The essence of finance - the formation, distribution and use of income

The essence of finance lies in the totality of economic relations, as a result of which money is formed, distributed and used.

Spheres of the finance system

The financial system of any state has three basic areas of activity :

• The sphere of public finance (the basis of the system is the national and local budgets, as well as extrabudgetary and other funds);
• The company's financial sector (the basis is the finance of legal entities);
• The sphere of household finance (budgets of individual citizens).

All these spheres are in close relationship with each other. Forms of financial relationships are a manifestation of this relationship.

Forms of financial relations

The essence of finance implies the following monetary relations:

1. Money relations that occur between the state and households are manifested in the payment of taxes and compulsory payments to local and national budgets. The state conducts social payments, payment of wages to individual citizens.

2. Monetary relations between the enterprise and households (workers) consist in providing part of the budget of individual citizens through labor payment, social payments, dividends, and interest on securities.

3. Monetary relations of the enterprise with the state consist in providing the profitable part of local and national budgets with the help of tax deductions and compulsory levies, payments on rent of state complexes. The state, in turn, at the expense of budgetary resources of different levels, invests and provides concessional lending to enterprises.

Finances of individual enterprises are key to the formation of the financial system of the country, and also ensure its effective economic and social development.

Finance enterprises have a big impact on the essence of finance in general, as they contribute to the rational conduct of cash flows in the country and their effective use in the process of the economy.

The main features of finance

• The concept refers exclusively to monetary relations.
• Forced form of manifestation.
• Redistributive nature.

Functions of enterprise finance

The main functions performed by the enterprise finance are:

Resource-generating function

It determines the systematic formation of the required amount of financial resources, using various additional sources, in order to ensure economic activity and realize the intended objectives of the enterprise development.

Distribution function

This function is closely related to the resource-forming function. It optimizes the proportions of the distribution of the aggregate of all available resources through separate trust funds that provide financing for investment and operational activities, as well as return the principal amount of debt on loans received earlier.

Control Function

With the help of it, the results obtained from the investment and operational activities of the enterprise are monitored, as well as the processes of the formation, distribution and use of financial resources under the planned budget.

From all the above written it can be concluded that the essence of the enterprise's finances lies in the totality of the processes of education, distribution and use of the incomes of various enterprises.