The scientific works on finance and credit science are characterized by many aspects and levels according to the norms of the research object.
The general definition of economic relations formed in the formation, distribution and use of finance as a source of money is widely disseminated. For example, there are two definitions of finance in the General Theory of Finance:
1) “… Finance reflects economic relations, the formation of money source funds, according to distribution and use in the process of distribution and redistribution of national income “. This definition is given relative to the capitalist condition, when the cash-goods relationship is universal;
2) “Finance is the formation of a centralized and decentralized source of money, economic relation to distribution and use, serving the performance of state functions and obligations, and providing conditions for the further expansion of production”. This definition is presented without showing the context in which it works. We shared some of this financial explanation and thought some clarification was necessary.
First, although finance is the basis of finance, it goes beyond the bounds of national income distribution and redistributive services. In addition, the formation and use of depreciation funds, which are part of the financial field, do not belong to the distribution and redistribution of national income (newly formed value within a year), but to the distribution of already formed value.
This latest appeared initially to be part of the value of the main industry fund, later transferred to the cost price (i.e., value) of the ready-made product, when realized, it was set up as a depression fund. On the consistency of finished product cost price, its source is preconsidered as a depressed type.
Second, the main objective of finance is much larger than “fulfilling state functions and obligations to provide conditions for expanding production”. Finance exists at the national level, but also at the level of manufacturers and branches, and in this case, most manufacturers are not national.
V. M. Rodionova takes a different position on this issue: “The real formation of financial resources begins at the stage of distribution, when value is realized and the concrete economic form of realizing value is separated from the consistency of profit”. While D. S. Moliakov emphasizes the industrial basis of finance, V. M. Rodionova emphasizes finance as a distributive relation. Although they all have a fairly fleshed out discussion of finance, the system by which funds are formed, allocated and used as a source of money comes from the following financial definitions: “Financial cash relations, in the process of distribution to form the redistribution and redistribution of national wealth and part of the value of the total social products, are related to the formation and use of economic subjects and state cash income and savings in expanding production, in the material stimulation of workers to meet the social and other requirements of the society”.
In the handbook of political economy, we come across the following financial definitions:
“The finance of socialist countries is the economic (cash) relationship, with the help of which, through the planned distribution of income and savings, the monetary source of the state and socialist industrial products is formed to ensure the growth of production. To improve the material and cultural level of the people and meet other general social requirements “.
“The system of creating and using the necessary cash resources to ensure the further expansion of socialist production is the financial condition of socialist society. The sum of economic relationships generated between nations, manufacturers and organizations, branches, regions and individual citizens. The flow of cash funds establishes financial relationships.
As we have seen, financiers and political economists do not define finance very differently.
At each of the discussion locations are:
1) The expression of nature and phenomena in the definition of finance;
2) The definition of finance as a system for creating and using sources of capital at the phenomenal level.
3) The value of fiscal distribution and national income as social goods, the definition of the characteristics of distribution plans, the main objectives and economic relations of the economy, to serve them.
If we reject the preposition “socialism” in the fiscal definition, we can say that it remains realistic. In modern economic literature, we come across this traditional definition of finance without the adjective “socialist”. We can give the following statement n: “Finance is the production and use of cash resources, in the formation of economic products and national wealth in the process of value distribution, cash relations also appear in order to form and further produce economic agents and the state’s cash income and savings, reward the people workers and the satisfaction of social demands”. In the interpretation of the definition of finance by D. S. Moliakov and V. M. Rodionov, following the traditional inheritance, we encounter the broadening of the financial base. They involve “the distribution and redistribution of the value of economic products created and the partial distribution of the value of national wealth”. In contrast to the privatization process and the transition to privacy, this update is very practical and is regularly used in practice in different countries (e.g., the United Kingdom and France).
“Finance – is the source of cash, financial resources, their creation and flow, distribution and redistribution, use and economic relations, which are influenced by the mutual calculation of economic agents, the flow of cash sources, the circulation and use of money”.
“Finance is a system of economic relationships related to the creation, allocation and use of financial resources by enterprises”.
We came across the financial definition of absolute innovation in the basic manuals of Z. Body and R. Merton. “Finance – it is the science of how people lead to spend” deficit cash resources and revenues “over a given period of time. Financial decisions are characterized by the fact that costs and revenues are 1) separated in time and 2) as rules that make it impossible for either the decision maker or anyone else to think about them in advance “. “Financial theory is made up of several concepts… It systematically studies the topic of allocation of cash resources relative to time factor. It also considers quantitative models with which alternative variants of each financial decision are estimated, put into practice and implemented.
These basic concepts and quantitative models are used at all levels of financial decision-making, but in the latest definition of finance, we come across the following basic theories of finance: the main function of finance is to meet people’s needs; Economic agents of any kind (corporations, as well as state agencies at all levels) are there to perform this basic function.
For our specific objectives, it is important to compare well-known definitions of finance, credit and investment to determine how and to what extent finance, investment and credit are integrated into a whole.
Some scholars believe that credit is an integral part of finance, if discussed from the perspective of nature and category. A further group demonstrates that the economic category of credit exists in parallel with the economic category of finance, by emphasizing that credit cannot exist in the consistency of finance.
N. K. Kuchukova emphasizes the independence of the credit category and points out that this is only its “characteristic of the value-shifting movement, and has nothing to do with the transmission of loan opportunities and owners’ rights”.
N. D. Barkovski replied that the operation of money created the economic basis for the allocation of finance and credit as a separate category and gave rise to credit and financial relations. He notes the Gnoseological roots of science in money and credit, since the science of finance has business with the study of this economic relationship, which depends on cash flow and credit.
Let’s discuss the broadest definition of credit. In modern publications, credit seems to be more “lucky”, followed by finance. For example, we come across the following definition of credit in the dictionary of financial economics: “Credit is a loan in the form of cash and goods, usually repaid in percentage payments. Credit represents a form of movement of loan capital and expresses the economic relationship between creditor and borrower.
That’s the traditional definition of credit. In an early economic dictionary, we read: “Credit is a system of economic relations formed by the transfer of cash and material means to time use, usually on terms of return and payment in percentage”.
In the Handbook of Political Economy, published under the simplification of V. A. Medvedev, the following definitions are given: “Credit, as an economic category, refers to the relationship established between the society, the labor collective and the workers in the formation and use of loan funds, according to the temporary use and accumulation of resources in the transmission of the current payment and return terms”. Credit was discussed in an early handbook of educational methods in political economy as follows: “Credit is a system of monetary relations arising from the use and mobilization of temporary free cash instruments such as state budgets, unions, and manufacturers. Organization and population. Credit has an objective nature. It is used to provide for the production and other needs of the country for further expansion. Credit differs from finance in the nature of returns, while state financing of manufacturers and organizations is achieved without this condition “.
If “economic process”, we will encounter the following definition: “Credit is an economic category, it represents relations, and independent industrial organizations or individuals under the condition of regression, transfer monetary means to each other for temporary use. Credit is determined by the historical process of the performance of economic and monetary relations, and its form is monetary relations.
The following scientists define credit slightly differently:
“Credit – a loan in the form of money or commodities, granted to the borrower by the creditor in return for repayment and payment of a certain percentage of interest.”
Credit is a fixed percentage of the price of a temporarily free source of money or goods given as a fixed term debt. Thus, credit is a loan in the form of money or goods. In the process of the loan flow, the creditor (loan provided by natural person legal person, with a certain amount of cash as debt) and debtor formed a certain relationship.
Combining each of the definitions mentioned above, we arrive at the idea that credit is given as a debt the monetary capital of a commodity under certain terms and material supplies at a fixed percentage price. It expresses the defined economic relationships among the participants in the capital formation process. The necessity of credit relations depends on the existence of large temporary and free sources of money and on the existence of demands on them.
At the same time, however, we must distinguish between two similar concepts: loan and credit. The characteristics of the loan are:
O Here, discuss things that may involve the transfer of funds and from one party (lender) to another (borrower) : a) in the borrower’s possession, at the same time, b) under the condition of returning the same amount or the same quantity and quality of things;
O Borrow money without interest;
O Anyone can take part.
Unlike a loan, credit is to some extent a private occasion for a loan, which stands for:
O one party (lender) gives money to the other party (borrower) only, _ for temporary use;
O It may not assume any benefits (if the task does not foresee something);
O A creditor is not anyone but a credit organization (bank first).
So credit is bank credit. In our view, it is incorrect to use the words “credit” and “loan” as synonyms.
Bank credit is the combination of the relationship between the bank (as creditor) and its borrower. These relationships involve:
A) give the borrower a certain amount of money for a specific purpose (although, we encounter so-called free credit, the purpose and object of the credit are not specified in the transfer);
B) Timely regression;
C) The percentage of resources obtained from the borrower at its disposal.
The essential basis and essential element of the nature of credit is the existence of trust between two parties (from which the Latin credo comes the word “credit”, meaning “trust”).
Comparing the different definitions of finance and credit in terms of the status of money circulation forms (abstractly, economic relations and social budgets, the historical process of the formation of the banking system) leads to a paradoxical conclusion: credit is the private occasion of finance. Indeed, from the position of the movement of monetary form, finance represents the formation and use of cash means of capital process. Most of the time, the move is done without a return, but sometimes loans can be made from the budget for other needed investments. In addition, when a manufacturer or company uses their cash funds, we refer to the finances of an industrial subject, such use may be realized within the manufacturer or company (subject of no return or return of use), and therefore return conditionally free of charge. This latest form of commerce is called a form of commerce because of the transfer of sources to others, but even in this case it is an element of the financial system of manufacturers and companies.
From the perspective of cash instrument flow, the main feature of credit is the formation and use of cash instrument funds under the condition of return, usually take a percentage of value. Tiger. If there is no gating of credit value (even in exceptional cases), credit becomes a private financial condition according to the form of movement, since loans that do not assume any debt can be used for benefits from net fiscal funds (and therefore from the state budget). If a gated credit value occurs, the credit is discussed as a financial modification through the appearance form.
Historically, finance (especially in national budgets) and credit (beginning with usury and later with commerce and banks) developed differently when credit was seen as part of finance. However, from a genetic history point of view, previous lenders need to collect non-returnable permanent capital, or net financial base, before lending. Banks also need to concentrate significant amounts of their own capital in order to flow to consumers and earn higher interest rates in return. Thus, on a precise financial basis, a portion of the bank’s capital in such a financial fund (which later became partly a loan fund) appears to be the reserve (insurance) portion of the fund, which is essentially financial and not loaning. Thus, although there is an essential difference between finance and credit from a genetic history point of view, credit seems to have been formed by finance and represents their modification.
From the basic standpoint of expressing the relationship between finance and credit economy, we encounter the main differences between the two categories. Although they are returnable or not, they are expressed mainly through the difference in the form of motion. Finance expresses the relationship between distribution and redistribution of social products and part of national wealth. Credit represents only the distribution of appropriate value in the percentage of the loan granted, and only the temporal distribution of the source of money occurs according to the loan itself.
Thus, finance and credit essentially have a lot in common, and so do the forms of movement. At the same time, finance and credit in essence, there are significant differences in form. Accordingly, there must be a general economic category which regards finance and credit as a whole, and within this category itself the concrete nature of finance and credit will be separated.
Cash funding is common for economic types of research. It occurs in any separate financial and credit systems that have been touched upon in the analysis that defines financial and credit. The combination of the words “financing from sources of funds” accurately reflects and defines the nature and form of the more general economic, financial and credit categories. In economic text and practice, though, it is very uncomfortable to use a three-word terminus. Moreover, even under the conditions of its strict confirmations and thoroughness, information “offloading” greatly enhances its inflow into circulation.
In the context of the discussion, we consider:
1) Broad and narrow understanding of the scope of financial economy;
2) Discuss finance in a narrow sense in the general traditional sense;
3) Discuss finance, as a means of financing cash, in a broad sense involving finance – narrow and credit – comprehensive.
Termini ‘capital’ and its equivalent ‘capital formation’ is the purposeful structure that we use as a means of cash, based on two poles – the accumulation (collection) of money sources and their explicit use in financing and credit methods.
We created a new term, “finance-investment domain” (FIS). Our analysis of the interrelationship between finance and credit gives us an opportunity to demonstrate that, in a given term, the meaning of the word “finance” is to fund a source of cash, with the purpose of structuring. In this process, we consider the economic categories of finance, credit and investment simultaneously.
Let’s summarize the intermediate results from the discussion of the new concept “finance-investment domain” and discuss its investment component.
The concept of “investment” was introduced from the West into local economic science. In Soviet economic sciences, they have long used the term “capital allocation” in the term “investment”, which expresses the use of industrial elements in the field of actual industrial activities in the realization of capital projects. At first glance, the term is conceptually the same as “investment”, so they can be used synonymously. The words “investment” and “investment” have linguistic and linguistic advantages over the term “capital allocation”. Opinions, because they are expressed in one word. This is not only economical and comfortable in using the terminal to “invest” itself, but also provides the opportunity for terminal formation. More specifically: “investment process”, “investment domain”, “finance-investment domain” — all of these terms are easier to accept.
If it is really important (to inherit by using local terminals in parallel), then changing local economic terminals with foreign economic terminals serves a purpose. Although the domestic economic end cannot be changed to a foreign one at the same time, it has its own end when private, narrow concrete processes and elements are easily explained in the traditional language of Ordinal Numbers. The “movement” of these terms is recognised within a narrow range of professions, but their “spitting out” into economic science can turn the language of economics into tangled slang.
Let’s discuss how the terms “investment” and “capital allocation” are used in economic literature.
Investment is the investment of capital and circulating capital for the purpose of profit. “Investment in physical assets – is putting money into liquidity and real estate (land, buildings, furniture, etc.). Investing in financial assets is putting money into securities, bank accounts and other financial instruments.
We didn’t meet early in the term “investment”, economic dictionary but we had a combination of the term “investment policy” – industrial alliance of decision, it ensures that the main direction of capital investment, they focus on the activities of a decisive suburbs, depends on the social production plan development speed, balance and effectiveness, and every one rouble lost, More and more production and profits will come from the national income.” For today, in the most practical definition, capital investment is limited only by financial means, not only by financial means, but also by investments in natural, physical, technological and information resources. Labor resources have a place in the investment process. They go through this or that investment process themselves.
The positive aspect of the definitions discussed is that they link investment policy to capital allocation (investment) :
– Developing the economy in accordance with the direction of concentration and priority;
– Providing high economic growth rates;
– Improving economic efficiency, as shown in:
A) by increasing the loss of production and national income per lost rouble;
B) through the completion of the investment branch structure;
C) by improving its technical structure;
D) by further optimizing their production structure.
Compared with this definition of investment (allocation of capital), the definition of investment in the dictionary with “economics” appended seems unimproved: “investment – the cost of gathering information about production and industry and increasing material stocks”. In this definition, current costs (production costs) are mixed with investment (capital) costs. Moreover, not investment expenses, but (although investment is followed by appropriate expenses) complete advancement. It differs from expenses in that means are invested through the return of advanced value, also under conditions of growth corresponding to conceptually advanced capital. This progress can come in the form of money, natural materials and information.
In addition to the term “investment”, there are two terms related to investment. They are shown below.
“Investment in human capital” – any activity provided to increase the Labour productivity of workers (in a way to improve their qualifications and develop their capabilities); At the expense of improving workers’ education, health and Labour force mobility “. The use of the above terminus is very useful, but needs to be corrected: investment in human capital involves not only workers, but also servants, representatives of all kinds of labor.
“Investment goods, capital goods — capital.”
In the official manual of political economy during the reform era, capital investment is referred to as “the cost of creating new major funds and expanding, rebuilding, and renewing active funds.” In this definition, the form (type) of further production of primary capital investment (capital allocation) during the separation is limited only by primary capital (no increase in liquidity and insurance reserves) :
A) Create new ones;
B) the widening;
D) to update.
In addition, the concept of industrial aggregation has emerged at the expense of expanding the base, circulating capital and insurance reserves.
You will encounter the following definition of investment from an “economic process” : Investment is referred to as “the investment of money into capital (basic means of production), reserves, and other economic objects and processes that require a long-term inflow of material and cash means.” Capital is divided into physical and monetary forms, and investment must also be divided into physical and cash investments.
They distribute investment products for industrial and non-industrial buildings, change or expand vehicles and furniture in the technology park, and increase reserves.
“They refer to the total investment produced as investment products, the purpose of which is to maintain and increase basic capital (basic means) and reserves. The total investment consists of two parts. One of them is called depreciation, which represents an important investment resource. Compensation is updated to pre-industrial levels for wear and tear and repair of infrastructure. The second part of total investment is expressed as net investment – capital investment for the purpose of increasing infrastructure. Depreciation is not a compensatory resource that consumes basic capital, but a purposeful source of funding for those resources.
Investment in human capital is “a specific type of investment, mainly for education and health protection”.
“Real investment is the investment in the economic sector, is also a kind of economic activity, it provides the increase in real capital, that is, increases the material value of industrial means”. We can agree to this definition with a norm that says that material and immaterial values are also real capital (wealth), and therefore the results of scientific research, experiments, information, education of workers, etc. Services such as organising exciting games and redistributing social wealth from one private person to another (except charity).
“Financial investment is investing money in stocks, debt, promissory notes, other securities and instruments. Such investments, of course, do not increase actual physical capital, but they contribute to the attainment of profits by altering the course of securities in speculation, or by differentiating the course of buying and selling in different places “. We fully agree with such a definition, so it can be concluded that financial investment (if not accompanied by real investment) does not increase real material wealth and real immaterial wealth. In this context, the following statement is important: “We must distinguish between financial investment, which represents the transfer of funds to real tangible capital, in the form of selling and buying securities for the purpose of making a profit, and financial investment in the form of cash and physical objects.”
In the “economic line” cited before separating long-term investment from short-term investment. Recognizing that there is a boundary between them, the authors classify short-term investments as investments of “a month or more”. If we get such conditional criteria, we can call investments with maturities of more than a few months long-term investments, which is highly questionable and we disagree. The long-term nature of fund allocation is a distinguishing feature of investing (short term is not combined with the concept of investing). In principle, it would be useful to indicate quick, medium-term and long-term compensatory investments:
– Less than 6 months – quick compensation;
– From 6 months to one and a half years – interim compensation;
– Over a year and a half – long-term compensation.
We are stuck on the definition of investment in capital work “economic courses” for special purposes, as the author attempts to systematically and completely discuss the concept of investment in this book, which has just been published.
We will revisit the definition of the economic category of “investment” in different publications in the next chapter. The definitions given here are sufficient to give one an idea of how light a given category is in the economics literature.
Based on the definition of economic categories mentioned in the published work, what conclusions can be drawn beyond the proposed concepts and specifications?
The concept of “investment” has a very deep, specific and thorough definition, which is different in the economic literature; But most of the work we’ve talked about investing so far has failed to address the essence of investing as an economic category. In each monograph, even if there is a title investment, as an economic category, it only gives the definition and concept of investment. But, as Academician Vasil Chantladze explains, “a concept is a discussion, which proves the remarkable characteristics of the object of study. A concept that contains many essential characteristics represents only one, and the essence of which is only — definition “.
But the categories are much broader; It is “the key, fundamental concept of every science”. Economic category represents the real and objective relations of production in theory. Category is the definition of the occasion of the characters, connections and relations existing in the objective world. In general, any educational process is accomplished by categories that provide the opportunity to semantically divide processes and occasions, express the definition of topics, and realize their specific properties and economic relationships in the physical world.
Our goal is to validate investment — as an economic category, but also as a narrowly defined financial category.
Here we apply for another handwork paper written by Academician Vasil Chantladze: “Every financial relation is economic, every financial category is economic, but not every economic relation and economic category is financial relation and financial category”.
In defining investments, it is important to take into account all aspects of resources, costs and income, since investments are on the one hand the result of manufacturing activities and, on the other hand, part of income, which in this case is not used.
Another occasion: Investment is best discussed in two terms: as a category of reserves and flows, this will accurately reflect the link between “capital placement” and “investment”.
As we mentioned above, not long ago, in well-known Soviet literature, the concepts of “capital placement” and “investment” were accepted as synonyms and regarded as sources of investment for further production of major resources. Capital and working capital formation. We read in modern economic journals an understanding of the concept of “investment” (here investment costs are divided into three categories: investment in basic capital investment, housing construction investment and reserve investment). It is mainly used for macroeconomic statistical analysis of economic processes. Investing in this specific situation is the domain of reserves.