In business administration, when talking about financial resources, the allusion is made to the set of so-called “liquid resources” of an organization or a certain degree of liquidity. That is, they can be converted into cash or other equivalents.
In that 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, known as the financial cost or cost of capital, and is normally equivalent to interest payable.
The management of a company’s financial resources is a fundamental activity for its survival since they allow the acquisition or contracting of goods 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 cannot generate money in a sustained manner without reducing its equity.
Types of financial resources
Financial resources are commonly classified into two: own and third parties.
- 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 company’s assets, 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.
Examples of financial resources
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.
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 the capital involved.
For example, if we think of a factory, on the one hand, it requires the initial money to buy the machines and lease the premises of its location, in addition to the first batch of raw material.
They must also pay monthly salaries, contract 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 materials to transform them into marketable products.
Other resources of a company
In addition to financial resources, every organization has different types of resources:
- Human resources. It refers to the group 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 of which it freely disposes 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 and the set of equipment required to do so.