together they provide a circuit of funds of enterprises on an extended basis . The Russian Federation has attracted credit resources to cover the budget deficit.

 

The loan is a loan fund movement , carried out through banks and special financial and credit institutions .

 

Banks accumulate free cash businesses and people and pass them on the basis of security, repayment, and the urgency of enterprises who need them . If finances are a one-way express and royalty-free movement of value , the loan must be returned to the lender agreed time with the payment of pre-established thereon percent.

 

4 . The finance function .

 

The essence of finance is shown in their functions. Finance performs two main functions: distribution and control . These functions are carried out at the same time finance . Each financial transaction means the distribution of the social product and national income and control over this distribution .

 

1. The distribution function is shown in the distribution of national income, when there is the creation of so -called basic or primary income . Their sum is equal to the national income . Basic earnings generated in the distribution of income among the participants of material production. They are divided into two groups: 1 ) salary of workers, employees , income of farmers , peasants working in the sphere of production , 2) business income of material production .

 

However, the primary income not yet constitute a community of funds sufficient for the development of priority sectors of the economy, the country's defense , the satisfaction of material and cultural needs of the population. Need for further distribution or redistribution of the national income -related :

 

• a cross-sectoral and territorial redistribution of resources in favor of the most effective and efficient use of income and savings of enterprises and organizations;

 

• presence , along with the production of non-productive sphere in which national income is not generated (education , health, social insurance and social security , management) ;

 

• redistribution of income between different social groups.

 

The reallocation formed secondary or derivative gains . These include income earned in non-production sectors , taxes ( income tax on individuals , etc.). Secondary revenues are used to generate end- use proportions of national income.

 

Actively participating in the distribution and redistribution of national income , finance contribute to the transformation of the proportions encountered in the primary distribution of national income, the proportion of its final use . Revenues generated in the course of such redistribution must ensure consistency between the material and financial resources and, above all between the amount of funds and their structure , on the one hand, and the amount and structure of the means of production and consumption - on the other.

 

Redistribution of national income in the Russian Federation is in the interest of the restructuring of the economy, the development of priority sectors of the economy (agriculture, transport, energy, conversion of military production), in favor of the poorest segments of the population (pensioners , students, and single mothers with many children ) .

 

Thus , the redistribution of the national income is between manufacturing and non-manufacturing sectors of the economy , the production industries , different regions of the country , ownership, and social groups .

 

Control function . Being an instrument of formation and use of cash income and assets, finances objectively reflect the progress of the allocation process . The control function is shown in the control over the distribution of GDP by the relevant funds and spending them for their intended purpose .

 

The control function of finance is also evident through the multifaceted activities of financial authorities. With the development of market relations control the direction of the forms and methods of financial control vary considerably .

conclusion

Finance - an integral part of monetary relations, so their role and value depend on what kind of money relations take place in economic relations.