Definition of Public-Private Finance

All human activity with an economic impact requires a certain financial organization. In this sense, finance could be defined as the set of techniques for handling money.

In this way, in the world of finance the following issues are addressed: the sources of financing for the investment or the search for funds, the capital investment alternatives and, finally, a section dedicated to the administration and money management. These characteristics are applicable both in the public and in the personal or private dimension.

Some fundamental aspects of public finances

The economic resources of a government, of a municipality or of any public entity are governed by principles established by the legal framework and with a clear social projection.

One of the basic sections of public finances is public debt, which is the money that a state borrows to finance its needs (for example, works and infrastructure). From the accounting point of view, indebtedness affects the balance of a public entity and is the sum of all the loans that are contracted. On the other hand, the public deficit is the difference between the

income that are collected via taxes and expenses associated with the administration of a public entity.

Obviously, the accounts of public finances depend on the approval of a general budget.

Public entities are exempt from paying taxes, since their social purpose is not economic benefit but social cohesion and maintenance of some services for all citizens.

Private finance

Individuals or private companies also need control of their finances. However, its objective is oriented towards the cost effectiveness economical. Normally a person has to manage their economy starting from a salary.

To do this, it is convenient to adopt a series of measures:

1) incorporate a education financial to efficiently face economic difficulties,

2) It is advisable not to spend more than what you earn, otherwise a debt is generated that gradually increases,

3) it is convenient to save an amount of money from salary (experts recommend saving approximately 10% of personal income),

4) It is highly advisable to keep a detailed record of expenses and

5) It is very useful to manage financial activity from a family budget.

A company requires a financial system that includes a series of premises:

1) know the economic variables that affect business activity, such as the exchange rate, the inflation rate or the interest rate,

2) the values ​​in the previous section directly influence the financing capacity of a company (for example, interest rates are a determining factor),

3) loans should be used to increase the capacity of production or sale,

4) the accounting record must be professionally kept and

5) it is essential to know what the profit margin is.

Photos: Fotolia - Sergey Nivens / Rawpixel

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