What are Finances? Concept, Types, and Importance

Finances encourage complete understanding to understand and act most appropriately in capital and money management areas. It provides an entrance to a path of opportunities, where the different economic entities can benefit from the virtues that finance possesses and offers.

Finance Definition

Finance is a branch of finances that studies the management of money and capital of any economic agent (State, company, family, or person). In addition, it analyzes the risks involved in the exchange of these financial resources between these economic entities.

The objective of finances is to correctly manage money and capital to achieve reasonable 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, considering all the variables that intervene in these financial decisions.

Likewise 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 general economy.

The goal is to manage your resources correctly to meet statewide goals.

Private Finance

That is to say. 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 the family. In other words, contempt the fact that your planning consists of the correct management of money at 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 Finances

Most importantly. Main article: International finance

International finances are those that study the economy between 2 or more countries. Analyzes the financial variables that intervene at the international level to evaluate the economy of countries with economic relations.

Meanwhile It takes into consideration: the international monetary system, global financial system, foreign investment, the balance of payments, and exchange rates.

Corporate Finance

Firstly. Corporate finance is responsible for analyzing the business variables that intervene in corporate areas. In other hand. In addition the objective is to make the best decisions to increase the company’s value and, with it, that of the shareholders.

Finance Characteristics

• However, Finance focuses on obtaining and managing money and capital.
• Analyze the risk in any financial decision, minimizing losses and maximizing profits.
• It studies the means of acquiring capital, its use, and the returns it obtains for its investments.
• Some of the key concepts in finance are inflation, interest rates, opportunity costs, financial risk, economic profit, supply, and demand.
• It is helped by other discipline such as mathematics, accounting, administration, and statistics.
• Optimizes the financial resources of any economic agent (State, company, family, and person).

Importance of Finances

Moreover, Finance helps the different economic entities manage money and capital in a propitious way, in such a way that financial decisions benefit the economic authors.

It helps 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. 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.

Conclusion

We must become aware of the importance of the role played by the financial system since it decisively influences the pace and nature of the economic activity and its development. If you have any comments to contribute, we will be happy to hear them. Please share this article or tell us on social networks. Our website is regularly updated with tips. Please keep supporting us. Thank you.
Also Read: Making Your Video a Selling Machine – About, Advantages, and More