Finance and Banking


International financial organisation
Hospital finance
Car Loans
Refinance car loans

Refinance home loan
Loans and Mortgages
Payday loans cash advance
Loans on Car
Fastloan Aprroval
Loans Easy
Loans Company
Loans Business


Quick links

Boston Apartments


Role of Finance in Economics

Economic activity either at the macro level or at the micro level largely depends on the financial management. Economic prosperity is directly related to sound financial management either at the individual sector or in the corporate area. Study of finance, therefore, assumes immense significance for overall economic growth. To manage finance for effective running of any economic activity is the essence of Finance study, which is very essential for understanding any business growth and even its business future. To any individual, management of his own fund in effective way is his financial management. He finds his way out to invest his surplus fund over his overall expenditure in other prospective venture with the hope that the surplus fund, so available from his normal income, would generate more and more income to involve him in greater economic activities. He may invest this surplus fund in purchasing shares from other corporate sector with the hope of getting back multiple returns within a short spell of time. Judicious investment in sound corporate sector is other side of prudent financial management of any individual entity, which may be termed

as risk venture. This investment of surplus fund in any favorable quarter with the assured prospective return also helps in tide over the situation if any unforeseen situation arises resulting involvement of sufficient and immediate fund. In case of corporate entity, financial management is more complex where larger risk and liability is involved where supreme corporate goal is to achieve more profit and credibility. Required corporate finance is attained either by accepting public money offering equities of the organization to the general public, floating bonds to the public for a specific period accepting money in exchange or by borrowing from the banking institutions. While offering share to the debtors or the general public, the ultimate objective is to strengthen the capital base of the organization to act as bull-work against any odd situation out of sluggish market or sheer competitiveness with other concerns.

A good financial manager of any corporate entity should use his prudence, accurate judgment capacity and above all his vision of the future happenings and select the path in right direction to attain the corporate objectives of higher profitability. Offering of share of the company or borrowing loans – both are liabilities to the organization. Proper utilization of such collected fund with an aim to neutralize such borrowed money along with total development of the corporate entity, demands lots of acumen from the finance manager of the organization. It requires more than the skill of a financial accountant.

On the contrary, change of capital structure and more involvement of public money through the equity, may change, if not obstruct, the corporate attitude and shift towards a particular line. The finance manager while broad basing the borrowing periphery should also keep this in mind. Similarly, investment of its surplus fund in other suitable corporate bodies with the objective of steady and better rather say multiple returns is other arena of financial management which may be named as Fund management of any corporate body. The other goal of it is to arrange or procure liquid money in the quickest possible of time if the organization so demands. While personal finance or corporate finance at the micro level follows some normal rules and procedures coupled with general motive of increasing assets, in case of Public finance at the macro level needs lots of other factors, dependant of Government’s avowed policy of well-being of the people, etc. Through out the world it is observed that most of the Governments don’t follow the standard dictum – “cut according to your cloth”. For acquiring Public Finance, Government holds some other objectives in mind, foremost of which is social objective keeping aside the profit motive behind all of its financial management. As because Government is for the general people, any activity of the Government surrounds the well being of its people first and foremost.

And to achieve that goal, Public finance is required by the Government. Therefore, the financial management of Public finance is a different ball game quite devoid from the established path of the finance management. It is often found that total revenue of the Government from all sectors always go below the total expenditures as because Government keeps in mind social objective and political consideration. It results deficit financing, a new jargon in the economic buzzword, which is not always loathsome in normal parameter. Unlike the individual entity or the corporate entity, it is rather easy and less risky for the Government to raise the money for attainment of its objectives, which is primarily invested in infrastructures to accelerate the pace of development and improvement of the people. This public finance is achieved through disinvestments of its own assets, by issuing various Bonds, by borrowing from foreign countries or

international monetary authorities or as a last resort by printing money. Government hopes that by investing that acquired money in the infrastructure set-up total development and progress of the country is possible and by which resurging economy will be buoyant once, which in turn, will repay the entire borrowed amount. Even some economists opine that financial deficit should be invited and encouraged. To their views it prevents stagnation, retardation or slow improvement of the economic activities. However, in that case even, management of finance is largely required to meet up the Government’s objective while ensuring that the country does not fall under any debt-trap or any major policy shift is happened contrary to the interest of the nation. Another big task of finance management at macro level is the budgeting, envisioning several factors in mind in time-bound way. To enhance revenues from all sectors and critical balancing between the revenue earnings and its judicious expenditure for all-round development of the economic growth is the first and foremost word of a successful budget.

Role of Banks in Finance management

Bank plays the role of a facilitator in case of individual, corporate entity or even to any country like the World Bank. Bank collects money from the public and lends it to the same segment of people. Its one hand accepts the money from the public giving some financial benefit, which in turn, is lent to other needy borrowers for meeting their urgent requirement or achieving their goal of development. Thus, Bank has a very distinguished role to play very different from other sectors. It is said that sound banking system is the symptom of sound economic activity of any country as the Banks work as a bulwark against any adverse situation faced by the country. Though the ultimate aim of any Banking business is to earn profit, but volatility of the uncertain market and resultant sudden liquidity crisis, may move the Bank up and down. As the ultimate looser may be the public in large, Government has to incorporate some Banking Regulations assuring safekeeping of public money. On the one hand, Bank provides succor to the individual or corporate body by providing the required finance, international bank like the World Bank which is conglomeration of various countries’ fund, comes to aid various countries for their overall development or to mitigate stagnation of economy. Bank, therefore, directly or indirectly acts as the fund manager of any sector.

Related Articles

Investment planning
Equipment finance