What are finances

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Finance is something we know very well. It is not necessary to be autonomous, have an SME or a large company to understand that this concept is present in the day-to-day life of any person and / or family. And it is that today managing what you earn and what you spend is essential, fundamentally to make ends meet.

But, What is finance? ¿Es lo mismo que la contabilidad? ¿Y qué tipo de finanzas existen? Todas estas dudas, y algunas más, es lo que vamos a comentar en este post de hoy.

What are finances

According to the RAE, finances are conceptualized as "Obligation that someone assumes to respond to the obligation of another person." However, among the other meanings it offers, we have that of «Flows, goods», which is how we commonly know it. In fact, finances can be set as a part of the economy that deals with studying the money and capital markets, as well as the organizations that operate in them, and its purpose is to develop policies to attract resources. In other words, we are talking about the science that studies how to create, develop and manage the money you have.

It not only focuses on the alternatives to get money (income, salary, etc.) but also takes care of saving and investment, proposing plans to make everything profitable.

The difference between finance and economics

Having said that, it is clear that finance is one thing and economics another. We could say that finance is a small part of everything that is included in the economy.

Time Economics has a broad focus for different disciplines, debido a que se centra en ver cómo satisfacer las necesidades de las persons mediante la producción económica; las finanzas disponen un enfoque más centrado en el dinero.

Finance vs accounting

Now, there are many who confuse two concepts that a priori could be considered the same, but in fact it is not like that. We talk about finance and accounting. What do you think are the same right now?

Well, the truth is that it is not. They are two similar concepts, but at the same time very different. To give you an idea we have:

• Accounting: Accounting is a discipline that encompasses the rules and procedures for ordering, analyzing and cataloging economic and financial operations. Or, in other words, we are talking about the way in which financial and economic operations are collected, analyzed and ordered.
• Finance: Las finanzas en sí son más importantes que la contabilidad, debido a que depende de esta disciplina tomar decisiones sobre el dinero, ya be para invertir, ahorrar, gastar o buscar planes para conseguir más financiamiento.

In other words, accounting is part of finances, since without it finances could not be carried out.

Features

Once you are clear about the concept, and fundamentally the difference between finance, economics and accounting, the next step is to know what characterizes finance to strengthen your knowledge. For this case, we are talking about the following:

• You target es gestionar el dinero. But also capital goods. In other words, it is not only responsible for managing the money you have, but also savings, investments, loans ... Both what you have and what you should pay attention to finances.
• Handles specific concepts. We talk about financial and economic terminology: benefits, interest rate, risk, investment costs ...
• Help improve money management. By knowing perfectly what you have, what you owe and where you intend to go, the decisions made by finances seek to obtain that objective and, with it, improve the economic situation. That is why they are so important to companies, as well as to families and individuals.
• They are helped by other disciplines. Actually, you have already seen that accounting is closely related to finance, but also to economics, statistics, probability ...

What are finances for?

It is clear that finances are present in our day to day. It is a way of showing people, and companies, what they have, what they owe and what they can do with their benefits or with their debts, in such a way that they seek to achieve the best result, and the most appropriate resources, so that the economy (whether of a person, a family or a company) run its course.

Then, a waste, a bad investment or bad financial decisions can have negative repercussions (to the point of bankruptcy), this is why you cannot leave this to your free will, but have a head not to spend more than what you have, or to leave savings without movement because they could give you great benefits.

Types of financing

Finally, you should know that finances can be divided into four large groups.

Corporate finance

They are the ones that focus on companies. In other words, what they want is study how to get, manage and use the financial resources of a company. As an example, they can choose in which projects or products to invest, in how to distribute the benefits or in how to obtain sources of financing to move the company forward.

Personal finance

These are the best known, since we apply them daily individually and as a family. We refer to those who study how to get resources and how to manage them. And it would not only cover the economic issue, but also labor and training, since depending on the career or profession, as well as the job position, decision-making will be different, including investment and savings.

Public

Public finances refer to analysis and management of all financial and economic resources available to state organizations.

In other words, how to get resources through taxes, how to invest money in projects; how to redistribute resources and profits, etc.

International

These refer to international transactions, focused mainly on companies that work exporting or importing, or buying and selling abroad.

They must be very aware of currency fluctuations, profitability, the indebtedness of a country, as well as the risks that can arise from these transactions.