Financial Resources (Meaning and Explanation)

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

What are financial resources?

In business administration, when we talk about financial resources, we refer to the set of so-called “liquid resources” of an organization or those that have 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 shares in other organizations.

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

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

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

Types of financial resources

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

Own resources. It refers to the company's assets, composed of the capital it has, that is, the total of its money in bank accounts, profits and reserves (money from the marketing of goods and services), or the investment capital of partners and shareholders who give their money in exchange for company shares.
External resources. Those that are not part of the company's assets, but are at its disposal, through negotiations, and that always become debt (payment obligation) 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

financial resources examples money — The money it receives from customers is only part of a company's financial resources.

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

He money that the company has in their bank accounts.
He money you receive from your clients for the loan of services or the purchase of products.
The bonds, stocks and securities that the company can issue and sell to make money in exchange for acquiring partners.
State subsidies
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 exercise of productive activity requires inputs that cannot be acquired without capital in between.

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

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

Other resources of a company

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

Human resources. It refers to the group of workers who participate in productive or administrative activity, and whose work keeps the company going.
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 form part of its assets.
Technological resources. It refers to know-howthat is, the specialized knowledge that is put into practice in production, as well as the set of equipment that is required to do so.