Expanded reproduction includes the continuous renewal and expansion of production assets, growth of GDP and its main part – national income, reproduction of labor and production relations. It is carried out using economic levers, commodity-money, financial and credit relations. An important role in the reproduction of all constituent parts of GDP belongs to public finance and enterprise finance.
The role of finance can be summarized in 3 main areas:
1. Financial support for the needs of expanded reproduction means covering all costs at the expense of financial resources (own funds, borrowed or attracted sources)
2. Financial regulation of economic and social processes. Changing the growth rate of individual structural units for the restructuring of production in accordance with the needs of society. 3 types of economic regulation: – self-regulation, i.e. regulation of the economy by a market mechanism; – state; – regulation of the economy through the finances of enterprises (the enterprise itself determines the proportions between consumption and accumulation of funds).
3. Financial incentives for the efficient use of all economic resources are carried out by the following methods: – through the effective investment of financial resources; – through the creation of incentive funds; – through the use of budgetary incentives; – through the use of financial sanctions.
4 . The relationship of finance with other economic categories
Finance is closely related to such categories of a distributive nature as money, wages, price, credit.
Finance and money. Finance is often (especially at the household level) defined as a certain amount of money that is at the disposal of a legal entity or an individual. Finance is always expressed in monetary terms. However, a certain amount of money is not finance yet. In addition, finance differs from money and in the functions it performs.
Finance and prices. Both price and finance are involved in the distribution of GDP. Price is a monetary expression of the value of any product. It acts as the initial degree of the distribution of the value of GDP and creates conditions for its further redistribution. The state, using various financial levers, influences the price level. When a product is sold, the price is determined based on supply and demand. Therefore, the market sometimes experiences sharp fluctuations in the general level of prices, which can significantly affect the state of the financial sector and the financial security of the state.
+Finance and wages. The relationship between finance and wages is manifested in the fact that the state regulates the amount of wages with the help of financial levers, in particular taxes, by creating national funds of financial resources. At the same time, the state, with the help of these funds, can stimulate the development of certain types of activity, and as a result, promote the growth of wages in certain areas.
5. Spheres and links of financial relations
Financial relations are relations associated with the distribution, redistribution and use of monetary income.
All financial relations are responsible for the distribution of GDP and ND; participate in the formation of funds and funds, in their use. All financial relations control and regulate the distribution process.
In the general set of financial relations, three large areas can be distinguished: finance of enterprises, institutions and organizations; insurance; public finance.
Links are distinguished within each of the named spheres. The grouping of financial relations is carried out depending on the nature of the entity’s activities, which has a decisive influence on the composition and purpose of targeted monetary funds.
Different links of the financial system serve different types of financial distribution: intra-economic – with the finances of enterprises, intra-sectoral – with the finances of enterprises, complexes, associations; inter-sectoral and inter-territorial – by the state budget, extra-budgetary funds.
Each link of the financial system is subdivided into sub-links in accordance with the internal structure of the financial relationships it contains.
6. Financial system of Ukraine
The financial system is a set of separate but interconnected spheres and links of financial relations, as well as financial bodies and institutions that manage cash flows in the country.
The organizational structure of a financial system is a collection of financial bodies and institutions that characterizes the financial management system. The separation of the governing bodies of the financial system is based on its internal structure.
Internal structure of the financial system. Finance is allocated in the following areas: finance of business entities, public finance, international finance, financial market, insurance.
Links: state budget, special purpose funds, state credit, public sector finance, foreign exchange market, finance of international organizations, international financial institutions, money market, capital market, credit system, securities market.
The organizational structure of the financial system of Ukraine includes:
a) governing bodies : – Ministry of Finance of Ukraine; – State Tax Service; – Control Revision Service; – Treasury Department; – the Accounts Chamber; – Audit Chamber; – Committee for supervision of insurance activities; – State Commission on Securities and Stock Market; – Pension Fund; – Social Insurance Fund; – State Innovation Fund.
b) financial institutions: – National Bank of Ukraine; – Commercial banks; – Insurance companies; – Non-bank credit institutions (pawnshop, credit unions); – Interbank Currency Exchange; – Stock exchanges; – Financial intermediaries in the securities market.
7. Essence and significance of financial policy
Financial policy is the purposeful activity of the state in the formation and distribution of funds of the state funds for the implementation of its functions and tasks. Financial policy is a set of government measures aimed at stabilizing and increasing financial resources, their rational distribution and efficiency of use.
8. Financial mechanism in the implementation of financial policy
The financial policy finds its practical embodiment in the financial measures of the state, which are implemented through the financial mechanism. It is a set of methods for organizing financial relations used by society in order to ensure favorable conditions for economic development. The financial mechanism includes the types, forms and methods of organizing financial relations, ways of quantifying them.
The state, represented by its executive and legislative authorities, on the basis of a thorough study of the operation of economic laws, patterns of development of finance, tasks of economic and financial policy, establishes methods for the distribution of the social product, national income, forms of monetary savings, provides for the types of payments, determines the principles and directions of use of state financial resources, etc.
When considering the financial mechanism from the point of view of its impact on social reproduction, its functional links are distinguished: financial planning and forecasting, financial indicators, financial levers and incentives, financial control, resource mobilization, financing, incentives, etc.
Consequently, the financial mechanism is a set of forms and methods, tools and levers for the formation and use of funds of financial resources in order to meet the needs of the state, business entities and the population.
The financial mechanism plays a special role in the implementation of the financial policy of the state. The modern financial mechanism is designed not only to create a real financial base to ensure the economic independence of the state, but also to ensure economic regulation in the conditions of a functioning market and a mixed economy.