Banking. The essence and functions of finance (F). The role of finance in a market economy (the most important)

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Banking. The essence and functions of finance (F). The role of finance in a market economy (the most important)

Lecture notes, cheat sheets

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Topic 8. Essence and functions of finance (F). The role of finance in a market economy

Finance represents economic relations associated with the formation, distribution and use of centralized and decentralized funds of funds in order to perform the functions and tasks of the state and ensure conditions for expanded reproduction (Finance and credit).

Ф express monetary relations arising between: - enterprises in the process of acquiring inventory items, selling products and services; - The state and enterprises when they pay taxes. But F is different from money. Money is a universal equivalent, with the help of which, first of all, labor costs are measured, and F is an economic instrument that distributes and redistributes GDP, ND, as well as a means of controlling the formation and use of money.

The essence of F is represented in their functions:

1) Distribution - with the help of this function, the distribution and redistribution of ND is carried out. The distribution of NI is to create the so-called basic or primary income. Their sum = ND. The main incomes are formed during the distribution of ND among the participants in material production. They are divided into 2 groups:

▪ Salary of workers, employees; income of farmers engaged in material production

▪ Enterprise income

However, primary incomes do not form the social funds necessary for the development of the branches of the national economy. Therefore, further distribution is needed.

The redistribution of ND is connected with the intersectoral and territorial redistribution of funds in the interests of more efficient use of enterprise income. Also, ND is redistributed to the non-productive sphere (education, health care, culture). As a result of redistribution, secondary or production incomes are formed, received in the non-productive sphere (social security, management, social insurance). Secondary incomes serve to form the final proportions of the use of ND.

2) Control - is manifested in the control over the distribution of GDP to the relevant funds. Also, this function is aimed at ensuring the dynamic development of public and private production, accelerating scientific and technological progress. Also checks the exact match of legislation on financial matters.

3) Regulatory - associated with government intervention through finance (government spending, taxes, government credit) in the reproduction process. The market economy has not only led to a strengthening of the role of finance in the functioning of enterprises, it has determined a new place for them in the economic system. The purpose of finance is the impact of the financial mechanism on improving the activities of business entities. Business entities bear full responsibility for compliance with loan agreements and settlement discipline. Financial independence of business entities creates the basis for effective management of financial relations and resources.

Authors: Shevchuk D.A., Shevchuk V.A.

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