Finance as an economic category is an essential part of the global economic system. In fact, they are a tool with which the redistribution of GDP is carried out, and the creation and operation of various monetary funds is also monitored. Many people combine the concepts of finance and money, but such a decision is fundamentally wrong. Finance as an economic category is a narrower concept, because, unlike monetary relations, they reflect only those cash flows that go through special funds and do not take into account the interaction of ordinary people. Thus, the essence of finance and their functions have their own characteristics compared to money. Let us dwell on this issue.
Finance as an economic category has several main functions:
- Distribution - with its help, there is financing of all business entities with the necessary cash. The most obvious in this case is the example of the state budget, which initially collected taxes of citizens of a certain country. After the budget is replenished from all possible sources of financing, the distribution of funds between various organizations, ministries and other economic structures begins. It is this function of finance that allows all citizens of the state to receive their share of the gross domestic product, and the state - to fulfill their responsibilities to the population.
- The controlling function allows you to obtain information about the production process as a whole and its various components. It is this function that allows you to quickly receive information and make decisions about changing situations.
- Fiscal - is the seizure by the state of citizens and enterprises
part of their income in order to maintain the state apparatus and carry out its functions. It is through the payment of taxes that the country's budget is formed, which is then distributed to defense, education, medicine, science and culture, as well as other components of our lives. - The stimulating function is tax rates that are different for different categories of citizens and enterprises. In addition, it implies the existence of benefits and penalties that help not only to collect taxes on time, but also contribute to the development of certain sectors of the economy. An example of this function is the government program aimed at developing small businesses. Many entrepreneurs can currently work on a simplified taxation system, as well as receive government subsidies and subsidies.
It is finance as an economic category that reflects the development of society and the state, giving instant signals in the event of an unfavorable development of the situation. A competent approach to
financial relations and constant control over them will help the government avoid unforeseen situations and economic crises.
As you can see, the role of finance in the economy is huge.