Financial resources: Concepts, examples, and characteristics - GovtVacancy.Net

Financial resources: Concepts, examples, and characteristics - GovtVacancy.Net
Posted on 25-10-2022

Financial resources: Concepts, examples, and characteristics

Financial resources are the means that every organization uses to carry out its business operations. They provide an indication to determine the level of liquidity that is possessed, that is, the availability of liquid and non-liquid resources.

Due to their value, it can be deduced that financial resources are the assets that represent the main economy of a company.

Definition of financial resources

Financial resources are defined as those assets that have a certain level of liquidity. That is, they are those resources that have as an attribute the possibility of being converted into cash in a certain period of time and at a certain value.

So, a financial resource is an asset that is either already cash or has the conditions to be in the future. The level of liquidity of an asset is what determines how quickly a resource can be converted into cash. The greater the liquidity, the easier it is for a resource to be converted into cash without significant losses in its value.

These resources are generated mainly through the production and sale of products and services that the company itself has as an economic activity.

Examples of financial resources

  • Money: It is the resource with the highest level of liquidity, since it is the pure representation of a liquid asset.

  • Shares: Shares are also resources with a certain degree of liquidity, and depending on the action, said resource may be more or less liquid. That is, if a stock is easy to buy and sell with minimal impact on its value, it is considered a highly liquid stock.

  • Properties: Properties are considered items with a low degree of liquidity, since they are resources that require time to be sold. Additionally, properties may lose value when sold.

Types of financial resources

  • Own resources: These are the resources that the company itself generates. The greater the resources of an organization, the less dependence it will have on external resources. This leads to less financial debt and, therefore, the financial risk is reduced.

  • External resources: These are the resources that do not come from the company itself, but from external sources. For this reason, these resources are in the passive balance, since it is money that must be returned.

Characteristics of financial resources

  • It is an asset with a certain level of liquidity, and may be liquid or non-liquid.

  • They are the means used by a company to finance its business activities.

  • They can be the company's own resources or resources outside of it.

  • They are resources that are obtained due to the economic activity of the company, that is, by the sale of products or services.

Importance of financial resources in a company

Financial resources represent the capital means to finance the operations of a company. They pay for the strategic activities that are carried out to meet the company's objectives. In addition, they allow you to make investments to increase the possibilities of creating other sources of income and generate more money in the long term.

Good management of financial resources guarantees the proper development of an organization, avoiding having to resort to external financing and increasing productive activity.

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