What are financial resources?

What Does Financial resources Mean

We explain what the financial resources of a company are, their types, importance and examples. Also, other business resources.

Financial resources are those that can be converted into money or its equivalent.

In business administration , when it comes to financial resources, allusion is made to the set of so-called “liquid resources” of an organization or that have a certain degree of liquidity, that is, they can be converted into cash or other equivalents. .

In this sense, the term refers to those business resources that are either money ( capital ) or can be , such as money in bank accounts, debts receivable or actions in other organizations.

For the most part, except for cash, these resources require a cost to materialize, which is known as the financial cost or cost of capital, and is normally equivalent to interest payable.

The management of the financial resources of a company is a fundamental activity for its survival, since they allow the acquisition or contracting of goods and / or services , many of which will be essential to start up the productive apparatus, such as machines. , raw material or qualified personnel.

No company can function regularly if it does not have the ability to generate money in a sustained manner and without diminishing its assets .

It can help you: Financing

  1. Types of financial resources

Financial resources are commonly classified into two: own and others.

  • Own resources . It refers to the equity of the company, composed of the capital it owns, that is, the total of its money in bank accounts, the profits and reserves (money from the commercialization of goods and services), or the investment capital of partners and shareholders who give their money in exchange for shares of the company.
  • Outside resources . Those that are not part of the assets of the company, but that are at its disposal, through negotiations, and that always become a debt (obligation to pay) with other companies. Such is the case of loans from suppliers or creditors, bank or private credits , or the issuance of securities such as bonds , shares, etc., sold to the highest bidder.
  1. Examples of financial resources

The money you receive from customers is only part of the financial resources of a company.

Any form of liquid resource is an example of financial resources:

  • The money that the company has in its bank accounts.
  • The money you receive from your customers for the loan of services or the purchase of products .
  • The bonds, stocks and securities that the company can issue and sell to earn money in exchange for acquiring partners.
  • State grants.
  • Private credits issued by banks or financial institutions, or even a lender.
  1. Importance of financial resources

The importance of financial resources in the performance of any company is fundamental, since the very exercise of productive activity requires inputs that cannot be acquired without capital involved .

For example, if we think of a factory, on the one hand it requires the initial money to buy the machines and rent the premises of its site, in addition to a first batch of raw material.

In addition, they must pay monthly salaries, hire outsourced services that the company itself cannot provide (for example, maintenance, cleaning of the premises, or the selection of its human resources , or the energy consumed by the factory). Finally, you will have to constantly buy raw material to transform it into marketable products.

  1. Other resources of a company

In addition to financial resources, every organization has different types of resources:

  • Human resources . It refers to the set of workers who participate in productive or administrative activity, and whose work keeps the company running.
  • Material resources . It refers to the set of properties, machinery and other tangible inputs that every company owns, and which it freely disposes of since they are part of its patrimony.
  • Technological resources . It refers to the know-how , that is, to the specialized knowledge that is put into practice in production, as well as the set of equipment that is required to do so.

 

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