What is Public and Private Finance definition/concept

Every human activity with an economic impact needs a certain financial organization. In this sense, finance can be defined as a set of techniques to manage money. Public and Private Finance

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

Fundamental aspects of public finances

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

One of the basic items of public finance is public debt, which is the money a state borrows to finance its needs (for example, works and infrastructure). From an accounting point of view, debt affects the balance of a public entity and is the sum of all borrowings. On the other hand, the public deficit is the difference between the revenue collected through taxes and the expenses associated with running a public entity.

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

Public entities are exempt from paying taxes, as their social objective is not economic benefit, but social cohesion and maintenance of services for all citizens. Public and Private Finance

private finance

Individuals or private companies also need control of their finances. However, its objective is aimed at economic profitability

Typically, a person needs to manage their accounts through a salary . Therefore, it is convenient to adopt a series of measures: Public and Private Finance

1) incorporate financial education to efficiently respond to economic difficulties;

2) it is advisable not to spend more than what is earned, otherwise the debt will increase little by little;

3) it is convenient to save a certain amount of money from the salary (experts recommend saving about 10% of personal income);

4) it is highly recommended to keep track of expenses in detail;

5) it is useful to manage financial activity through a household budget.

A company needs 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 ​​of the previous item directly influence a company’s financing capacity (for example, the type of interest rates is a determining factor) Public and Private Finance

3) loans must be used to increase production or sales capacity ;

4) The accounting record must be professional;

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

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