Finance: what is it – Dictionary of Economy

finance concept

Finance is the area of ​​economics that studies the functioning of the money and capital markets, the institutions that operate in them, the policies for attracting resources, the value of money over time and the cost of capital.

Types of Finance

According to the area of ​​specialization within Finance we can speak of three types:

1- Public Finance

Public Finance constitutes the economic activity of the public sector, with its particular and characteristic structure that coexists with the market economy, from which it obtains resources and to which it lends a framework for action.

It includes the assets, income and debts that make up the assets and liabilities of the Nation and all other assets and income whose administration corresponds to the National Power through the different institutions created by the state for that purpose. In order to carry out its functions and meet its public needs, the State must have resources, and these are obtained through the different procedures legally established and prescribed in constitutional legal principles.

Public finance sets; studies the needs; create the resources; Income; Expenses, The state makes use of the necessary resources from its political management to develop financial activities through the exploitation and distribution of wealth to satisfy public needs (individual and collective).

Create the appropriate platform in terms of education, health, social security, for the development of new sources of work, create its own technology, within the framework of a pluralistic and flexible decision-making system, which articulates different mechanisms for shaping the will collective. Guarantee greater social control over its management, improve the means and instruments that currently exist for political and social representation and establish other ways of participation that are complementary to those of political representation, that strengthen and decentralize its power and transfer responsibilities and resources to state communities. and local governments and, finally, improve their political structures.

Develop concurrent action strategies and promote these actions aimed at protection, the development of citizen security, health, education, sports, culture, work, and in short, social welfare, so that the country’s economy can develop and lead to a prosperous future. Fiscal policy as an instrument of stabilization and adjustment; Heterodox and orthodox policies (traditional and non-traditional) of public finances.

2 – Business Finance

They are those that focus on the monetary or investment decisions that companies make (identification of investment opportunities and analysis of their economic viability, usually in terms of profitability) and on the tools and analyzes that are used to make those decisions.

The fundamental objective of corporate finance is to maximize the value of the company for its shareholders.

3- Personal finances

They are those related to the ability of individuals to generate savings, as well as to obtain additional financial resources from, for example, financial entities to be able to cover their investment needs. In addition, they also encompass the investment decisions of the surplus financial resources available.