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Date: 2015-10-07; view: 356.

What is finance?

The production, distribution and consumption of material things is two most important conditions for the existence and development of human society. In modern times material production involves the manufacture, distribution and use things not for the personal consumption but for exchange. The development of commodity-money relations gives rise to the need for finance and credit and their extensive use. Citizens of all countries have dealing with finance and credit institutions. Finance and credit matters are sources of controversy and give rise to political and class struggles. Government bodies and political parties, public institutions, organizers of production are all concerned with finance and credit. This is why most people take an interest in financial problems and want to know about the working of finance and credit, and why they assume such an important role in the life of ordinary people and in relations between states.

Finance is a necessary part of any modern economy. Finance concern money and its utilization in the economy. In essence, finance comprises the economic relations that arise in society in connection with monetary transactions and the formation of monetary income and expenditures. Finance exists wherever there are money incomes and money is spent. Obviously money incomes and expenditures are possible only where commodities are produced and distributed that is where commodity-money relations prevail. Incomes and expenditures relating to financial transactions have the following features: first, they are monetary in form; secondly, they are the result of the actions of the people; thirdly, the methods by which incomes are made and the nature of payments depend on definite conditions of social development. In particular, they are connected with the existence of the state. Monetary incomes and accumulations go to form financial reserves; their use provide the money for the various requirements of individuals, institutions, classes and states. The economic content of finance and credit, their role in social life are determined by the mode of production, the content of the productive forces, the relations of production within the framework of which these productive forces operate, the class nature of the state and the extend to which commodity – money relations are developed.