In controlling a company’s financial performance, a basic concept of financial management is needed to obtain working capital funding, use or allocate funds, and manage assets to achieve the company’s main goals.
According to the Big Indonesian Dictionary (KBBI) finance is everything related to money, the ins and outs of money, money matters, or the state of money.
Because if a company does not have good financial management, it will have difficulties in running its business.
Therefore it can be concluded that a finance must have a close relationship with the monetary world, especially money.
As you also know, money is an important tool that must be had when making a transaction.
Therefore it is very important to know a basic financial concept. So, what is contained in a basic financial concept?
Is it the same as the basic concept of accounting? Here are 6 basic concepts of finance:
1. Net income
The basic concept of finance that business people need to know is net income or net income.
Every businessman needs to know how to calculate profits to get information on how much profit he has made.
You can also use an audit report to ensure accuracy in all transactions and forecast balances for existing accounts.
But for those of you who don’t want to bother tidying up all existing financial transactions, you can use professional bookkeeping services which is ready to assist you in making every transaction in your business.
A net income is very useful for investors to assess how much income exceeds the organization’s expenses.
The value that appears on rule of 70 is also an indicator of the company’s profitability.
If your company’s net income shows a high number compared to competing companies, it is said that your company’s condition is getting better.
According to Barro and Robert J in their book Macroeconomics, inflation is a process of increasing prices in general and is continuously related to market mechanisms that can be caused by various factors such as consumption in society which is now starting to increase, or excess liquidity in the market that triggers consumption. or even speculation, to include the result of the improper distribution of goods.
However, if for business actors, inflation can provide maximum benefits because the amount of income is higher than the increase in production costs.
Because this inflation will also encourage the country’s economy to be better by increasing national income.
However, if an inflation rate is more than thirty percent and almost reaches one hundred percent, then the business economy will be more chaotic.
Because if this happens, it will result in the price of goods soaring high, making it difficult for the little people.
However, as an entrepreneur you must also be able to meet the demand in economics in order to maintain your business and avoid financial risk problems
The third basic concept of finance is liquidity. The definition of liquidity according to the Financial Dictionary issued is the ability to fulfill all obligations that must be paid immediately in a short time.
In general, liquidity is the power or ability of a company to pay its short-term obligations and debts it owns.
One example of short-term debt owned by companies such as taxes, trade payables, dividends and several other types.
Each company has a different level of liquidity which can be described by numbers.
What is used to describe the level of liquidity a company has is a ratio.
However, high liquidity is a sign that a company is performing well in its operational activities.
The benefits of the basic concept of liquidity finance for the company are
• Useful as a tool that can anticipate urgent funding needs that must be met by the company
• Very useful for those of you who have a company that is engaged in finance or finance, liquidity can make it easier for customers who want to borrow and withdraw funds.
• And the last is to measure the level of flexibility of the company in getting investors or other profitable businesses for the company.
If you are a businessman or planning to start a business, then I hope you would have got great information from our article.