Financial Terms: Financial Functions

What is the financial function?

Financial function is the inherent function of enterprise finance in operation.

The function of Finance stems from the movement of capital and its economic relations. It is characterized by fund-raising, capital utilization, cost and distribution, including financial forecast, financial decision, financial planning, financial control and financial analysis.

After introducing property rights theory, the traditional financial function theory is based on the theory of financial stratification, and it is more scientific to study the financial function from the angle of financial management subjects (owners and managers).

The financial function defined from this angle is more inclined to enable owners and operators to have the responsibilities and functions of financial management jointly carried out for the realization of enterprise goals.

The owner's financial function is defined as decision-making, supervision and regulation. The financial function of the operator is organization, coordination and control.

The separation of the two powers enables the financial functions to be quickly realized and the efficiency improved.

Financial functions and related concepts

1. financial nature and financial functions.

The essence of finance is a category with fundamental stipulation about financial work practice, which is about financial objects, financial attributes, and financial functions.

2. financial objectives and financial functions.

Financial goal is the starting point and end point of financial management activities. It not only leads the theory of financial application, but also links the basic theory of Finance and applied theory.

The financial function is determined by the nature of finance. Its connotation is how to carry out financial management, organize financial activities efficiently, deal with financial relationship and improve the efficiency of funds utilization. It is the premise for financial management to achieve its objectives and has a clear function to better manage it.

3. financial environment and financial functions.

Financial environment is the specific time and space in which enterprises engage in financial management activities.

The financial environment includes both the financial and financial problems faced by enterprises.

Contents of financial functions

The nature of Finance determines financial functions.

Financial functions refer to the unique functions of finance itself.

(1) fund-raising function

Finance is primarily a kind of principal investment activity.

Because the process of enterprise reproduction is ongoing, the principal investment and turnover in the process of reproduction.

The amount of capital input is determined by the scale and the turnover speed of capital.

This requires that the finance constantly raise the capital needed to invest, so that the finance has the fund-raising function.

The fund-raising functions include the determination of the amount of fund-raising, the choice of financing channels and the optimization of the ownership structure.

Under the condition of socialist market economy, there are many ways and means of raising funds.

Giving full play to the fund-raising function is the premise of carrying out the financial organization and the premise of the enterprise's reproduction process.

With the expansion of the scale of enterprise reproduction, the scale of financial fundraising will also expand, and the fund-raising function is more important.

(two) regulating function

Finance is an economic mechanism that regulates the reproduction process.

Finance, as the input activity of principal, the scale and direction of capital input is restricted by the scale and structure formed by production and operation factors. On the other hand, when the amount of capital raising is available, it is the main content of financial adjustment function to adjust the structure of assets owners or implement the policies and measures of macroeconomic regulation and control, and adjust the original production scale and economic structure (technical structure, product structure, etc.) through the adjustment of principal investment and investment volume.

In the aspect of the formation and Realization of production and operation results, finance, as the input activity of enterprise principal, is also an important content of financial adjustment function by optimizing the allocation of capital and adjusting the allocation of resources so as to achieve the goal of improving economic efficiency and efficiency.

To play the role of financial regulation is an important means to adjust and rationalize the economic behavior of enterprises. It is also an important link between the national macro-control policies and the micro activities of enterprises.

(three) distribution function

Finance is the revenue activity of the enterprise's principal. After obtaining the monetary revenue, it should allocate income according to the turnover tax, the compensation income tax, the payment cost, the withdrawal of the provident fund and the public welfare fund, and the distribution of profits to the investors, which is the basic content of the financial distribution function.

The object of financial allocation is the monetary performance (C+V+M) of all commodity value realized by enterprises within a certain period.

It can be seen that financial allocation is not only a means of preserving assets and guaranteeing simple reproduction, but also a tool for asset appreciation and Realization of expanded reproduction.

Financial allocation is the basic means to deal with the needs of the state's political functions and economic functions properly, and to deal with the material interests of owners, operators and laborers.

The relationship between financial distribution, credit distribution, insurance allocation and enterprises is linked by financial distribution.

Financial allocation function is another important feature that distinguishes financial category from other economic categories.

(four) supervisory function

Finance, as the input income activity of enterprise principal, has a comprehensive reflection on enterprise production and operation and external investment activities.

On the one hand, financial activities reflect the formation of the elements of production and operation, the utilization of resources, the production and operation, and the results of foreign investment. They can reveal the problems of various management work of enterprises. On the other hand, financial relations reflect the material interests relationship between state administrators, owners, operators and workers, and reveal the problems in dealing with these relations.

In order to properly organize financial activities and properly handle financial relations, the state has formulated relevant laws and regulations on finance, taxation, finance and finance, and owners and managers have also formulated various financial decision-making strategies and internal management systems.

Financial management must carry out financial supervision according to the relevant regulations of the state and owners and operators, so that these regulations can be carried out. This is the basic content of the function of financial supervision.

Financial supervision is an important means to ensure the effectiveness of corporate financial activities and the rationality of financial relationship handling. It is also an important bridge for national financial supervision, credit supervision and other macroeconomic supervision measures to be implemented to enterprises.

A correct understanding of financial functions, giving full play to the role of finance, promoting a virtuous circle of economic activities, and realizing the combination of speed and efficiency of enterprise economic development are the basic tasks of financial management of enterprises.