Money turnover: essence, concept, main components and defining parameters
Cash flow is a set of cash flows that are carried out by millions of economic entities.
Money turnover – the totality of all cash flows in the economy for a certain period.
Depending on the purpose of payments in the reproduction process, they can be grouped into several large flows. This makes it possible to schematize money turnover in the form of several interconnected and circular flows of money.
Cash flow – a set of payments that serve a separate stage (or part of it) of the expanded reproduction process.
The general scheme of money turnover and its constituent flows are shown in the figure.
- payment by firms for the resources they need, which they buy from households (labor, land, housing, etc.);
- government remuneration for civil servants;
- household income from the sale of their resources (wages, interest, dividends, rent, etc.);
- household consumption expenditure;
- payment of net taxes by households;
- payment by households of savings directed to the money market;
- mobilization by firms in the money market of the funds they need for investment;
- investment costs of firms;
- mobilization by the state of funds in the money market (government loans);
- state procurements;
- payment for products entering the country by import;
- receipts into the country of money from the world market in payment for exports;
- firms income from the sale of goods and services (national product);
- net inflow of funds (capital) from the world market to the domestic one;
- net outflow of funds (capital) from the domestic market to the world market.
The structure of money turnover
Money turnover is the movement of money in the performance of their functions in cash and non-cash form.
The basis of money circulation is the social division of labor and the development of commodity production, which in turn has a significant impact on the further expansion of money circulation and the formation of national and world markets.
The beginning of the movement of money is preceded by their concentration in individuals and legal entities. In order for the movement of money to arise, it is necessary for one or the other side to have a need for money. When concluding transactions, money is needed for circulation, payments for goods and services. Their volume is determined by the nominal gross domestic product. The larger the total money supply, the greater the need for money to conclude transactions.
Demand for money is also presented for accumulation, which appears in various forms: deposits in credit institutions, securities, official reserves.
Money circulation is carried out in two forms: cash and non-cash.
Cash turnover – the movement of cash in the sphere of circulation and the performance by them of two functions (means of payment and means of circulation).
Cash is used:
- for the circulation of goods and services;
- for settlements directly related to the movement of goods and services, namely:
- settlements for the payment of wages, bonuses, benefits, pensions;
- on the payment of insurance claims;
- when paying for securities and paying income on them;
- on payments of the population for utilities.
Cash circulation includes the movement of all cash money supply for a certain period of time between the population and legal entities, between the population and government agencies, between legal entities and the state.
Cash flow is carried out using various types of money: banknotes, miniature coins, other credit instruments (bills of exchange, checks, credit cards).
The emission of cash is carried out, as a rule, by the central bank (in Ukraine – the NBU). He issues cash into circulation and withdraws it if it has become unusable, and also replaces the money with new samples of coins and banknotes.
The development of the credit system and the appearance of customer funds in accounts with banks and other credit institutions led to the emergence of non-cash circulation.
Cashless turnover – movement of value without the participation of cash: transfer of funds through the accounts of credit institutions, offset of mutual claims.
Cashless circulation is carried out using checks, bills of exchange, credit cards and other credit instruments.
The size of non-cash turnover depends on the volume of goods in the country, the level of prices, settlement links, as well as the size of distribution and redistribution relations carried out through the financial system.
Cashless circulation has a number of advantages, the essence of which is as follows:
- the social distribution costs are significantly reduced;
- conditions are created for state regulation of monetary circulation;
- the economic situation of the subjects of monetary circulation improves, since the speed of circulation of funds increases;
- it becomes possible to rationally use temporarily free funds in bank accounts.
Depending on the economic content and scope of application, the entire non-cash turnover is divided into two parts: settlements for commodity and non-commodity transactions.
Settlements for commodity transactions for inventory items, services rendered and work performed – they are the predominant ones, they determine the nature and composition of the work of the financial service of the enterprise in the field of settlements. The state of all the calculations of the enterprise, its financial condition, largely depends on the uninterrupted and planned nature of these calculations.
Settlements for non-commodity transactions – related to the fulfillment of the financial obligations of the enterprise (receipt and repayment of loans, payment of interest on them; payment of taxes and other payments to the budget, payment of fines, etc.).
There is an interconnection and interdependence between cash and non-cash circulation: money constantly moves from one sphere of circulation to another, cash changes form into accounts with a credit institution and vice versa.
Thus, non-cash circulation is inseparable from the circulation of cash and together with it forms a single money of the same denomination.