Answer to Question #240260 in Economics for kajal

Question

“Regulatory mechanisms are implemented to ensure that there is always a balance between the inflow of money and the outflow of funds so that the financial markets are able to function efficiently and effectively.” Regarding the above statement explain any 3 important regulatory institutions.

Answer 1

Effective management of various types of cash flows of the organization provides:

1) Financial balance, stability, and profitability of the enterprise, which depend on the uniformity of movement and the level of synchronization in terms of volumes and time of different types of cash flows. The higher the level of synchronization, the faster the strategic goals are realized and the more intensively the company develops.

2) Rational use of the financial resources of the company, which allows to reduce credit dependence, to minimize the need of the company for borrowed funds.

Reducing the risk of insolvency, when the organization cannot fulfill its financial obligations in the required amounts on time.

3) Synchronizing the receipt of money is an essential part of the company's anti-crisis plan. The imbalance of various types of cash flows of an organization increases the risk of insolvency and bankruptcy of even a successful enterprise.

Competent and effective financial management contributes to obtaining additional profits and increasing the assets of the company. It is necessary to include in turnover even temporarily free residual funds and continuously increase investment resources.

With a high level of synchronization of income and expenses in terms of volume and time, the company's real need for the current and insurance balance of funds decreases. Such a management strategy is aimed at reducing the reserves of investment resources that are formed in the process of real investment.

Competent financial management contributes to the discovery of new sources of profit. Effective management of various types of cash flows allows you to create additional resources for investment (investments) - the placement of capital in order to make a profit.