01.10.2019

Three main principles of effective money management. Analysis of the effectiveness of equity and borrowed capital management

The authorized capital of Profile LLC is 10,000 million rubles.

Accounting for authorized capital makes it possible to determine the amount of obligations of an enterprise to its participants (shareholders).

The authorized capital of Profile LLC is divided into shares of participants in accordance with the size of the contribution.

The state and changes in equity and debt capital, as well as the structure of debt capital, are of great importance for investors. The dynamics of the sources of the enterprise’s property are presented in Table 7.

Table 7. Dynamics of sources of property and their structure LLC “Profile”

As the data in table shows. 6, there have been some changes in the structure of the organization’s funding sources over three years.

In 2011, the share of equity capital increased by 26.54%. The share of short-term liabilities decreased by 89.67%. The amount of long-term liabilities decreased by 97 million rubles.

The share of equity capital in 2013 increased compared to 2012 by 24,337 million rubles. The amount of short-term liabilities increased significantly - by 50996 million rubles.

The growth rate of funding sources in 2013 amounted to 512.97%.

To analyze the structure of equity capital, identify the reasons for changes in its individual elements and evaluate these changes for the analyzed period, we will compile Table 8.

As can be seen from Table 8, during the analyzed period there were significant changes in the structure of equity capital.

If in 2011 it consisted of 50.8% of contributions to the consumption fund, 48.8% of additional capital and 0.1% of authorized capital, then by the end of 2013 its composition expanded significantly due to reserve capital. The consumption fund began to account for 55.8% of the company's equity capital.

The size of the authorized capital for the analyzed period did not change and remained equal to 10 million rubles.

Sources of capital				Absolute Deviations 2013 to 2011

Authorized capital
Extra capital
Consumption fund
Retained earnings of the reporting year
Retained earnings from previous years
Total equity

Table 8. Dynamics of the equity capital structure of Profile LLC

The amount of additional capital changed slightly and by 2013 became equal to 5900 million rubles. There was a decrease in the share of additional capital by 4.9%.

The capital structure of the analyzed enterprise carries a risk for investors, since the enterprise operates primarily on borrowed capital.

It is advisable to analyze the efficiency of using equity capital in Profile LLC and assess the financial stability of this enterprise.

Analyzing the indicators presented in Table 9, the following conclusions can be drawn. Autonomy coefficients are among the main indicators of the structure of an enterprise’s sources of funds, and shows the share of the enterprise’s own funds in the total amount of sources. This indicator determines the share of owners in the total value of the enterprise's property. The maximum value of this coefficient = 1.

Analysis of the efficiency of using the equity capital of organizations is a method of accumulating, transforming and using accounting and reporting information with the purpose of:

· assess the current and future financial condition of the organization, that is, the use of equity capital;

· justify the possible and acceptable pace of development of the organization from the point of view of providing them with sources of financing;

· identify available sources of funds, evaluate rational ways of mobilizing them;

· predict the position of the enterprise in the capital market.

Analysis of the efficiency of using organizations' own capital is carried out using various types of models that make it possible to structure and identify the relationships between the main indicators. Given the current situation, descriptive models are the most suitable for analysis. This does not eliminate the problems of using predictive and normative models to analyze the efficiency of using equity capital.

Descriptive models, or models of a descriptive nature, are basic both for conducting capital analysis and for assessing the financial condition of an organization.

These include:

· construction of a system of reporting balances;

· presentation of financial statements in various analytical sections;

· structural and dynamic analysis of reporting;

· coefficient and factor analysis;

· analytical notes for reporting.

All these models are based on the use of accounting information.

Structural analysis represents a set of methods for studying structure. It is based on the presentation of financial statements in the form of relative values that characterize the structure, that is, the share (specific weight) of private indicators in the generalizing final data on equity capital is calculated.

Dynamic analysis allows us to identify trends in changes in individual items of equity capital or their groups included in the financial statements.

Ratio analysis is the leading method for analyzing the efficiency of using an organization's capital, used by various groups of users: managers, analysts, shareholders, investors, creditors and others. Many such coefficients are grouped as follows:

· coefficients for assessing the movement of capital of an enterprise;

· business activity ratios;

· capital structure ratios;

· financial stability ratio;

· maneuverability coefficient;

· ratio of provision of inventories and costs with own working capital.

The coefficients for assessing the flow of equity capital of an enterprise include the coefficients of receipt and use.

The equity capital receipt ratio shows what part of the equity capital available at the end of the reporting period consists of funds newly received into its account:

where Ksk is the coefficient of receipt of equity capital;

SK - equity capital.

The coefficient of use of equity capital shows what part of the equity capital with which the enterprise began operations in the reporting period was used in the process of activity of the business entity:

where Ki.sk is the coefficient of use of equity capital.

Business activity ratios allow you to analyze how effectively a company uses its own capital. As a rule, this group includes various turnover ratios: equity capital turnover; turnover of invested capital; accounts payable turnover.

Equity turnover, calculated in turnover, is defined as the ratio of sales volume (sales) to the average annual cost of equity capital (AC), turnover:

where Kosk is equity capital turnover;

N - volume of sales (sales).

This indicator characterizes various aspects of activity: from a commercial point of view, it reflects either excess sales or their insufficiency; from financial - the rate of turnover of invested capital; economically - the activity of funds at risk of the investor. If it significantly exceeds the level of sales over invested capital, then this entails an increase in credit resources and the possibility of reaching the limit beyond which creditors begin to participate more actively in the business than the owners of the company. In this case, the ratio of liabilities to equity increases, and the risk of creditors also increases, in connection with which the company may experience serious difficulties due to a decrease in income or a general trend towards lower prices. On the contrary, a low indicator means the inactivity of part of one's own funds. In this case, the equity turnover ratio indicates the need to invest equity in another more suitable source of income.

Investment capital turnover is determined as the quotient of sales volume divided by the cost of equity capital plus long-term liabilities.

where OIC is the turnover of investment capital;

N - sales volume;

DO - long-term obligations.

The accounts payable turnover ratio is calculated as the quotient of the cost of goods sold divided by the average annual cost of accounts payable and shows how much the company needs to make turnover of investment capital to pay the invoices issued to it:

where KOKZ is the accounts payable turnover ratio;

KZ - accounts payable.

Turnover ratios can be calculated in days. To do this, you need to divide the number of days in a year (366 or 365) by the turnover ratios calculated above. Then we will find out how many days on average it takes to complete one revolution of the KZ, IR, SK.

Capital structure ratios characterize the degree of protection of the interests of creditors and investors. They reflect the company's ability to repay long-term debt. The coefficients of this group are also called solvency coefficients. We are talking about the equity ratio and the equity to debt ratio.

The equity ratio characterizes the share of equity in the company's capital structure, and, consequently, the relationship between the interests of the owners of the enterprise and creditors. This coefficient is also called the coefficient of autonomy (independence):

where KSK is the equity ratio;

A - assets.

It is advisable to maintain this ratio at a fairly high level, since in this case it indicates a stable financial structure of funds, which is preferred by creditors. It is expressed in a low proportion of borrowed capital and a higher level of funds secured by own funds. This is protection against large losses during periods of downturn in business activity and a guarantee of obtaining loans.

The equity ratio, which characterizes a fairly stable position, all other things being equal, in the eyes of investors and creditors, is the ratio of equity to the total at 60%. In this case, the optimal value of the indicator under consideration for the enterprise is greater than 0.5.

The ratio of debt to equity capital characterizes the degree of dependence of the organization on external loans (credits):

where Ksootn is the ratio of debt and equity capital;

ZK - borrowed capital;

SK - equity capital.

It shows how much borrowed funds account for 1 ruble of own funds. The higher this ratio, the more loans the company has and the riskier the situation, which can ultimately lead to bankruptcy. A high level of the ratio also reflects the potential danger of a cash shortage in the organization.

The interpretation of this indicator depends on many factors, in particular, such as: the average level of this coefficient in other industries; the company's access to additional debt sources of financing; stability of the company's economic activities. It is believed that the ratio of debt to equity capital in a market economy should not exceed one. High dependence on external loans can significantly worsen the organization’s position in the event of a slowdown in the pace of sales, since the costs of paying interest on borrowed capital are classified as semi-fixed, that is, expenses that, other things being equal, do not decrease in proportion to the decrease in sales volume.

A high debt-to-equity ratio may make it difficult to obtain new loans at average market rates. This coefficient plays a vital role when deciding on the choice of sources of financing.

Financial stability ratio is a coefficient equal to the ratio of equity capital and long-term liabilities to the balance sheet currency. The data for its calculation is the balance sheet.

Financial stability ratio:

where Kfu is the financial stability coefficient;

SK - equity capital;

Dobyaz - long-term obligations;

VB - balance sheet currency.

The financial stability coefficient shows what part of the asset is financed from sustainable sources, that is, the share of those sources of financing that the organization can use in its activities for a long time.

If the value of the coefficient fluctuates between 0.8-0.9 and has a positive trend, then the financial position of the organization is stable.

The coefficient of maneuverability of own funds is a coefficient equal to the ratio of the company’s own working capital to the total amount of own funds. The data for its calculation is the balance sheet.

Maneuverability coefficient:

where Km - Maneuverability coefficient;

SK - equity capital.

The coefficient of maneuverability of own funds shows the ability of the enterprise to maintain the level of its own working capital and replenish working capital, if necessary, from its own sources.

The coefficient of maneuverability of own funds depends on the capital structure and the specifics of the industry, it is recommended in the range from 0.2-0.5, but universal recommendations on its value and trend of change are hardly possible.

The equity ratio is a coefficient equal to the ratio of the company's own working capital to the amount of current assets. The data for its calculation is the balance sheet.

Current assets coverage ratio with own funds:

where is Kob? сс - coefficient of provision with own funds;

SOS - own working capital;

OA - current assets.

The equity ratio shows the share of the company's current assets financed from the enterprise's own funds.

The equity ratio characterizes the availability of the enterprise's own working capital, which is necessary for its financial stability. Lack of own working capital, i.e. a negative value of the coefficient indicates that all the organization’s current assets and, possibly, part of the non-current assets were formed from borrowed sources. Improving the financial position of an enterprise is impossible without effective working capital management, based on identifying the most significant factors and implementing measures to increase the enterprise's provision of its own working capital.

The normative value Koss = 0.1 (10%) was established by Decree of the Government of the Russian Federation of May 20, 1994 No. 498 “On some measures to implement legislation on the insolvency (bankruptcy) of enterprises” as one of the criteria for determining the unsatisfactory balance sheet structure along with the current ratio .

The equity ratio is calculated to assess the company's solvency. If the equity ratio at the end of the reporting period is less than 0.1, then the structure of the company’s balance sheet is considered unsatisfactory.

Evaluating the effectiveness of equity capital management 2006 Similar works on the topic "Assessing the effectiveness of equity capital management":
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Year: 2006

Introduction

The relevance of the topic of the course work is due to the fact that equity capital for each enterprise is that vital part, without which neither work nor the further existence of the enterprise is possible. Managing your own capital is associated not only with ensuring the effective use of the already accumulated part of it, but also with the formation of your own financial resources that ensure the future development of the enterprise.

The object of research in this work is the process of formation and use of equity capital, and the subject is the equity capital of VITORG PLUS LLC.

The purpose of the course work is to analyze the efficiency of managing an enterprise's equity capital using the example of VITORG PLUS LLC. To achieve this goal, it is necessary to solve the following tasks:

Study of the economic essence of the enterprise's capital;

Research the structure and sources of the enterprise's own capital;

Analysis of equity capital management.

In preparing the course work, the following methods were used: methods of summarizing practical experience; methods of information processing, methods of financial analysis.

When preparing the course work, the legal acts of the Russian Federation, scientific and educational manuals and monographs, publications of specialized periodicals, and materials from the financial statements of VITORG PLUS LLC were used.

Structurally, the work consists of an introduction, two chapters and a conclusion.

The introduction substantiates the relevance of the work and sets out the purpose and objectives of the research.

The first chapter examines theoretical issues of the sources of an enterprise's own capital: essence, classification and types.

The second chapter of the thesis examines the effectiveness of equity capital management using the example of VITORG PLUS LLC: the results of the company’s activities, the structure of its own and borrowed sources of financial resources and the efficiency of their use are analyzed.

In conclusion, the main conclusions from the study are formulated.

1. Own capital and its role in the activities of the enterprise

1.1. Economic essence of enterprise capital

From the point of view of economic theory, in order to start production, the presence of four factors of production is necessary: labor, land, capital, entrepreneurship. At the same time, labor means human activity aimed at achieving some useful result. Under land as a factor of production in economic theory, we mean not only land as such, but all other benefits that nature provides for human use. Entrepreneurship is a special factor through which the three factors of production listed above are combined. Capital represents the entire accumulated supply of funds necessary for the production of material goods. It is capital that is closely related to financial resources.

Economists often associate the concept of capital with the ability to generate interest or some other income. Depending on what is the source of income received, capital in economic theory is called a variety of things, objects, and phenomena.

Capital - means of production, means produced means of production or goods that can be used to produce future goods. Machinery and equipment are capital, along with industrial and commercial buildings and structures. This approach has its roots in classical political economy. A. Smith considered accumulated labor as capital, D. Ricardo - the means of production, and the physiocrats - land.

Such definitions of capital have become widespread in modern economic theory. Thus, U. Baumol and A. Blinder define capital as the reserves (stocks) of an enterprise, equipment and other production resources owned by a company, an individual or some other organizations. P. Samuelson and W. Nordhaus argue that capital consists of durable goods created by the economy for the production of other goods. These goods include the countless machines, roads, computers, hammers, trucks, rolling mills and buildings that make up the landscape of the modern economy. D. Begg, S. Fischer, R. Dornbusch also believe that physical capital is the stock of production goods that serve to production of other goods and services. Physical capital, in their view, includes assembly line equipment for automobiles, railroads that provide transportation services, school buildings that provide education services, residential buildings that provide housing services, and even household durable consumer goods such as televisions. that provide entertainment.

The concept of capital is often associated with money and financial resources. Thus, J. Robinson argues that capital, when it is contained in finances that have not yet been invested, is a sum of money. D. Begg, S. Fischer, R. Dornbusch propose to distinguish from the “physical capital” of a company its “financial capital,” which is represented by money and securities. According to B. Mintz and M. Schwartz, capital is a universal commodity of the business world. Unlike iron, coal and machinery, which are important to some firms and unimportant to others, capital is necessary for all corporations. It is needed both in the narrow sense for payments to hired workers and suppliers, and in the broad sense for the re-equipment and development of an industrial enterprise.

Capital is the most important category of Marxist political economy. According to K. Marx, capital is a complex concept that, on the one hand, covers the entire system of production relations of bourgeois society, and on the other, is an instrument of exploitation.

K. Marx gives at least three definitions of capital. Firstly, capital as a self-increasing value, which follows from the general formula of capital M - C - M." Secondly, "... capital is not a thing, but a certain, social production relation belonging to a certain historical formation of society, which represented in a thing and gives this thing a specific social character." Thirdly, "capital is movement, a process of circulation, passing through various stages, a process which, in turn, contains three different forms of the process of circulation. Therefore, capital can only be understood as movement, and not as a thing at rest."

Returning to the issue of the relationship between capital and financial resources, it can be noted that economic theory in this case connects it with capital represented in shares, bonds, bills and other forms. Its emergence and circulation are closely related to the functioning of the market for real assets, that is, the market in which the purchase and sale of material resources takes place. With the advent of securities, or stock assets, there is a kind of bifurcation of capital. On the one hand, there is real capital, represented by production assets, and on the other hand, it is reflected in securities.

The emergence of this type of capital is associated with the development of the need to attract increasing amounts of credit resources due to the complication and expansion of commercial and industrial activities. Thus, the stock market historically begins to develop on the basis of loan capital, since the purchase of securities means nothing more than the transfer of part of the monetary capital on a loan, and the paper itself receives the form of a loan document, according to which its owner acquires the right to a certain regular income in the form of interest or dividends on loaned capital. The security (title of ownership) that arises as a result of such a transaction retains its owner's ownership of the loaned capital and, in addition, gives the right to increase it through interest or dividends.

Having appeared, such capital begins to live an independent life. This is manifested in the fact that its market value (the total market price of securities) changes not only under the influence of the functioning of real assets that represent the securities, but also (and often to the most significant extent) depending on other factors, such as, for example, like political events. The value of stock assets can fluctuate widely in relation to the size of firms' production assets, either exceeding them several times or decreasing to almost zero. The life of securities, independent of real assets, is also manifested in independent circulation on the market. From a theoretical point of view, this situation becomes possible due to the fact that, firstly, as a result of the act of lending, capital-property is separated from capital-function and, secondly, the security represents potential monetary capital with a high degree of liquidity, that is, the ability to easily be converted into cash.

1.2. Structure and sources of the enterprise's own capital

Own capital is understood as a set of economic relations that make it possible to include financial resources belonging either to the owners or to the economic entity itself into economic circulation.

Internal sources of equity capital include, first of all, authorized capital, profit from various types of activities, and depreciation of fixed assets.

Authorized capital is an organizational and legal form of capital, the amount of which is determined by the charter or agreement on the founding of an enterprise. The authorized capital can be formed in the form of shares of participants in a limited liability company or by issuing shares when creating a joint-stock company (JSC).

Contribution to the authorized capital can be made in the form of cash, in property form and in the form of intellectual property: patents, licenses, projects. The authorized capital creates the basis for the activities of the established enterprise and is reflected in the liabilities side of the enterprise’s balance sheet.

Reserve capital is a reserved part of the enterprise's equity capital, intended for internal insurance of its economic activities. The size of this reserve part of equity capital is determined by the constituent documents. The formation of reserve capital is carried out at the expense of the enterprise's profits (the minimum amount of profit contributions to the reserve fund is regulated by law).

Special (targeted) financial funds include purposefully formed funds of own financial resources for the purpose of their subsequent targeted spending. These financial funds usually include: depreciation fund, repair fund, labor protection fund, production development fund, etc. The procedure for the formation and use of funds from these funds is regulated by the charter and other constituent documents of the enterprise.

Other forms of equity capital include payments for property (when renting it out), payments to participants (for payment of income to them in the form of interest or dividends) and some others, reflected in the first section of the liability side of the balance sheet.

Retained earnings characterize the part of the enterprise's profit received in the previous period and not used for consumption by the owners (shareholders, shareholders) and staff. This part of the profit is intended for capitalization, i.e. for reinvestment in production development. In terms of its economic content, it is one of the forms of reserve of the enterprise’s own financial resources, ensuring its production development in the coming period.

Sales revenue is the main source of formation of the enterprise's own financial resources. In particular, it is a source of depreciation (in terms of cost) and a source of calculating profit from the sale of goods and services (business income). It is formed as a result of the enterprise’s activities in three main areas:

Main;

Investment;

Financial.

Income from sales, according to Art. 249 of the Tax Code of the Russian Federation, revenue from the sale of goods (work, services) both of own production and previously acquired, revenue from the sale of property (including securities) and property rights are recognized

The income of the enterprise can be divided into two items:

Income from the main activities of the enterprise;

Income from other sales or other activities.

Table 1.1 Structure of income and expenses of the enterprise

INCOME		EXPENSES
from sales	non-operating	for production and sales	non-operating
revenue from the sale of goods of own production; revenue from the sale of previously purchased goods; proceeds from the sale of property; proceeds from the sale of securities; proceeds from the sale of property rights	from equity participation in the activities of other enterprises; from leasing property; dividends received on securities; property received free of charge; penalties, penalties for violation of contracts; positive exchange rate differences on foreign currency accounts; income of previous years identified in the reporting year	material costs; labor costs; the amount of accrued depreciation; other expenses: office, postal, payment for audit and consulting services, taxes and fees, rental payments, advertising costs and others	maintenance of leased property; organization of securities issue; liquidation of decommissioned fixed assets; penalties, penalties for violation of contracts; negative exchange rate differences on foreign currency accounts; court expenses; losses from natural disasters

Profit (loss) is the positive (negative) difference between the enterprise’s income and its expenses. When generating profit, the following income and expenses are taken into account:

The Profit and Loss Statement shows the following components included in the profit of the enterprise:

Gross profit is the difference between revenue from the sale of goods and services (minus VAT and excise taxes) and the cost of goods and services sold, excluding commercial and administrative expenses;

Profit (loss) from sales - gross profit minus commercial and administrative expenses;

Profit (loss before tax) = profit (loss) from sales + interest receivable - interest payable + income from participation in other organizations + other operating income - other operating income + non-operating income - non-operating expenses;

Profit (loss) from ordinary activities - the difference between profit before tax and the amount of income tax;

Net profit is equal to the amount of profit from ordinary activities increased by the amount of extraordinary income, minus the amount of extraordinary expenses.

Depreciation of fixed assets is included in the cost of production according to established standards to the book value of fixed assets. Since depreciation charges are included in the cost price, their value is reflected in the total amount of taxes payable. The larger the amount of depreciation deductions, the lower the amount of income tax and property tax for legal entities. This value allows the company to accumulate its own funds for investment. In Russian and international practice, there are various methods of calculating depreciation: the straight-line write-off method; production method; sum of years (numbers) method; Declining book value (declining balance) method.

Net profit is the goal and, as a rule, the result of the economic activity of any enterprise, is distributed and is the source of the formation of the following monetary funds:

Reserve capital: the monetary fund of an enterprise, which is formed in accordance with the law and constituent documents from deductions from profits remaining at the disposal of the enterprise after paying taxes and other obligatory payments to the budget. It is used if it is necessary to cover the losses of the reporting year, pay dividends in the absence or insufficiency of the profit of the reporting year for these purposes. Therefore, it is advisable to store funds sent to the financial reserve in liquid form so that they generate income and, if necessary, can be easily converted into cash capital.

Accumulation fund: money intended for the development of production. It is necessary both for the development of the main production in order to increase the property of the enterprise, and for financial investments to make a profit.

Consumption fund: funds allocated for social needs, financing of non-production facilities, compensation payments, etc.

Internal (own) sources of financing are characterized by the following positive features:

a) Simplicity and speed of attraction;

b) High return on the criterion of the rate of return on investment of capital, since they do not require payment of loan interest in any of its forms;

c) Significantly reducing the risk of insolvency and bankruptcy of an enterprise when using them;

d) Full retention of management in the hands of the original founders of the company.

However, they have the following disadvantages:

a)Limited volume of attraction, and, consequently, opportunities for a significant expansion of investment activity under favorable investment market conditions:

b)Limited external control over the efficiency of using one’s own investment resources, which, if managed unskillfully, can lead to severe financial consequences for the company.

2. Analysis of the efficiency of equity capital management using the example of VITORG PLUS LLC

2.1. Brief description of the enterprise

The object of the study is the Limited Liability Company "VITORG PLUS", which was formed on April 10, 1998.

According to the Charter of the Company, the sole founder is the Limited Liability Company STYLES LLC.

The main goal of the enterprise is the complete and comprehensive satisfaction of all client needs within the scope of activity with the participation of professional managers and specialists.

The external environment of the enterprise is characterized by two groups of factors: factors of direct and indirect influence.

Factors of direct impact include: state; suppliers; consumers; competitors.

The relationship between an enterprise and the state is that the state directly controls the state and development of the economy. VITORG PLUS LLC is guided in its activities by laws and regulations, decrees, recommendations, and requirements of government authorities. The enterprise regularly makes tax payments and similar mandatory contributions to budgets of various levels and extra-budgetary funds.

Among the competing organizations for VITORG PLUS LLC are MSS LLC, DOK LLC, Realt CJSC, etc.

The competitive advantage of VITORG PLUS LLC is mainly its lower price level, because The company carries out direct supplies of materials, bypassing intermediary organizations.

The organizational structure of the enterprise is shown in Fig. 2.1. According to this scheme, we can conclude that the enterprise has a linear-functional organizational structure.

The activities of the enterprise involve close interaction between all structural divisions, therefore the relevant regulations on departments and job descriptions of specialists are widely used.

Rice. 2.1. Management structure of VITORG PLUS LLC

2.1. Equity management analysis

Own financial resources belong to the business entity itself, and their use does not entail the possibility of losing control over the activities of the enterprise. In business practice, these resources are used mainly to finance fixed assets, long-term investments and partly to form working capital. Ownership is the most important factor in motivating the efficient use of financial resources.

The structure of the company's balance sheet liabilities is presented in Table. 2.1. According to the balance sheet data, the largest share falls on the company's borrowed funds (about 82% at the beginning of the year and 67% at the end of the year). The share of equity capital is respectively 18 and 33% at the beginning and end of the analyzed period. During the period under review, equity capital increased most significantly. Therefore, the first paragraph of this chapter is devoted to the analysis of the enterprise’s own financial resources.

Table 2.1

Liability structure of the enterprise's balance sheet.

Balance indicator	Absolute values thousand rubles	Specific gravities, %	Changes(+,-)

			In absolute terms, thousand rubles	In specific gravity, %
3. Capital and reserves
4. Long-term loans and borrowings
5. Current liabilities
Accounts payable
Short-term loans and borrowings

According to the calculations presented in table. 2.1. the increase in equity capital was 14% (16,457 tr.) compared to the previous year, and the increase in long-term borrowed funds was 8% (10,657 tr.). The amount of short-term borrowed funds decreased by 22% (-11,049 rubles).

The main objectives of equity capital management are:

Determining the appropriate amount of equity capital;

Increasing, if required, the amount of equity capital through retained earnings or additional issue of shares;

Determining the rational structure of newly issued shares;

Determination and implementation of dividend policy.

The analysis of the structure of the enterprise's own funds is presented in Table. 2.2.

Table 2.2

Structure of own funds

The following changes occurred in the structure of equity capital during the year. In absolute values, only the amount of retained earnings changed by 29,589 - 13,132 = 16,457 thousand rubles. This influenced changes in the structure of equity capital: the share of retained earnings increased from 96.4% to 98.4%, and the shares of authorized and additional capital decreased to 0.8% from 1.9 and 1.7%, respectively.

Thus, retained earnings predominate in the structure of equity. Since the enterprise’s activities are profitable, there is a tendency for retained earnings to grow.

It is advisable to determine the enterprise's security with its own sources of funds.

Three indicators of the availability of sources for the formation of reserves and costs correspond to three indicators of the provision of reserves and costs with sources of formation:

1. Surplus (+) or deficiency (-) of own working capital:

+(-) FS = SOS -ZZ;

where ZZ - inventories and costs

SOS - own working capital (defined as the difference between the amount of equity capital and non-current assets

2. Excess (+) or deficiency (-) of own and long-term borrowed sources of formation of reserves and costs:

+(-) FT = SD - ZZ;

where SD are own and long-term borrowed sources

3. Excess (+) or deficiency (-) of the total amount of the main sources for the formation of reserves and costs:

+(-) FO = OI - ZZ;

where OI are the main sources of formation of reserves and costs (SD + short-term attracted resources)

Using these indicators, we can determine a three-component indicator of the type of financial situation:

S(Ф) = 1 if Ф>0

S(Ф) = 0 if Ф<0

It is possible to distinguish 4 types of financial situations:

1.Absolute independence of financial condition. This type of situation is extremely rare, represents an extreme type of financial stability and meets the following conditions:

that is, a three-component indicator of the type of situation S = 1;1;1

2. Normal independence of financial condition, which guarantees solvency: +(-) FS<0;

that is, S = 0;1;1

3. Unstable financial condition, associated with a violation of solvency, but in which it is still possible to restore balance by reducing accounts receivable and accelerating inventory turnover:

that is, S = 0;0;1

4. Crisis financial condition, in which the enterprise is completely dependent on borrowed sources of financing. Own capital and long-term and short-term credits and borrowings are not enough to finance working capital, that is, replenishment of inventories comes from funds generated as a result of the slowdown in repayment of accounts payable:

that is, S = 0;0;0

The calculation results are presented in table. 2.3. Based on the data obtained, we can conclude that the company at the beginning of the year was characterized by an unstable financial condition, and at the end of the year - normal financial independence.

Table 2.3

Classification of the type of financial condition of an organization

Indicators
1 Total inventory and costs (ZZ)
2. Availability of own working capital (SOS)
3. Own and long-term borrowed sources (SD)
4. Total value of sources (VI)
5. FS = SOS - ZZ
6. FT = SD - ZZ
7. FO = OI - ZZ
8. Three-component indicator of the type of financial situation S =

At the beginning of the year, the lack of own working capital amounted to -39,072 thousand rubles, which means financing of most of the current assets through borrowed capital (at the end of the year, the lack of own working capital amounted to 20,925 thousand rubles). There is also a shortage of own and long-term borrowed sources at the beginning of the year - 25,448 thousand rubles. However, by the end of the year there was a surplus in the amount of 9156 thousand rubles. which contributed to increasing the financial stability of the enterprise from unstable at the beginning of the year to normal at the end of the year.

Return on equity allows you to determine the efficiency of using the capital invested by the owners and compare it with the possible profit from investing these funds in other securities. Shows how much profit is received from each unit of money invested by the owners of the enterprise. This indicator serves as an important criterion when assessing the level of stock quotes on the stock exchange.

Return on equity:

Rsk = (Pp/Iss)*100,

where Rsk is return on equity;

Iss - sources of own funds.

This ratio shows how much income investments in a given business bring to investors. Those who have invested their funds for a long term are primarily interested in its growth, because it characterizes how effectively their own capital is used. Like return on assets, it is more appropriate to calculate this ratio using the average equity value for the period, since some of the profits are reinvested throughout the year.

The values of the indicators for calculating the return on equity ratio are presented in table. 2.4.

Table 2.4

Return on equity

Based on the results obtained, we can conclude that the return on equity is at a very high level, which is associated with a fairly low value of the authorized capital. At the same time, there is a tendency for profitability to decrease; during the analyzed period, it decreased by 17%. This reduction occurred due to the fact that the growth rate of sources of own funds exceeded the growth rate of net profit. We can say that the efficiency of investing profits in business is reduced.

As part of the internal sources of formation of its own financial resources, the main place belongs to the profit remaining at the disposal of the enterprise; it forms the predominant part of its own financial resources, ensures an increase in equity capital, and, accordingly, an increase in the market value of the enterprise. Depreciation charges also play a certain role in the composition of internal sources, especially in enterprises with a high cost of their own fixed assets and intangible assets; however, they do not increase the amount of the enterprise’s own capital, but are only a means of reinvesting it. Other internal sources do not play a significant role in the formation of the enterprise's own financial resources.

An analysis of the enterprise's profit is presented in table. 2.5. The amount of total profit is influenced by the following factors: sales revenue, cost of production, income and expenses from other sales, operating income and expenses.

Table 2.5

Profit Analysis

The name of indicators	for 2004	for 2005	deviations	specific gravity,%		Relates. deviations
				for 2004	for 2005

Cost of goods, products, works, services sold
Gross profit
Business expenses
Administrative expenses
Profit (loss) from sales
Operating income
Operating expenses
Non-operating income
Non-operating expenses
Profit (loss) before tax
Income tax and other obligatory payments
Net profit (loss) of the reporting year

According to the data in Table. 2, there was an increase in revenue by 18,116 thousand rubles, production costs increased by 5,967 thousand rubles, but its share in revenue decreased by 1.8%. Gross profit increased by 12,149 thousand rubles. Selling expenses increased by 993 thousand rubles, administrative expenses by 4442 thousand rubles. net profit by 4127 thousand rubles. Operating income and non-operating expenses decreased by 857 thousand. rub. and 509 thousand rubles. respectively. Operating expenses and non-operating income increased by 3,163 thousand rubles. and 2228 thousand rubles. respectively.

According to the data presented, it is clear that the structure of profit elements is quite stable. Changes in the structure do not exceed 2%. There is a trend of proportional growth of all indicators.

For commercial enterprises, it is important to determine the cost recovery threshold, after which they will begin to make a profit - the so-called break-even point. This is the amount of revenue at which the company receives neither profit nor loss, i.e. when the difference between income and expenses is zero. In this case, the total sales volume coincides with the sum of the enterprise’s fixed and variable costs and production breaks even:

3 post

K = ________,

C - I lane

Where TO - the quantity of products produced at which break-even production is achieved;

3 post - the amount of fixed costs necessary for production;

C - price per unit of production;

And per - the sum of variable costs required to produce a unit of production.

If it is planned to produce not one, but several types of products, then the total production volume ensuring break-even can be calculated using the formula:

3 post

P = ________________________________________,

(C1 - And lane 1) * K1 + ... + (Cn - And lane.n) * Kn

Where P - volume of production;

3 post - the amount of fixed costs;

Tsn price per unit of each type of product;

And lane 1 - variable costs per unit of production of each type;

Kn - the share of revenue from the sale of each type of product in the total revenue from the sale of all products produced by the enterprise (in unit shares).

After determining the break-even point, planning is based on the effect of operational (financial) leverage, i.e. that margin of financial strength at which an enterprise can afford to reduce its sales volume without becoming unprofitable. The effect of operating leverage is that any change in sales revenue leads to an even stronger change in profit:

Impact Strength Contribution Margin (Marginal Profit)

operating leverage = _____________________________________________

Profit

Marginal profit = sales revenue - variable costs

Profit (financial result) = marginal profit - constant. expenses

The operational analysis of profit as part of marginal income for the enterprise under consideration is presented in table. 2.6.

Table 2.6

Operational analysis of profit as part of marginal income

indicators	Absolute change	Growth rate
Revenue (net) from the sale of goods, products, works, services
variable costs
marginal income
fixed costs

production lever force
profitability threshold (threshold revenue that ensures break-even operation of the enterprise)

According to table. 2.6. The company's revenue increased by 4.97%, variable costs decreased by 5.24%, and fixed costs increased by 4.08%. Marginal income in 2005 increased by 27.98%, and profit from sales by 140.87%. The operating leverage decreased by 47.55%, therefore, the effect of economies of scale in production decreased in 2005. The profitability threshold decreased by 14.63%.

Thus, based on the results of the analysis, we can conclude that lowering the profitability threshold makes the operation of the enterprise less risky. Undoubtedly, this is a positive factor, since the enterprise’s resistance to market changes increases and contributes to long-term break-even operation.

It is also advisable to conduct a factor analysis of profit using the following model:

P = (q1 q1 - q1 q0) - (q1s1 - q1s0)+ (q1 q0/q0 q0-1)*(q0 q0-q0s0)+((q1 q0-q1s0) - (q0 q0-q0s0)*q0 q0/q1 q0)

q1t1 - revenue from sales of the reporting period in actual prices

q1ц0 - revenue from sales of the reporting period in basic prices

q1s1 - cost of the reporting period in actual costs

q1s0 - cost of the reporting period in basic costs

q0ц0 - revenue from sales of the base period

q0s0 - cost of the base period

This analysis is presented in table. 2.7. The influence of factors on profit is presented in table. 2.8.

Table 2.7

Factor analysis of profit

Profit from sales is influenced by the following factors: changes in sales revenue, changes in the share of products with a higher level of profitability, changes in the cost of products sold, changes in prices.

Table 2.8

Influence of factors on profit, thousand rubles.

The name of indicators	amount of profit changes
the total amount of deviations in profit from sales of the reporting period from the base, incl. due to
growth in revenue from sales of goods (q1 ts0/q0 ts0-1)*(q0 ts0-q0s0)
increasing the share of products with a higher level of profitability ((q1 q0-q1s0) - (q0 q0-q0s0)*q0 q0/q1 q0)
increase in cost of goods sold (-(q 1s 1 - q 1s 0))
increase in selling prices for sold products ((q 1ts1 - q 1ts0))

Thus, the enterprise’s profit increased by 12,149 thousand rubles. due to a reduction in sales revenue by 6,060 thousand rubles, an increase in the share of products with a higher level of profitability by 813 thousand rubles, and a reduction in cost by 20,858 thousand rubles. and an increase in selling prices for sold products by 38,255 thousand rubles.

The most significant factor is the increase in cost. It is advisable for an enterprise to pay increased attention to measures to manage production costs.

Enterprise capital management also includes determining the optimal ratio between own and borrowed financial resources.

In order to answer these questions, it is necessary to become familiar with the concept of financial leverage and consider the issue of its functioning.

Financial leverage (“financial leverage”) is a financial mechanism for managing the return on equity capital by optimizing the ratio of used own and borrowed financial resources.

The effect of financial leverage is an increase in the profitability of equity capital obtained through the use of a loan, despite the payment of the latter.

The effect of financial leverage arises from the discrepancy between economic profitability and the “price” of borrowed funds. Economic profitability of assets is the ratio of the value of the production effect (i.e., profit before interest on loans and income taxes) to the total value of the total capital of the enterprise (i.e., all assets or liabilities).

In other words, the enterprise must initially develop such economic profitability that there are enough funds at least to pay interest on the loan.

To calculate the effect of financial leverage, you can use the following formula:

EGF = (Rk - Rzk) x ZK / SK,

where Rk is the return on total capital (the ratio of the amount of net profit and the price paid for borrowed funds and the amount of capital);

Rzk - return on borrowed capital (the ratio of the price paid for borrowed funds to the amount of borrowed funds);

ZK - borrowed capital (average value for the period);

SK - equity capital (average value for the period).

Calculations of the indicator for the analyzed enterprise are presented in table. 2.9.

Table 2.9

Calculation of the effect of financial leverage


Average borrowed capital
Funds paid for borrowed funds
Return on debt capital
Average total capital
Net profit + funds paid for borrowed capital
Return on total capital
Average equity capital

Thus, a positive EGF value indicates the advisability of raising borrowed funds.

The effect of financial leverage determines the limit of economic feasibility of borrowing funds. Since a positive EGF value indicates the advisability of raising borrowed funds, the analyzed enterprise can attract additional borrowed capital.

A high positive value of the EGF indicator indicates that the company prefers to make do with its own funds, does not make sufficient use of investment opportunities and does not pursue the goal of maximizing profits. In this situation, shareholders, having received modest dividends, may begin to sell shares, reducing the company's market value.

If the profitability of investments in an enterprise is higher than the price of borrowed funds, financing from borrowed sources should be increased, while the rate of profit growth will depend on the rate of change in the capital structure of the enterprise (the ratio of the amounts of borrowed and equity capital). However, an increase in the amount of debt in the structure of liabilities is accompanied by a decrease in the liquidity and solvency of the borrower, an increase in risks, and an increase in the price of loans provided. As a result, the profit from use and the price of borrowed sources are leveled, which leads to a zero value of the effect of financial leverage.

Further growth in the share of borrowed capital greatly increases the risk of bankruptcy of a business entity and should be perceived by management as a signal to repay part of the debt or search for sources of profit growth.

The return on total capital changes depending on the dynamics of the individual components of the above formula. The influence is exerted by the following factors: profit from business operations, the price of attracted resources, the ratio of equity and borrowed capital.

Obviously, with an increase in the share of raised funds in the capital structure and a decrease in financial stability, the rate of profit growth decreases down to a negative value (i.e., to an absolute decrease in profit). Thus, in pursuit of the goal of maximizing profits, an enterprise must increase the share of borrowed capital in sources of financing with a positive EGF value, while simultaneously avoiding financial instability.

The autonomy coefficient is a characteristic of the stability of the financial condition of an enterprise, characterizing the degree of its financial independence. The autonomy ratio is the ratio of own funds to total assets6

Kavt = Sk/Wb

Where Sk is equity capital;

ВБ - balance currency.

In 2004, the value of the indicator was: 13624/77084 = 0.18, and in 2005 - 30081/93149 = 0.32. We can conclude that the enterprise is characterized by high dependence on external sources of financing, since the standard value of the autonomy coefficient is 0.5. However, it should be noted that in 2005 there was a tendency towards improvement of this indicator.

Conclusion

Equity capital characterizes the total value of the enterprise's funds owned by it and used by it to form a certain part of the assets. This part of the asset, formed from the equity capital invested in them, represents the net assets of the enterprise. Equity capital includes sources of financial resources that are different in their economic content, principles of formation and use: authorized capital, additional capital, and reserve capital.

Based on the analysis of our own and attracted sources of financial resources using the example of Vitorg Plus LLC, we can conclude that the share of equity capital in the total sources of financial resources is 18 and 33%, respectively, in 2004 and 2005. respectively at the beginning and end of the analyzed period. The company's own working capital is insufficient to form reserves and costs. Return on equity is at a very high level of 92% in 2004 and 75% in 2005, which is associated with a fairly low value of the authorized capital. The efficiency of using borrowed financial resources in 2005 increased compared to 2004. The structure of borrowed funds is dominated by short-term liabilities: at the beginning of the year they amounted to 80.5%, and at the end of 63.5%.

Return on equity is at a very high level, which is associated with a fairly low value of the authorized capital. At the same time, there is a tendency for profitability to decrease; during the analyzed period, it decreased by 17%. This reduction occurred due to the fact that the growth rate of sources of own funds exceeded the growth rate of net profit. We can say that the efficiency of investing profits in business is reduced.

A positive value of financial leverage indicates the advisability of raising borrowed funds. The profitability of using borrowed funds has increased, showing an increase in the efficiency of external investments.

The autonomy coefficient for the analyzed enterprise is significantly lower than the standard value of 0.5. This fact may limit the enterprise’s ability to attract borrowed funds; therefore, the enterprise should take measures to increase the efficiency of forming the structure of financial resources.

Bibliography

Civil Code of the Russian Federation. Part 1 of November 30, 1994 No. 51-FZ. - "Collection of Legislation of the Russian Federation", 05.12.1994, N 32, art. 3301, "Rossiyskaya Gazeta", N 238-239, 12/08/1994.

Tax Code of the Russian Federation Part 2 of 05.08.2000 N 117-FZ. - “Collection of Legislation of the Russian Federation”, 08/07/2000, N 32, art. 3340, "Parliamentary newspaper", N 151-152, 08/10/2000.

Federal Law of April 22, 1996 N 39-FZ “On the Securities Market”. - "Collection of Legislation of the Russian Federation", No. 17, 04/2/1996, art. 1918, "Rossiyskaya Gazeta", N 79, 04/25/1996.

Federal Law of December 26, 1995 N 208-FZ “On Joint Stock Companies”. - ATP "Garant", 2005. - "Rossiyskaya Gazeta", N 248, 12/29/1995, "Collection of Legislation of the Russian Federation", 01/01/1996, N 1, art. 1.

Bendikov M.A., Jamai E.V. Management of financial resources of knowledge-intensive industries on a competitive basis // Financial management No. 2, 2001.

Berzon N.I., editor. Financial management. - M.: "Academy", 2003.

Brigham Y., Gapenski L. Financial management: Complete course: Translation from English. - M.: "Economic School", 2005.

Gavrilova A.N., Sysoeva E.F., Barabanov A.I. and others. Financial management. - M.: "KnoRus", 2006.

Glukhova M.I., Prikhodko A.V., Snezhinskaya M.V. Securities market: Lecture notes. - M.: "Phoenix", 2004.

Komarov A.V. Strategy for fulfilling an enterprise’s obligations to pay for goods (works, services) in conditions of a shortage of monetary resources // Financial Management No. 2 / 2003.

Kurakov L.P., Vladimirova M.P., Ryabinina E.N., Kurakov V.L. “Economic analysis and fundamentals of financial management” - Cheboksary: Chuvash Publishing House. Univ., 2002.- 366 p.

Course in Economic Theory: Textbook / ed. Prof. Chepurina M.N., prof. Kiseleva E.A. - Kirov: ASA, 2002.

Mishchenko A.V., Posokhov Yu.V., Filatkin A.V., Management of enterprise credit resources // Financial management No. 4, 2003.

Rozanova E.Yu. Managing the investment attractiveness of shares // Management in Russia and abroad No. 1, 2000.

Rudenko O.E. Finance and credit. Educational and practical manual. - M.: MSUTU, 2004.

Samsonov N.F. and others. Financial management. Textbook for universities - M.: "UNITY", 2002.

Samuelson P. Nordhaus V. Economics: Transl. from English - M.: BINOM, 1999.

Safronov N.A., editor. Economics of an organization (enterprise). - M.: "Economist", 2004.

Selezneva N.N., Ionova A.F. The financial analysis. - M.: "UNITY", 2004.

Selezneva N.N., Ionova A.F. The financial analysis. Financial management. - M.: "UNITY", 2003.

Semenov V.M., Nabiev R.A. Finance of construction organizations. - M.: "Finance and Statistics", 2004.

Sklyarenko V.K. and others. Economics of the company Dictionary reference book. - M.: "INFRA-M", 2000.

Vorobiev S.Yu. Strategy for financing enterprise activities based on risk indicators. Scientific proceedings of the IV International Scientific and Practical Conference “Fundamental and applied problems of instrument engineering, computer science, economics and law.” Section “Economics”, part 2 / MGAPI. - Moscow, 2001. - p. 10.

List of references and sources:
1. Civil Code of the Russian Federation. Part 1 of November 30, 1994 No. 51-FZ. – "Collection of Legislation of the Russian Federation", 05.12.1994, N 32, art. 3301, "Rossiyskaya Gazeta", N 238-239, 12/08/1994.
2. Tax Code of the Russian Federation Part 2 of 05.08.2000 N 117-FZ. - “Collection of Legislation of the Russian Federation”, 08/07/2000, N 32, art. 3340, "Parliamentary newspaper", N 151-152, 08/10/2000.
3. Federal Law of April 22, 1996 N 39-FZ “On the Securities Market”. - "Collection of Legislation of the Russian Federation", No. 17, 04/2/1996, art. 1918, "Rossiyskaya Gazeta", N 79, 04/25/1996.
4. Federal Law of December 26, 1995 N 208-FZ “On Joint Stock Companies”. - ATP "Garant", 2005. - "Rossiyskaya Gazeta", N 248, 12/29/1995, "Collection of Legislation of the Russian Federation", 01/01/1996, N 1, art. 1.
5. Bendikov M.A., Dzhamai E.V. Management of financial resources of knowledge-intensive industries on a competitive basis // Financial management No. 2, 2001.
6. Berzon N.I., ed. Financial management. - M.: "Academy", 2003.
7. Brigham Y., Gapenski L. Financial management: Complete course: Translation from English. - M.: "Economic School", 2005.
8. Gavrilova A.N., Sysoeva E.F., Barabanov A.I. and others. Financial management. - M.: "KnoRus", 2006.
9. Glukhova M.I., Prikhodko A.V., Snezhinskaya M.V. Securities market: Lecture notes. - M.: "Phoenix", 2004.
10. Komarov A.V. Strategy for fulfilling an enterprise’s obligations to pay for goods (works, services) in conditions of a shortage of monetary resources // Financial Management No. 2 / 2003.
11. Kurakov L.P., Vladimirova M.P., Ryabinina E.N., Kurakov V.L. “Economic analysis and fundamentals of financial management” - Cheboksary: Chuvash Publishing House. Univ., 2002.- 366 p.
12. Course of economic theory: Textbook / ed. Prof. Chepurina M.N., prof. Kiseleva E.A. – Kirov: ASA, 2002.
13. Methodological recommendations for developing the financial policy of an enterprise: Order of the Ministry of Finance of the Russian Federation dated January 1, 1997 No. 118 // Economics and life. – 1998. – No. 2. – P.12-15.
14. Mishchenko A.V., Posokhov Yu.V., Filatkin A.V., Management of enterprise credit resources // Financial management No. 4, 2003.
15. Rozanova E.Yu. Managing the investment attractiveness of shares // Management in Russia and abroad No. 1, 2000.
16. Rudenko O.E. Finance and credit. Educational and practical manual. - M.: MSUTU, 2004.
17. Samsonov N.F. and others. Financial management. Textbook for universities - M.: "UNITY", 2002.
18. Samuelson P. Nordhaus V. Economics: Transl. from English - M.: BINOM, 1999.
19. Safronov N.A., ed. Economics of an organization (enterprise). - M.: "Economist", 2004.
20. Selezneva N.N., Ionova A.F. The financial analysis. - M.: "UNITY", 2004.
21. Selezneva N.N., Ionova A.F. The financial analysis. Financial management. - M.: "UNITY", 2003.
22. Semenov V.M., Nabiev R.A. Finance of construction organizations. - M.: "Finance and Statistics", 2004.
23. Sklyarenko V.K. and others. Economics of the company Dictionary reference book. - M.: "INFRA-M", 2000.
24. Trokhina S.D., Ilyina V.A., Morozova T.F., Managing the financial condition of an enterprise // Financial management No. 1, 2004.
25. Ugolnikova E.V. Concept and features of a leasing agreement "Citizen and Law", 2002, N 9/10.
26. Financial management: textbook / ed. E.I. Shokhina. – M.: ID FBK-PRESS, 2004.
27. Fischer S., Dornbusch R., Schmalenzi R. Economics Trans. from English from 2nd ed. - M.: Delo, 2002.
28. Sheremet A.D. Theory of economic analysis. - M.: "INFRA-M", 2003.
29. Sheremet A.D., Negashev E.A. Methods of financial analysis.: Textbook for universities. –M.: INFRA-M, 2001. –207 p.
30. Shulyak P.N. Enterprise finance. - M.: "Publishing House Dashkov and K", 2006.

The Bekmology knowledge base contains a huge amount of materials in the field of business, economics, management, various issues of psychology, etc. The articles presented on our website are only a tiny part of this information. It makes sense for you, a casual visitor, to familiarize yourself with the concept of Backmology, as well as the contents of our knowledge base.

Theories of capital have a long history. Adam Smith characterized capital only as an accumulated stock of things or money. At the same time, he made a distinction between fixed capital (it produces profit, while remaining the property of the one who owns it) and circulating capital (it also produces profit, but ceases to be the property of its owner). D. Ricardo interpreted capital as a means of production, without making any distinction between a stick and a stone in the hands of primitive man and modern machines and factories. Unlike his predecessors, K. Marx approached capital as a category of a social nature. Capital is a value that brings surplus value, or it is a self-increasing value. At the same time, K. Marx argued that capital is not money. Money becomes capital only when it is used to purchase the means of production and labor, and he considered only the labor of hired workers to be the creator of the increase in value. “...Therefore, capital can only be understood as movement, and not as a thing at rest.” Profit, according to Marx, is a transformed form of surplus value, considered as a product of the entire advanced capital.

There are three main approaches to formulating the essential interpretation of capital:

1. Economic approach(physical concept of capital)

Capital is the value (totality of resources) advanced into production for the purpose of making a profit. In this case, capital is considered as a set of resources that are the source of income for society. Capital can be divided into real and financial, fixed and working capital. In accordance with this concept, the amount of capital is calculated as the total of the balance sheet for the asset, i.e. The fundamental accounting equation looks like this:

Assets = Total Capital

2. Accounting approach(financial concept of capital)

Capital is interpreted as the interest of the owners of the entity in its assets, i.e. the term “capital” in this case is synonymous with net assets, and its value is calculated as the difference between the amount of assets of a business entity and the amount of its liabilities. A liability is an organization’s debt existing at the reporting date, which is a consequence of completed projects of its economic activity and settlements for which should lead to an outflow of assets.

In this case, the fundamental equation takes the form:

Assets = Liabilities + Capital.

The same approach exists in the definition given in International Financial Reporting Standards (IFRS). The term "capital" means "the net assets, or equity, of a company."

In practice, the understanding of net assets as the assets of an enterprise, free from all debt obligations, has become established. In fact, net assets are the equity capital of the enterprise.

According to the concept of maintaining financial capital, profit is considered earned only if there is an increase in net monetary assets during the reporting period without taking into account all payments to the owners of the organization and their contributions to the organization during the reporting period. It is in accordance with this concept that capital is interpreted as the share of owners in the assets of the organization, and profit - as an increase in the actual purchasing power of the capital invested by the owners.

And in accordance with the concept of maintaining physical capital, profit is considered earned only if during the reporting period there is an increase in the physical productive (or operational) ability of the organization (resources, funds that ensure this ability) without taking into account all payments to the owners of the organization and their contributions to the organization during reporting period. Obviously, within the framework of this concept, the capital of a company is its entire productive capacity, that is, the totality of all its assets as carriers of future economic benefit.

3. Accounting and analytical approach is a combination of the two previous approaches.

In this case, capital as a set of resources is characterized simultaneously from two sides: a) directions of its investment and b) sources of origin. Accordingly, there are two interrelated types of capital: active and passive.

Active capital is the property of a business entity, formally presented in the assets of its balance sheet in the form of two blocks - fixed and working capital.

Passive capital is the sources of funds from which the assets of the entity are formed, and sources of a long-term nature. They are divided into equity and debt capital.

In accordance with the accounting and analytical approach, the amount of capital is calculated as the sum of the results of sections III “Capital and reserves” and IV “Long-term liabilities” of the balance sheet, i.e. in this case, the fundamental accounting equation will take the form:

Assets = Capital + Current Liabilities

Considering capital from the standpoint of how it is reflected in the balance sheet of an organization (enterprise), we note that the structure of assets and liabilities of the balance sheet is different, but the total of assets and liabilities (balance sheet currency) is the same. A liability in relation to an asset performs the function of financing, and assets - the function of covering. Thus, we highlight the concept of “total capital”, which acts as a source of formation of the organization’s assets, i.e. We will use the term “capital” in the broadest sense, namely as the total sources of financing the property of the enterprise (total financial resources).

IFRS principles allow companies to choose one of two concepts of capital as the basis for their accounting methodology (reporting basis):

maintaining financial capital
maintaining physical (or economic) capital.

Currently, most companies preparing their financial statements under IFRS adhere to the financial concept of capital.

The assessment of profit and the reflection of changes in capital in the reporting of companies in accordance with the concept of capital maintenance is one of the basic differences between the accounting methodology determined by the ideas of IFRS and the methodological foundations of existing Russian accounting practice.

The existing differences are that profit is considered not as the difference between the nominal amounts of obligations arising during the implementation of transactions of the reporting company, but as a value demonstrating an assessment of the growth of the real (from the point of view of economic theory) welfare of the company, which allows us to talk about the receipt of income by the owners from investment in its activities.

This approach is more consistent in assessing the success of a company’s activities from the time of its creation to the current moment, taking into account the dynamics of the economic situation in which the company operates. At the same time, the statement of the reliability of the presentation in the reporting of the dynamics of capital assessment is largely a consequence of the exercise of the professional judgment of the accountant, the degree of compliance of which with the actual state of affairs must be assessed in the conclusion of the company’s auditors.

It is very important in this case to understand the difference in the definitions of the concepts we are considering in the original text of IFRS and their existing translations into Russian.

The volume of own sources of funds, called “capital” in Russian translations, in the original text is defined by the term “owners’ share” (equity) in the company’s capital. Based on this, the interpretation of the concept of capital corresponds to its classical interpretation in economic theory - a set of goods, property that carries economic benefits, that is, ultimately allows the organization to generate income.

Thus, capital organizations (enterprises) are the value (financial resources) advanced into production (business) for the purpose of making a profit and ensuring expanded reproduction on this basis.

The financial resources of an economic entity are the funds at its disposal. Financial resources are directed to the development of production (production and trade process), maintenance and development of non-production facilities, consumption, and may also remain in reserve. Financial resources used for the development of the production and trade process (purchase of raw materials, goods and other items of labor, tools, labor, and other elements of production) represent capital in its monetary form.

Financial resources are divided into:

capital
consumption expenses
investments in non-productive areas
financial reserve.

Thus, capital is part of financial resources. Resources aimed at consumption are not capital.

Capital is a part of financial resources allocated for production and economic purposes (current expenses and development). Capital is money intended for profit. The capital structure includes funds invested in:

fixed assets
intangible assets
revolving funds
circulation funds.

Capital and financial resources are of the same nature. However, capital is the value of financial resources put into circulation by an enterprise and generating income from this turnover. In this sense, capital becomes a converted form of financial resources, since it cannot remain in the form of cash for a long time.

The capital of an enterprise characterizes the total value of funds in monetary, tangible and intangible forms invested in the formation of its assets. The economic essence of an enterprise’s capital is determined by its following features:

1. The capital of an enterprise is the main factor of production. There are three main factors of production that ensure the economic activity of manufacturing enterprises - capital; land and other natural resources; labor resources. Among these factors, capital plays a decisive role, since it combines all factors into a single production complex.

2. Capital also characterizes the financial resources of an enterprise that generate income. In this capacity, capital can act in isolation from production – i.e. in the form of loan capital, which generates the enterprise’s income not in operating activities, but in financial activities.

3. Capital is the source of wealth for its owners. The consumed part of capital leaves its composition, being aimed at satisfying the current needs of its owners. The accumulated part is designed to ensure the satisfaction of the needs of its owners in the future.

4. The capital of an enterprise is a measure of its market value. This capacity is represented, first of all, by the enterprise’s own capital, which determines the volume of its net assets. The amount of equity capital also characterizes the company’s ability to attract borrowed funds to ensure additional profit. In combination with other factors, this forms the basis for assessing the market value of the enterprise.

5. The dynamics of an enterprise's capital is an indicator of the effectiveness of its economic activities. The growth rate of equity capital characterizes the level of formation and efficiency of profit distribution of the enterprise, as well as its ability to maintain financial balance from internal sources.

The significant role of capital in the economic development of an enterprise and satisfying the interests of the state, owners and personnel determines capital as the main object of financial management of an enterprise.

Capital classification

The capital of an enterprise is classified according to the following main characteristics:

Classification sign	Classification groups
I.By sources of attraction
1. According to the title of ownership of the capital being formed	Equity - Borrowed capital
2. By groups of sources of raising capital in relation to the enterprise	Capital raised from internal sources - Capital raised from external sources
3. By nationality of the owners of capital providing it for economic use	National (domestic) capital - Foreign capital
4. By type of ownership of capital	Private - Foreign
II. By forms of attraction
1. By organizational and legal forms of attraction	Joint Stock - Share - Individual
2. According to the natural-material form of attraction	Capital in cash - Capital in financial form - Capital in material form - Capital in intangible form
3. According to the time period of attraction	Long-term (permanent) - Short term
III. By nature of use
1. By the degree of involvement in the economic process	Capital used in the economic process - Capital not used in the economic process
2. By areas of use in the economy	Capital used in the real sector of the economy - Capital used in the financial sector of the economy
3. By areas of use in economic activities	Capital used as an investment resource - Capital used as a productive resource - Capital used as a credit resource
4. According to the features of use in the investment process	Initially invested - Reinvested - Disinvested
5. According to the features of use in the production process	Basic - Negotiable
6. According to the degree of involvement in the production process	Working - Not working
7. According to the level of risk of use	Risk-free - Low risk - Medium risk - High risk
8. Compliance with legal regulations of use	Legal - Shadow

Let us consider in more detail the individual types of capital attracted and used by the enterprise, in accordance with its classification according to its main characteristics.

By title The capital generated by an enterprise is divided into two main types - own and borrowed. In the system of sources of attracting capital, this division is decisive.

Equity characterizes the value of the enterprise’s funds owned by it and used by it to form part of its assets. This part of the assets represents the net assets of the enterprise.

Equity is the value of all the assets of a business after all debts have been paid.

The balance sheet is based on the following equation:

equity = total assets – total liabilities =
non-current assets + current assets – current liabilities – long-term liabilities

Own capital as of a specific date can be calculated in another way:

equity = initial investment + retained earnings

where retained earnings are profits reinvested in the business process.

Borrowed capital characterizes funds or property assets attracted on a repayable and paid basis. All forms of borrowed capital used by an enterprise represent its financial obligations subject to repayment.

By groups of sources of raising capital in relation to the enterprise The following types are distinguished: capital attracted from internal sources and capital attracted from external sources.

Capital raised from internal sources, characterizes own and borrowed financial resources generated directly at the enterprise to ensure its development. The basis of own financial resources generated from internal sources is the capitalized part of the enterprise’s net profit (“retained earnings”). The basis of borrowed financial resources generated within the enterprise is current settlement obligations (“internal accrual accounts”).

Capital raised from external sources, characterizes that part of it that is formed outside the enterprise. It covers both equity and borrowed capital attracted from outside. The composition of the sources of this group of capital formation is quite numerous.

By nationality of the owners of capital providing it for economic use, a distinction is made between national (domestic) and foreign capital invested in an enterprise.

National capital, attracted by the enterprise, allows it to better coordinate its economic activities with the economic policy of the state. Additionally, this type of capital tends to be more accessible to small and medium-sized businesses. At the same time, at the present stage of the country’s economic development, the volume of free national capital is very limited, which does not allow business entities to provide the necessary rates of economic growth.

Foreign capital attracted, as a rule, by medium and large enterprises engaged in foreign economic activity. Although the volume of capital supply on the global market is quite significant, the conditions for attracting it by domestic business entities are very limited due to the high level of economic and political risk for foreign investors.

According to the forms of ownership of capital provided to the enterprise, allocate private And state its types. This classification of capital is used primarily in the process of forming the authorized capital of an enterprise. It serves as the basis for the appropriate classification of enterprises by type of ownership.

According to the organizational and legal forms of raising capital by an enterprise There are joint-stock, share and individual types. This division of capital corresponds to the general classification of enterprises by organizational and legal forms of activity.

Share capital is formed by enterprises created in the form of joint-stock companies (companies) of open or closed type. Such corporate enterprises have ample opportunities to generate capital from external sources by issuing shares. If the investment attractiveness of such enterprises is sufficiently high, their share capital can be formed with the participation of foreign investors.

Share capital formed by partnership enterprises created in the form of limited liability companies, limited partnerships, etc. Such enterprises, and accordingly the type of share capital, have become most widespread in modern conditions.

Individual capital characterizes the form of its involvement when creating individual enterprises - family, etc. In modern conditions, individual enterprises have not yet received widespread development in our country, while in foreign practice they are the most widespread (accounting for 70–75% of the total number of all enterprises). The creation of new individual enterprises is hampered by the lack of start-up capital among entrepreneurs and the insufficiently high level of market conditions in most segments of the goods and services market.

By natural-material forms of raising capital modern economic theory identifies the following types: capital in monetary form; capital in financial form; capital in material form; capital in intangible form. Investment of capital in these forms is permitted by law when creating new enterprises and increasing the volume of their authorized capital.

Capital in cash is its most common type attracted by the enterprise. The versatility of this type of capital is manifested in the fact that it can easily be transformed into any form of capital necessary for an enterprise to carry out economic activities.

Capital in financial form attracted by the enterprise in the form of various financial instruments contributed to its authorized capital. Such financial instruments can be stocks, bonds, deposit accounts and bank certificates and other types. In domestic economic practice, attracting capital in financial form is used extremely rarely by enterprises in the real sector of the economy.

Capital in material form attracted by the enterprise in the form of a variety of capital goods (machinery, equipment, buildings, premises), raw materials, materials, semi-finished products, and in some cases - in the form of consumer goods (mainly by trading enterprises).

Capital in intangible form attracted by an enterprise in the form of various intangible assets that do not have a material form, but are directly involved in its economic activities and the formation of profit. This type of capital includes rights to use certain natural resources, patent rights to use inventions, know-how, rights to industrial designs and models, trademarks, computer programs and other intangible types of property assets.

By time period of attraction allocate long-term (permanent) and short-term capital.

Long-term capital attracted by the enterprise, consists of equity capital, as well as borrowed capital with a term of use of more than one year. The totality of own and long-term borrowed capital formed by an enterprise is characterized by the term “permanent capital”.

Short-term capital attracted by the enterprise for a period of up to one year. It is formed to satisfy the temporary economic needs of the enterprise related to the cyclical nature of economic activity, temporary growth in market conditions, etc.

By degree of involvement in the economic process capital is divided into two main types - used and unused in the economic process. This form of capital classification determines the status of its volume used and allows us to identify the possible potential for its additional use in a specific period.

Capital used in the economic process, characterizes it as an economic resource involved in social production with the aim of generating income.

Capital not used in the economic process(or “dead” capital), is a previously accumulated part of it, which, for certain reasons, has not yet been used in the economic process. Such capital not only does not bring income to its owner, but loses its real value during storage in the form of “lost opportunity costs.”

Based on the areas of use in the economy, capital in existing economic practice is divided into two main types - used in the real or financial sectors of the economy. This division of capital is somewhat conditional, since it is based on the corresponding classification of enterprises, and not on capital transactions carried out in various sectors of the economy.

Capital used in the real sector of the economy, characterizes its totality involved in enterprises of this sector - in industry, transport, agriculture, trade, etc. (although a certain part of the capital of these enterprises may be associated with transactions in the financial market).

Capital used in the financial sector of the economy, characterizes its totality involved in various financial institutions (institutions) - commercial banks, investment funds and companies, insurance companies, etc. (although a certain part of the capital of these financial institutions may be directly involved in the processes of actual investment or productive use).

By areas of use in economic activities allocate capital used as an investment resource; capital used as a productive resource; capital used as a credit resource.

Capital used as an investment resource, constitutes a certain part of the capital of enterprises, both real and financial sectors of the economy, involved directly in the investment process. At enterprises of the first group, this part of the capital is used primarily for making real investments (usually in the form of capital investments), and at enterprises of the second group - for making financial investments (usually in the form of investments in securities).

Capital used as a productive resource, constitutes the predominant part of the capital of enterprises in the real sector of the economy. This part of their capital is involved in the direct production of products (goods, services).

Capital used as a credit resource, constitutes the predominant part of the capital of such institutions of the financial sector of the economy as commercial banks and non-bank credit institutions. To a certain extent, capital as a credit resource can be used in forms permitted by law and by other financial institutions (factoring companies, leasing companies, etc.). The use of part of the capital to provide commodity (commercial) credit by enterprises in the real sector of the economy does not belong to the type under consideration (this type of operation is carried out by them at the expense of capital used as a production resource).

According to the features of use in the investment process distinguish initially invested, reinvested and disinvested types of capital. The listed types characterize the movement of capital used in relation to a specific investment object (instrument).

Initial capital invested characterizes the volume of initially generated investment resources aimed at financing a specific investment object (instrument) (or a certain set of them - “investment portfolio”).

Reinvested capital characterizes its repeated investment in a specific object or investment instrument at the expense of returnable net cash flow (net profit, depreciation, etc.).

Disinvestment capital characterizes its partial withdrawal from the corresponding investment object or the investment portfolio as a whole (by selling the relevant assets).

According to the features of use in the production process allocate basic capital and negotiable enterprise capital.

By degree of involvement in the production process in the practice of financial management, working and non-working capital are distinguished.

Working capital characterizes that part of it that is directly involved in generating income and ensuring the operating or investment activities of the enterprise.

Non-working capital(or “dead” capital within an enterprise) characterizes that part of it that is advanced into assets that do not directly participate in the implementation of various types of operating or investment activities of the enterprise and the formation of its income. An example of this type of capital is enterprise funds advanced for unused premises and equipment; stocks of raw materials and supplies for discontinued products; finished products for which there is complete lack of customer demand due to the loss of their consumer qualities, etc.

By risk level The capital used is divided into three main groups - risk-free capital; medium risk capital; high-risk capital.

Risk-free capital characterizes that part of it that is used to carry out risk-free operations related to the production or investment activities of enterprises.

Low risk capital characterizes its use in production and investment operations, the level of risk of which is lower than the market average.

Medium risk capital characterizes that part of it that is involved in production or investment operations, the level of risk of which approximately corresponds to the market average.

High-risk (“venture”, “speculative”) capital characterizes its use in operational activities based on fundamentally new technologies and associated with the release of fundamentally new products (the so-called “venture capital”), or in investment activities associated with financial investment in high-risk (“speculative”) instruments (the so-called “speculative capital").

According to compliance with legal standards of use, they are distinguished legal And "shadow capital", used in the economic activities of enterprises. “Shadow” capital, widely used at the present stage of the country’s economic development, is largely a peculiar reaction of entrepreneurs to the strict “rules of the game” established by the state in the economy, primarily to the unjustifiably high level of taxation of business activities. The increase in the volume of use of “shadow” capital in the economic activities of enterprises serves for the state as a unique indicator of the low efficiency of decisions made in the field of tax regulation of the use as fuel in business activities from the standpoint of maintaining the parity of interests of both the state and the owners of capital.

The essence and objectives of capital management

Capital management is a system of principles and methods for developing and implementing management decisions related to its optimal formation from various sources, as well as ensuring its effective use in various types of economic activities of the enterprise.

Enterprise capital management is aimed at solving the following main tasks:

1. Formation of a sufficient amount of capital to ensure the necessary pace of economic development of the enterprise. This task is implemented by determining the total capital requirement to finance the assets required by the enterprise, developing schemes for financing current and non-current assets, developing a system of measures to attract various forms of capital from the provided sources.

2. Optimization of the distribution of generated capital by type of activity and areas of use. This task is achieved by exploring the possibilities of the most efficient use of capital in certain types of enterprise activities and business operations; formation of the proportions of the future use of capital, ensuring the achievement of conditions for its most efficient functioning and growth of the market value of the enterprise.

3. Providing conditions for achieving maximum return on capital at the envisaged level of financial risk. Maximum profitability (profitability) of capital can be ensured at the stage of its formation by minimizing its weighted average cost, optimizing the ratio of equity and borrowed types of attracted capital, attracting it in such forms that, in the specific conditions of the enterprise’s economic activity, generate the highest level of profit. When solving this problem, it is necessary to keep in mind that maximizing the level of return on capital is achieved, as a rule, with a significant increase in the level of financial risks associated with its formation, since there is a direct connection between these two indicators. Therefore, maximizing the profitability of the formed capital must be ensured within the limits of acceptable financial risk, the specific level of which is established by the owners or managers of the enterprise, taking into account their financial mentality (attitude to the degree of acceptable risk when carrying out business activities).

4. Ensuring the minimization of financial risk associated with the use of capital at the envisaged level of its profitability. If the level of profitability of the capital being formed is set or planned in advance, an important task is to reduce the level of financial risk of operations that ensure the achievement of this profitability. Such minimization of the level of risks can be achieved by diversifying the forms of attracted capital, optimizing the structure of the sources of its formation, avoiding certain financial risks, and effective forms of their internal and external insurance.

5. Ensuring constant financial balance of the enterprise in the process of its development. This balance is characterized by a high level of financial stability and solvency of the enterprise at all stages of its development and is ensured by the formation of an optimal capital structure and its advance in the required amounts into highly liquid types of assets. In addition, financial balance can be ensured by rationalizing the composition of the capital being formed over the period of its attraction, in particular, by increasing the share of permanent capital.

6. Ensuring a sufficient level of financial control over the enterprise on the part of its founders. Such financial control is ensured by a controlling stake (controlling share in the share capital) in the hands of the original founders of the enterprise. At the stage of subsequent capital formation in the process of enterprise development, it is necessary to ensure that attracting equity capital from external sources does not lead to the loss of financial control and the takeover of the enterprise by third-party investors.

7. Ensuring sufficient financial flexibility of the enterprise. It characterizes the ability of an enterprise to quickly generate the financially required amount of additional capital in the event of the unexpected emergence of highly effective investment proposals or new opportunities to accelerate economic growth. The necessary financial flexibility is ensured in the process of capital formation by optimizing the ratio of its own and borrowed types, long-term and short-term forms of its attraction, reducing the level of financial risks, and timely settlements with investors and creditors.

8. Capital turnover optimization. This problem is solved by effectively managing the flows of various forms of capital in the process of individual cycles of its circulation in the enterprise; ensuring the synchronicity of the formation of certain types of capital flows associated with operating or investment activities. One of the results of such optimization is the minimization of the average amount of capital that is temporarily not used in the economic activities of the enterprise and does not participate in the formation of its income.

9. Ensuring timely reinvestment of capital. Due to changes in the conditions of the external economic environment or the internal parameters of the enterprise’s economic activity, a number of areas and forms of use of capital may not provide the envisaged level of its profitability. In this regard, timely reinvestment of capital in the most profitable assets and operations that ensure the required level of its efficiency as a whole plays an important role.

Principles of formation of capital of the created enterprise

The main goal of forming the capital of the created enterprise is to attract a sufficient amount of it to finance the acquisition of the necessary assets, as well as to optimize its structure from the standpoint of ensuring conditions for subsequent effective use.

The process of capital formation for a newly created enterprise has a number of features, the main ones of which are the following:

1. Internal sources of financial resources, which are absent at this stage of its life cycle, cannot be involved in the formation of the capital of the created enterprise.. Thus, the need for the equity capital of a newly created enterprise cannot be satisfied at the expense of its profits, and the need for borrowed capital cannot be satisfied at the expense of current settlement obligations (accrual accounts), which have not yet been formed before the start of the operation of the enterprise.

2. The basis for the formation of the start-up capital of the created enterprise is the equity capital of its founders. Without contributing a certain part of your own capital to the creation of a new enterprise, it is quite difficult to attract borrowed capital (the formation of the start-up capital of a newly created enterprise exclusively through borrowed capital can be considered only as a theoretical possibility and is very rare in practice).

3. Start-up capital, formed in the process of creating a new enterprise, can be attracted by its founders in any form. These forms can be cash; various types of fixed assets (buildings, premises, machinery, equipment, etc.); various types of tangible current assets (stocks of raw materials, materials, goods, semi-finished products, etc.); various intangible assets (patent rights to use inventions, rights to industrial designs and models, rights to use a trademark or trademark, etc.); certain types of financial assets (various types of securities traded on the stock market).

4. The equity capital of the founders (participants) of the created enterprise is invested in it in the form of authorized capital. Its initial size is declared by the charter of the created enterprise.

5. Features of the formation of the authorized capital of a new enterprise are determined by the organizational and legal forms of its creation. This formation is carried out under the regulatory influence of the state. Thus, state regulations regulate the minimum size of the authorized capital of enterprises created in the form of an open joint-stock company and a limited liability company. For corporate enterprises created in the form of an open joint-stock company, the procedure for issuing shares, the volume of acquisition of a block of shares by its founders, the minimum volume of acquisition of shares by all shareholders during the stipulated period of open subscription and some other aspects of the initial formation of their capital are also regulated.

6. The possibilities and range of sources for attracting borrowed capital at the stage of creating an enterprise are extremely limited. Although there is an assertion in financial circles that any good entrepreneurial idea will definitely receive funding, this statement should be considered as a clear exaggeration (especially in a transitional economy). Modern practice shows that financing a new business by lenders is a rather complex and sometimes intractable task. At the same time, at the initial stage of formation of the enterprise’s capital, such borrowed sources as the issue of bonds, tax credits, etc. cannot be involved in its creation.

7. Forming the capital of a newly created enterprise through borrowed and attracted sources requires, as a rule, the preparation of a special document - a business plan. A business plan is the main document that defines the need to create a new enterprise, in which its main characteristics and projected financial indicators are outlined in the generally accepted sequence of sections. As a rule, the business plan for creating a new enterprise reflects the following main indicators: the total need for start-up capital necessary to start the operation of the enterprise; financing scheme for a new business proposed by its founders; expected terms of return of invested capital to investors (creditors) and some others.

8. To prepare a business plan, the founders of the newly created enterprise must make certain pre-start capital expenditures. These costs are associated with paying the business plan developers and funding related research. Pre-start-up capital expenses are, as a rule, not included in the amount of the authorized capital of the created enterprise.

9. Risks associated with the formation (and subsequent use) of the capital of the created enterprise are characterized by a fairly high level. This predetermines a correspondingly high level of cost of individual elements of borrowed capital attracted at the stage of creating an enterprise.

The initial stage of managing the formation of capital of the created enterprise is to determine the need for the required volume. The insufficient volume of capital formation at this stage significantly lengthens the period of opening and developing the production capacity of a new enterprise, and in some cases does not make it possible to begin its operating activities at all. At the same time, the excess volume of formed capital leads to subsequent inefficient use of the enterprise's assets and reduces the rate of return on this capital. In connection with the above, determining the total capital requirement of the enterprise being created is in the nature of its optimization calculations. Optimizing the total capital requirement of a newly created enterprise is the process of calculating the actually required amount of financial resources that can be effectively used at the initial stage of its life cycle.

Optimization of the total capital requirement of the created enterprise is achieved by various methods, the main of which are:

1. Balance sheet method optimization of the total capital requirement is based on determining the required amount of assets to allow a new enterprise to begin economic activity. This calculation method is based on the balance sheet algorithm: the total amount of assets of the created enterprise is equal to the total amount of capital invested in it.

The methodology for calculating the total amount of assets of the created enterprise in its alternative options was discussed earlier. When using this method, it should be taken into account that even before the formation of assets, the founders of the enterprise incur certain pre-start expenses associated with the development of a business plan, execution of constituent documents, etc. Taking into account these costs, the calculation of the total capital requirement of a newly created enterprise using the balance sheet method is carried out using the following formula:

Pk = Pa + Prk

Pa – the total need for assets of the created enterprise, determined at the stage of developing its business plan;
Prk – pre-start-up expenses and other one-time capital costs associated with the creation of a new enterprise.

2. Method of analogies is based on establishing the amount of capital used at similar enterprises. An analogue enterprise for such an assessment is selected taking into account its industry, region of location, size, technology used, the initial stage of the life cycle and a number of other factors.

Determining the volume of capital requirements of the created enterprise using this method is carried out according to the following main stages:

At the first stage Based on the projected parameters for the creation and future operation of the enterprise, its most significant features (indicators) are determined that influence the formation of the volume of its capital.

At the second stage Based on established characteristics (indicators), a preliminary list of enterprises is formed that can potentially act as analogues of the enterprise being created.

At the third stage a quantitative comparison of the indicators of selected enterprises is carried out with previously determined parameters of the enterprise being created that affect the need for capital. In this case, correction factors are calculated for the individual parameters being compared.

At the fourth stage taking into account correction factors for individual parameters, the total capital requirement of the created enterprise is optimized.

When characterizing this method of optimizing the overall capital requirement, it should be noted that there is a certain complexity in its use due to insufficient opportunities for adequate selection of analogous enterprises according to all significant parameters that form the amount of required capital.

3. Specific capital intensity method is the simplest, but allows you to obtain the least accurate calculation result. This calculation is based on the use of the “product capital intensity” indicator, which gives an idea of how much capital is used per unit of output produced (or sold). It is calculated in the context of industries and sub-sectors of the economy by dividing the total amount of capital used (own and borrowed) by the total volume of produced (sold) products. In this case, the total amount of capital used is determined as the average in the period under review.

The use of this method of calculating the total capital requirement for creating a new enterprise is carried out only at the preliminary stages before the development of a business plan. This method provides only an approximate estimate of capital requirements, since the industry average capital intensity of products fluctuates significantly across enterprises under the influence of individual factors. The main such factors are: a) the size of the enterprise; b) stage of the enterprise life cycle; c) progressiveness of the technology used; d) progressiveness of the equipment used; e) the degree of physical wear and tear of equipment; f) the level of use of the enterprise’s production capacity and a number of others. Therefore, a more accurate assessment of the capital requirement for creating a new enterprise when using this calculation method can be obtained if the calculation uses the indicator of capital intensity of products at existing analogue enterprises (taking into account the above factors).

Calculation of the total capital requirement of a newly created enterprise based on the capital intensity of production is carried out using the following formula:

Pk = Kp x OR + PRk

where Pk is the total capital requirement to create a new enterprise;
Kp – indicator of capital intensity of products (industry average or analogue);
OR – planned average annual production volume;
PRk – pre-launch expenses and other one-time capital costs associated with the creation of a new enterprise.

The advantage of this method of optimizing the overall capital requirements of the created enterprise is that it automatically sets the capital productivity indicators of the enterprise at the stage of its operation.

In the system for managing the formation of capital of the created enterprise, an important role belongs to the justification of the scheme and the choice of sources of its financing.

The financing scheme for a new business determines the fundamental approaches to the formation of the capital structure, specific methods of attracting it, the composition of participants and creditors, the level of financial independence and a number of other important parameters of the created enterprise.

When forming the capital structure of a newly created enterprise, two main schemes for its financing are usually considered.

I. Full self-financing provides for the formation of capital of the created enterprise exclusively at the expense of its own types, corresponding to the organizational and legal forms of the new business. This financing scheme, characterized in foreign practice by the term “financing without leverage,” is typical only for the first stage of an enterprise’s life cycle, when its access to borrowed sources of capital is difficult.

II. Blended finance provides for the formation of capital of the created enterprise at the expense of both its own and borrowed types, attracted in various proportions. At the initial stage of operation of an enterprise, the share of equity capital (the share of self-financing of a new business) usually significantly exceeds the share of borrowed capital (the share of credit financing).

The choice of a financing scheme for a new business is inextricably linked with taking into account the peculiarities of using both equity and borrowed capital.

Equity characterized by the following main positive features:

1. Ease of attraction, since decisions related to increasing equity capital (especially through internal sources of its formation) are made by the owners and managers of the enterprise without the need to obtain the consent of other economic entities.

2. Higher ability to generate profit in all areas of activity, because when using it, payment of loan interest in all its forms is not required.

3. Ensuring the financial sustainability of the development of the enterprise, its solvency in the long term, and, accordingly, reducing the risk of bankruptcy.

However, it has the following disadvantages.

1. Limitation of the volume of attraction, and therefore the possibilities for a significant expansion of the operating and investment activities of the enterprise during periods of favorable market conditions at certain stages of its life cycle.

2. High cost in comparison with alternative borrowed sources of capital formation.

3. The unused opportunity to increase the return on equity ratio by attracting borrowed funds, since without such attraction it is impossible to ensure that the financial profitability ratio of the enterprise’s activities exceeds the economic one.

Thus, an enterprise that uses only its own capital has the highest financial stability (its autonomy coefficient is equal to one), but limits the pace of its development (since it cannot ensure the formation of the necessary additional volume of assets during periods of favorable market conditions) and does not use financial opportunities to increase profit on invested capital.

Borrowed capital characterized by the following positive features.

1. Sufficiently wide opportunities for attraction, especially with a high credit rating of the enterprise, the presence of collateral or a guarantee from a guarantor.

2. Ensuring the growth of the financial potential of the enterprise if it is necessary to significantly expand its assets and increase the growth rate of the volume of its economic activities.

3. Lower cost in comparison with equity capital due to the provision of a “tax shield” effect (withdrawal of costs for its maintenance from the tax base when paying income tax).

4. The ability to generate an increase in financial profitability (return on equity ratio).

At the same time, the use of borrowed capital has the following disadvantages.

1. The use of this capital generates the most dangerous financial risks in the economic activity of an enterprise - the risk of reduced financial stability and loss of solvency. The level of these risks increases in proportion to the increase in the proportion of use of borrowed capital.

2. Assets formed from borrowed capital generate a lower (all other things being equal) rate of profit, which is reduced by the amount of loan interest paid in all its forms (interest on a bank loan; leasing rate; coupon interest on bonds; bill interest on goods loan, etc.).

3. High dependence of the cost of borrowed capital on fluctuations in financial market conditions. In a number of cases, when the average lending interest rate in the market decreases, the use of previously obtained loans (especially on a long-term basis) becomes unprofitable for the enterprise due to the availability of cheaper alternative sources of credit resources.

4. The complexity of the attraction procedure (especially on a large scale), since the provision of credit resources depends on the decisions of other economic entities (creditors), requires in some cases appropriate third-party guarantees or collateral (in this case, guarantees from insurance companies, banks or other economic entities are provided, usually on a paid basis).

Thus, an enterprise using borrowed capital has a higher financial potential for its development (due to the formation of an additional volume of assets) and the possibility of increasing the financial profitability of its activities, but to a greater extent generates financial risk and the threat of bankruptcy (increasing as the share of borrowed funds increases in the total amount of capital employed).

Financing schemes for specific sources of capital formation

The choice of financing scheme and specific sources of capital formation for the created enterprise is influenced by a number of objective and subjective factors. The main of these factors are:

1. Organizational and legal form of the created enterprise. This factor determines, first of all, the forms of attracting equity capital by directly investing it by investors in the authorized capital of the enterprise being created or attracting it through an open or closed subscription to its shares.

2. Industry specific features of the enterprise's operating activities. The nature of these features determines the structure of the enterprise's assets and their liquidity. Enterprises with a high level of capital intensity of production, due to the high share of non-current assets, usually have a low credit rating and are forced to focus on their own sources of raising capital when forming capital. In addition, the nature of industry characteristics determines the different duration of the operating cycle (the period of turnover of the enterprise's working capital in days). The lower the period of the operating cycle, the greater the extent (other things being equal) that borrowed capital raised from various sources can be used.

3. Enterprise size. The lower this indicator, the more the need for capital at the stage of creating an enterprise can be satisfied from its own sources and vice versa.

4. Cost of capital raised from various sources. In general, the cost of debt capital raised from various sources is usually lower than the cost of equity capital. However, in the context of individual sources of borrowing, the cost of capital fluctuates significantly depending on the expected credit rating of the enterprise being created, the form of loan security and a number of other conditions.

5. Freedom to choose funding sources. Not all of the sources are available for individual businesses being created. Thus, only some of the most significant national and municipal enterprises can count on funds from state and local budgets. The same applies to the opportunities for enterprises to receive targeted and preferential government loans, and gratuitous financing of enterprises from non-state financial funds and institutions. Therefore, sometimes the range of available sources of capital formation for a newly created enterprise comes down to a single alternative.

6. Capital Market Conditions. Depending on the state of this situation, the cost of borrowed capital raised from various sources increases or decreases. If this cost increases significantly, the predicted differential of financial leverage may reach a negative value (at which the use of borrowed capital will lead to unprofitable operating activities of the newly created enterprise).

7. Profit taxation level. In conditions of low income tax rates or the planned use of profit tax benefits by the enterprise being created, the difference in the cost of equity and borrowed capital being formed is reduced. This is due to the fact that the tax adjuster effect when using borrowed funds is reduced. Under these conditions, it is more preferable to form the capital of the newly created enterprise from its own sources. At the same time, with a high profit tax rate, the efficiency of raising capital from borrowed sources increases significantly.

8. A measure of risk taken by founders when forming capital. Aversion to high levels of risk shapes the founders' conservative approach to financing the creation of a new enterprise, in which its basis is its own capital. Conversely, the desire to obtain high returns on invested equity capital in the future, despite the high level of risk of violating the financial stability of the enterprise being created, forms an aggressive approach to financing a new business, in which borrowed capital is used in the process of creating an enterprise to the maximum possible extent.

9. The specified level of concentration of equity capital to ensure the required financial control. This factor usually determines the proportions of formation of equity capital in a joint-stock company. It characterizes the proportions in the volume of subscription to shares purchased by its founders and other investors (shareholders).

Taking into account these factors allows you to purposefully select a financing scheme and structure of sources of attracting capital when creating an enterprise.

Cost of Capital Management

The essence of the concept of the cost of capital is that, as a factor of production in an investment resource, capital in any of its forms has a certain value, the level of which must be taken into account in the process of its involvement in the economic process.

The process of assessing the cost of capital is consistently carried out at the enterprise in the following three stages:

Estimation of the value of individual elements of the enterprise's equity capital.
Assessment of the cost of individual elements of borrowed capital attracted by an enterprise.
Estimation of the weighted average cost of capital of an enterprise.

Let us consider the features and methodological tools for assessing the cost of capital of an enterprise in the context of each of the listed stages.

1. The cost of operating equity capital has the most reliable calculation basis in the form of reporting data of the enterprise. In the process of such an assessment, the following are taken into account:

A) average amount of equity capital used in the reporting period at book value. This indicator serves as the initial basis for adjusting the amount of equity capital taking into account its current market valuation. This indicator is calculated using the chronological average method for a number of internal reporting periods;

b) average amount of equity capital employed at current market valuation. The methodology for calculating this indicator was described earlier;

V) the amount of payments to capital owners (in the form of interest, dividends, etc.) from the net profit of the enterprise. This amount represents the price that the company pays for the capital used by the owners. In most cases, this price is determined by the owners themselves, setting the amount of interest or dividends on invested capital in the process of distributing net profit.

The cost of operating equity capital of the enterprise in the reporting period is determined by the following formula:

SKFO = ChPs x 100 / SK

where SKFO is the value of the operating equity capital of the enterprise in the reporting period, %;
NPV – the amount of net profit paid to the owners of the enterprise in the process of its distribution for the reporting period;
SK is the average amount of equity capital of the enterprise in the reporting period.

The process of managing the cost of this element of equity capital is determined, first of all, by the area of its use - the operating activities of the enterprise. It is associated with the formation of the operating profit of the enterprise and its profit distribution policy (the forms of such a policy will be discussed below).

Accordingly, the cost of operating equity capital in the planning period is determined by the formula:

SKfp = SKfo x PW

where SKfp is the cost of the operating equity capital of the enterprise in the planning period, %;
SKFO – the value of the operating equity capital of the enterprise in the reporting period, %;
PW is the planned growth rate of profit payments to owners per unit of invested capital, expressed as a decimal fraction.

2. Cost of additionally attracted share capital is calculated during the assessment process differentially for preferred shares and common shares (or additionally attracted shares).

The cost of raising additional capital through the issue of preferred shares determined taking into account the fixed amount of dividends, which is predetermined for them. This greatly simplifies the process of determining the value of this element of capital, since servicing obligations on preferred shares will largely coincide with servicing obligations on borrowed capital. However, a significant difference in the nature of this service from the standpoint of valuation is that payments for servicing borrowed capital are included in expenses (cost) and are therefore excluded from taxable profit, and dividend payments on preferred shares are made at the expense of the net profit of the enterprise, i.e. . do not have a “tax shield”. In addition to paying dividends, the company's expenses also include issue costs for issuing shares (the so-called “placement costs”), which amount to a significant amount.

Taking these features into account, the cost of additionally attracted capital through the issue of preferred shares is calculated using the formula:

SSKpr = Dpr x 100 / (Kpr x (1 – EZ))

where ССКр – cost of equity capital raised through the issue of preferred shares, %;
Дnp – the amount of dividends provided for payment in accordance with the issuer’s contractual obligations;
Kpr – the amount of equity capital raised through the issue of preferred shares;
EZ – costs of issuing shares, expressed as a decimal fraction in relation to the amount of the issue.

The cost of raising additional capital through the issue of common shares(or additionally attracted shares) requires taking into account the following indicators:

a) the amount of additional issue of common shares (or the amount of additionally attracted shares);

b) the amount of dividends paid in the reporting period per share (or the amount of profit paid to owners per unit of capital);

c) the planned growth rate of profit payments to capital owners in the form of dividends (or interest);

d) planned costs for issuing shares (or attracting additional share capital).

In the process of attracting this type of equity capital, it should be borne in mind that in terms of cost it is the most expensive, since the costs of servicing it do not reduce the profit tax base, and the risk premium is the highest, since this capital is protected in the least in the event of bankruptcy of an enterprise degrees.

The cost of additional capital raised through the issue of common shares (additional shares) is calculated using the following formula:

SSKpa = Ka x DpaPVt x 100 / (Kpa x (1 – EZ))

where SSKpa is the cost of equity capital raised through the issue of common shares (additional shares), %;
Ka is the number of additionally issued shares;
Dpa – the amount of dividends paid per common share in the reporting period (or payments per unit of shares), %;
PVT – the planned rate of dividend payments (interest on shares), expressed as a decimal fraction;
Kpa – the amount of equity capital raised through the issue of common shares (additional shares);
EZ – costs of issuing shares, expressed in decimal fractions in relation to the amount of issue of shares (additional shares).

Taking into account the assessment of the cost of individual components of equity capital and the share of each of these elements in its total amount, the weighted average cost of equity capital of the enterprise can be calculated.

The role of debt capital in the financial management process

Borrowed capital in the process of financial management is assessed according to the following main elements: 1) the cost of a financial loan (bank and leasing); 2) the cost of capital raised through the issue of bonds; 3) the cost of a commodity (commercial) loan (in the form of short-term or long-term deferred payment); 4) the cost of current liabilities according to settlements.

1. Cost of financial loan is assessed in terms of the two main sources of its provision at the present stage - bank loans and financial leasing (the fundamental provisions of such an assessment can also be used when an enterprise attracts a financial loan from other sources).

A) bank loan cost, despite the variety of its types, forms and conditions, is determined on the basis of the interest rate for the loan, which forms the main costs of servicing it. This rate requires two clarifications during the assessment process: it must be increased by the amount of other costs of the enterprise stipulated by the terms of the loan agreement (for example, credit insurance at the expense of the borrower) and reduced by the income tax rate in order to reflect the real costs of the enterprise.

Taking into account these provisions, the cost of borrowed capital in the form of a bank loan is estimated using the following formula:

SBK = PKb x (1 – Snp) / (1 – ZPb)

where SBK is the cost of borrowed capital attracted in the form of a bank loan, %;
PKB – interest rate for a bank loan, %;
ZPb – the level of expenses for attracting a bank loan to its amount, expressed as a decimal fraction.

If the company does not incur additional costs to attract a bank loan or if these costs are insignificant in relation to the amount of funds raised, then the given valuation formula is used without its denominator (its basic version).

Managing the cost of a bank loan comes down to identifying offers on the financial market that minimize this cost both in terms of the interest rate for the loan and other conditions for attracting it (with the same amount of the loan attracted and the period of its use remaining unchanged).

b) Cost of financial leasing– one of the modern forms of attracting financial credit – is determined on the basis of the leasing payment rate (leasing rate). It should be taken into account that this rate includes two components: a) gradual repayment of the principal amount (it represents the annual rate of financial depreciation of an asset raised under financial leasing, according to which, after payment, it is transferred into the ownership of the lessee); b) the cost of direct servicing of the lease debt. Taking these features into account, the cost of financial leasing is estimated using the following formula:

SFL = (LS – NA) x (1 – SNP) / (1 – ZPfl)

where SFL is the cost of borrowed capital raised under financial leasing terms, %;
LP – annual leasing rate, %;
NA – annual depreciation rate of an asset attracted under financial leasing terms, %;
SNP – income tax rate, expressed as a decimal fraction;
ZPfl – the level of expenses for attracting an asset under financial leasing to the cost of this asset, expressed as a decimal fraction.

Management of the cost of financial leasing is based on two criteria: a) the cost of financial leasing should not exceed the cost of a bank loan provided for the same period (otherwise it is more profitable for an enterprise to obtain a long-term bank loan to purchase an asset in ownership); b) in the process of using financial leasing, proposals must be identified that minimize its cost.

2. The cost of borrowed capital raised through the issue of bonds, is assessed on the basis of the coupon interest rate on it, which forms the amount of periodic coupon payments. If the bond is sold on other terms, then the valuation basis is the total amount of the discount on it, paid at maturity.

In the first case, the assessment is carried out according to the formula:

CO3k = SC x (1 – Snp) / (1 – EZo)

where SOZ k is the cost of borrowed capital raised through the issue of bonds, %;
SC – coupon interest rate on the bond, %;
SNP – income tax rate, expressed as a decimal fraction;
EZo is the level of emission costs in relation to the emission volume, expressed as a decimal fraction.

In the second case, the cost is calculated using the following formula:

CO3d = Dg x (1 – Snp) x 100 / ((Ho – Dg) x (1 – EZo))

where SOZD is the cost of borrowed capital raised through the issue of bonds, %;
Dg – average annual discount on the bond;
But is the face value of the bond to be redeemed;
SNP – income tax rate, expressed as a decimal fraction;
EZo is the level of issue costs in relation to the amount of funds raised through the issue, expressed as a decimal fraction.

Managing the cost of attracted capital in this case comes down to developing an appropriate issuance policy that ensures the full implementation of issued bonds on terms not higher than the market average.

3. Cost of commodity (commercial) loan is assessed in terms of two forms of its provision: a) for a loan in the form of a short-term deferred payment: b) for a loan in the form of a long-term deferred payment, issued by a bill of exchange.

A) the cost of a commodity (commercial) loan provided in the form of a short-term deferred payment, at first glance, appears to be zero, since in accordance with established commercial practice, deferment of payments for delivered products within the stipulated period (usually up to one month) is not subject to additional payment. In other words, outwardly this form of loan looks like a financial service provided free of charge by the supplier.

However, in reality this is not the case. The cost of each such loan is estimated by the size of the discount from the price of the product when making a cash payment for it. If, according to the terms of the contract, deferred payment is allowed within a month from the date of delivery (receipt) of the product, and the size of the price discount for cash payment is 5%, this will be the monthly cost of the attracted commodity loan, and per year this cost will be: 5 % x 360 / 30 = 60%. Thus, the seemingly free provision of such a commodity loan may turn out to be the most expensive source of borrowed capital in terms of the cost of attraction.

The cost of a trade loan provided in the form of a short-term deferred payment is calculated using the following formula:

STKk = (CS x Z60) x (1 – SNP) / PO

where STKk is the cost of a commodity (commercial) loan provided on the terms of a short-term deferred payment, %;
CA – the size of the price discount when making a cash payment for products (“payment against documents”), %;
SNP – income tax rate, expressed as a decimal fraction;
PO – period of deferred payment for products, in days.

Considering that the cost of attracting this type of borrowed capital is hidden, the basis for managing this cost is its mandatory assessment at the annual rate for each commodity (commercial) loan provided and its comparison with the cost of attracting a similar bank loan. Practice shows that in many cases it is more profitable to take out a bank loan to constantly pay for products immediately and receive an appropriate price discount than to use this form of commodity (commercial) loan.

b) the cost of a commodity (commercial) loan in the form of a long-term deferred payment with a bill of exchange is formed on the same terms as a bank one, but must take into account the loss of a price discount for cash payment for products.

The cost of this form of commodity (commercial) loan is calculated using the formula:

STKv = PKv x (1 – Snp) / (1 – TsS)

where STKv is the cost of a commodity (commercial) loan in the form of a long-term deferred payment with a bill of exchange, %;
PKv – interest rate for a bill of exchange loan, %;
Spi – income tax rate, expressed as a decimal fraction;
CA – the size of the price discount provided by the supplier when making a cash payment for products, expressed as a decimal fraction.

Managing the cost of this form of trade credit, like banking, comes down to finding options for the supply of similar products that minimize the size of this cost.

4. Cost of current liabilities of the enterprise according to calculations when determining the weighted average cost of capital, it is taken into account at a zero rate, since it represents free financing of the enterprise through this type of borrowed capital. The amount of these liabilities is conditionally equated to equity capital only when calculating the standard for the enterprise's provision of its own working capital; in all other cases, this part of current liabilities is considered as short-term borrowed capital (within one month). Since the terms of payment of this accrued debt (for wages, taxes, insurance, etc.) are strictly determined, it does not apply to managed financing from the standpoint of assessing the cost of capital.

Taking into account the assessment of the cost of individual components of borrowed capital and the share of each of these elements in its total amount, the weighted average cost of borrowed capital of an enterprise can be determined.

Estimation of the weighted average cost of capital of an enterprise

The assessment of the weighted average cost of capital of an enterprise is based on an element-by-element assessment of the cost of each of its components. The results of this element-by-element assessment of the cost of capital are preliminarily grouped in a table.

Table. Grouping the results of an element-by-element assessment of the cost of capital to calculate its weighted average cost

Taking into account the given initial indicators, the weighted average cost of capital (CAC) is determined, the fundamental calculation formula for which is:

SSC = amount by i C i x Y i

where SSC is the weighted average cost of capital of the enterprise;
C i– the cost of a specific element of capital;
Y i– the share of a specific element of capital in the total amount.

The calculated weighted average cost of capital is the main criterion indicator for assessing the efficiency of capital formation of an enterprise.

Capital structure management. Assessing the efficiency of using borrowed capital. Financial leverage

The capital structure is the ratio of all forms of own and borrowed financial resources used by an enterprise in the course of its business activities to finance assets.

In the process of financial capital management, optimization of its structure is one of the most important and complex tasks.

The optimal capital structure is a ratio of the use of own and borrowed funds that ensures the most effective proportionality between the financial profitability ratio and the enterprise’s financial stability ratio, i.e. its market value is maximized.

One of the mechanisms for optimizing the capital structure of an enterprise is financial leverage.

Financial leverage characterizes the enterprise's use of borrowed funds, which affect the measurement of the return on equity ratio. Financial leverage is an objective factor that arises with the appearance of borrowed funds in the amount of capital used by an enterprise, allowing it to obtain additional profit on its own capital.

An indicator reflecting the level of additionally generated profit on equity capital at different shares of borrowed funds is called the effect of financial leverage. It is calculated using the following formula:

EFL = (1 - SNP) * (KVRa - PC) * ZK/SK,

where EFL is the effect of financial leverage, concluding
resulting in an increase in the ren-
Statement of equity, %;

SNP - income tax rate, expressed as a decimal fraction;

KVRa - coefficient of gross profitability of assets (ratio of gross
profit to average asset value), %;

PC - the average amount of interest on a loan paid by an enterprise for
use of borrowed capital, %;

ZK - the average amount of borrowed capital used by the enterprise;

SK is the average amount of the enterprise's equity capital.

Let us consider the mechanism of formation of the effect of financial leverage using the following example (table):

Table.Formation of the effect of financial leverage

	Indicators	Company
	Indicators

	The average amount of total capital used (assets) for the analyzed period, including:
	Average net worth
	Average amount of borrowed capital
	The amount of gross profit (excluding interest costs on the loan)
	Gross return on assets ratio (excluding interest costs on loans), %
	Average interest rate for a loan, %
	The amount of interest on the loan paid for the use of borrowed capital (item 3 * item 6): 100
	The amount of gross profit of the enterprise, taking into account the costs of paying interest on the loan (clause 4 - clause 7)
	Income tax rate expressed as a decimal fraction
	Amount of income tax (clause 8 * clause 9)
	The amount of net profit remaining at the disposal of the enterprise after paying tax (clause 8 - clause 10)
	Return on equity ratio or financial profitability ratio, % (item 11 * 100): item 2
	Increase in return on equity due to the use of borrowed capital, in% (relative to enterprise “A”)

Analysis of the data presented allows us to see that for enterprise “A” there is no effect of financial leverage, since it does not use borrowed capital in its business activities.

For enterprise "B" the effect of financial leverage is:

EFL = (1-0.35) * (20-15) * (50000/250000)=0.65%

Accordingly, for enterprise “B” this indicator is:

EFL = (1-0.35) * (20-15) * (150000/150000)=3.25%

From the results of the calculations it is clear that the higher the share of borrowed funds in the total amount of capital used by the enterprise, the greater the level of profit it receives on its own capital. At the same time, it is necessary to pay attention to the dependence of the effect of financial leverage on the ratio of the return on assets ratio and the level of interest for the use of borrowed capital. If the gross return on assets ratio is greater than the level of interest on the loan, then the effect of financial leverage is positive. If these indicators are equal, the effect of financial leverage is zero. If the level of interest on a loan exceeds the gross return on assets ratio, the effect of financial leverage is negative.

The mechanism of formation of the effect of financial leverage can be expressed graphically (Fig.). To do this, we will use the data from the example given above.

Rice. Graph of the formation of the effect of financial leverage

The given formula for calculating the effect of financial leverage allows us to distinguish three main components:

1. Tax adjuster of financial leverage (1-Snp), which shows to what extent the effect of financial leverage is manifested in connection with different levels of profit taxation.

2. Financial leverage differential (KVRa-PK), which characterizes the difference between the gross return on assets ratio and the average interest rate on a loan.

3. Financial leverage ratio (LC/SC), which characterizes the amount of borrowed capital used by the enterprise per unit of equity capital.

Tax corrector of financial leverage practically does not depend on the activities of the enterprise, since the profit tax rate is established by law. At the same time, in the process of managing financial leverage, a differential tax adjuster can be used in the following cases:

a) if differentiated rates of profit taxation are established for various types of activity of the enterprise;

b) if the enterprise uses tax benefits on profits for certain types of activities;

c) if individual subsidiaries of the enterprise operate in free economic zones of their country, where a preferential income tax regime applies;

d) if individual subsidiaries of the enterprise operate in countries with a lower level of income taxation.

In these cases, by influencing the sectoral or regional structure of production (and, accordingly, the composition of profit according to the level of its taxation), it is possible, by reducing the average rate of profit taxation, to increase the impact of the tax corrector of financial leverage on its effect (all other things being equal).

Financial leverage differential is the main condition that forms the positive effect of financial leverage. This effect manifests itself only if the level of gross profit generated by the enterprise's assets exceeds the average interest rate for the loan used. The higher the positive value of the financial leverage differential, the higher, other things being equal, its effect.

Due to the high dynamics of this indicator, it requires constant monitoring in the process of managing the effect of financial leverage. This dynamism is due to a number of factors.

First of all, during a period of deterioration in financial market conditions, the cost of borrowed funds may increase sharply, exceeding the level of gross profit generated by the assets of the enterprise.

In addition, a decrease in the financial stability of an enterprise in the process of increasing the share of borrowed capital used leads to an increase in the risk of its bankruptcy, which forces lenders to increase the interest rate for the loan, taking into account the inclusion of a premium for additional financial risk. At a certain level of this risk (and, accordingly, the level of the general interest rate for the loan), the financial leverage differential can be reduced to zero (at which the use of borrowed capital will not increase the return on equity) and even have a negative value (at which the return on equity will decrease, since part of the net profit generated by equity capital will go to the formation of used borrowed capital at high interest rates).

Finally, during a period of deterioration in commodity market conditions, the volume of product sales decreases, and, accordingly, the size of the enterprise’s gross profit from production activities decreases. Under these conditions, a negative value of the financial leverage differential can be formed even at constant interest rates for the loan due to a decrease in the gross return on assets ratio.

In light of the above, we can conclude that the formation of a negative value of the financial leverage differential for any of the above reasons always leads to a decrease in the return on equity ratio. In this case, the use of borrowed capital by an enterprise has a negative effect.

Financial leverage ratio is the lever (leverage in literal translation - leverage) that causes a positive or negative effect obtained due to its corresponding differential. With a positive differential value, any increase in the financial leverage ratio will cause an even greater increase in the return on equity ratio, and with a negative differential value, an increase in the financial leverage ratio will lead to an even greater rate of decline in the return on equity ratio. In other words, an increase in the financial leverage ratio causes an even greater increase in its effect (positive or negative depending on the positive or negative value of the financial leverage differential).

Thus, with a constant differential, the financial leverage ratio is the main generator of both the increase in the amount and level of profit on equity, and the financial risk of losing this profit. Similarly, with a constant financial leverage ratio, positive or negative dynamics of its differential generate both an increase in the amount and level of return on equity and the financial risk of its loss.

Knowledge of the mechanism of influence of financial capital on the level of profitability of equity capital and the level of financial risk allows you to purposefully manage both the cost and capital structure of the enterprise.

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The managers of every commercial organization strive to achieve high financial results and efficiency of the enterprise. To achieve these goals, it is important to monitor and evaluate the effectiveness of money management. When analyzing the effectiveness of capital management, it is necessary to evaluate the weighted average cost of capital, profitability and capital turnover indicators.

It is important for financial management to know how capital is being used effectively. This problem can be solved by estimating the weighted average cost of capital of an enterprise. It helps to attract the cost of capital and select financing options for projects needed to implement the financial strategy.

The weighted average cost of capital indicator reveals information about the composition of the elements of the formed or emerging capital of the enterprise, individual value and significance in the amount of total capital. The weighted average cost of capital determines the relative amount of expenses for the use of financial resources invested in the activities of the enterprise. Let's consider this indicator at the Agro-Standard LLC enterprise and compare it with economic profitability.

Table 11 - Weighted average cost of capital, at the end of the year

Index	Growth rate, %	Growth rate, %	Growth rate, %
Share of equity capital, %
Share of long-term liabilities, %
Share of short-term liabilities, %
Cost of equity, %
Cost of long-term liabilities, %
Cost of short-term liabilities, %
Tax corrector, %
Weighted average cost of capital (WACC), %
Return on assets, %
Effect of financial leverage, %

According to Table 11, the level of costs to maintain economic potential with the current structure of the enterprise’s sources of funds is 11%; 7.5%; 7.6%, 9.9% by year, respectively, as you can see, the attractiveness of the enterprise for potential investors increased by 2012. Now, using the diagram, we will conduct a comparative analysis of WACC and return on assets. As can be seen in the diagram, only in

Figure 4 - Comparison of WACC with economic profitability

2011 return on assets exceeds the weighted average cost of capital, which means that this year the company was able to pay not only interest on loans and interest to owners, but also reinvest part of the profit in production. In the remaining years of the analyzed period, the return on assets is below the weighted average cost of capital of the enterprise, which indicates that the enterprise may have serious problems attracting new capital to finance its activities. That is why tracking this ratio is one of the most important tasks of a financial manager.

The calculated effect of financial leverage on the enterprise has a negative value, this is explained by the fact that economic profitability is lower than interest on debt obligations, this suggests that borrowed capital will not have a positive impact on return on equity.

Profitability indicators are necessary to assess the overall effectiveness of investing in a business entity, and they are also important for assessing the activity of an enterprise, since these indicators reflect the degree of profitability. When analyzing the efficiency of capital management of the enterprise Agro-Standard LLC, profitability indicators were calculated, which are presented in Table 12.

The return on assets at the Agro-Standard LLC enterprise in 2009 and 2010 is very low, only 1% and 2%, which indicates that the company's management did not effectively use assets to generate profit. Thus, in 2011, return on assets increased to 11%, which is assessed positively; in 2012, this figure decreased by 4.8% and amounted to 6.8%.

Table 12 - Indicators of return on capital of the enterprise

The conducted factor analysis, the results of which are presented in Table 10, showed that the decrease in return on assets in 2012 was influenced by the following factors: return on sales decreased by 2.04% and asset turnover decreased by 2.82%. This trend is assessed negatively as there is a decrease in overall profitability.

The return on current assets in 2009 was only 1.8%, which indicates that the level of profitability of the business is approaching unprofitability, but in 2010 this figure increased to 5.7%, and in 2011 to 17.1 %, this situation is assessed positively as the profitability of the enterprise increases. But in 2012, the return on working capital decreased to 8.5%, this was due to the faster growth rate of current assets compared to the growth rate of net profit, which indicates a slowdown in working capital turnover.

The minimum value of capital return was only 1% in 2009, the maximum in 2011 was 18%, and in 2012 it decreased to 11%, therefore, the amount of profit that the organization receives for each ruble invested in fixed assets decreased by 7 %.

The return on sales in terms of profit from sales during the period under study exceeds the return on sales in terms of net profit, which indicates that the company has other expenses that significantly exceed other income. Return on sales for the main activity in 2012 compared to 2011 decreased by 4.23% and amounted to 12.2%, as can be seen from Table 10, this change occurred due to a decrease in sales profit by 6.4%, and sales growth of 2.2%.

Table 13 - Changes in return on assets, sales and equity due to individual factors

Index	2010 - 2009	2010 - 2011	2011 -2012
Return on assets, %
Return on sales, %
Asset turnover, %
Return on equity, %
Return on sales, %
Asset turnover, %
Asset to equity ratio, %
Return on sales, %
Revenue from sales, %
Volume of sales, %

According to the data presented on the graph of the dynamics of return on equity, it is clear that this indicator for the period under study was unstable, changing either upward or downward.

Analyzing the return on equity in more detail, it is necessary to consider the data in Table 9 and Table 10. In 2009, this studied indicator was only 1.9%, but then it increased in 2010 to 6.5%, in 2011. up to 22.9%. Achieving maximum return on equity was due to an increase in return on sales by 6.34%, an increase in asset turnover by 9.39% and a decrease in the sensitivity coefficient by 0.24%. In 2012 there is a decrease in this

Figure 5 - Dynamics of return on equity

indicator by 9% due to a decrease in return on sales by 4.01%, a decrease in asset turnover by 5.55% and due to an increase in the sensitivity coefficient by 0.825.

In general, the company's profitability indicators are not high, but in the first three years of the period under study they had a tendency to gradually increase, but in 2012 there was a drop in all profitability indicators, the reason for this was a sharp decrease in the net profit received from investments in the economic activities of the enterprise. An analysis of the enterprise's capital turnover will help us understand the reasons that influenced the decrease in return on capital.

Turnover indicators characterize the level of business activity of an organization aimed at promoting the company in the product market. Since capital turnover is related to its profitability and characterizes its business activity and the intensity of use of the enterprise’s funds, in the analysis process it is necessary to study in detail the capital turnover indicators and determine at what stages of the circulation the acceleration or deceleration of the movement of funds occurred.

Table 14 - Analysis of enterprise capital turnover

Index	Growth rate, %	Growth rate, %	Growth rate, %
Average value of total assets, thousand rubles.
Average value of current assets, thousand rubles
Average value of material current assets (inventories), thousand rubles.
Average value of industrial reserves, thousand rubles
Average value of finished products and goods, thousand rubles
10. Proceeds from the sale of goods and materials
Turnover ratio, number of revolutions:
Assets;
Current assets;
Inventory;
Finished products and goods
Duration of turnover, days:
Assets;
Current assets;
Inventory;
Finished products and goods

The capital turnover indicators of the enterprise Agro-Standard LLC are presented in Table 14. During the first three years of the period under study, there was an increase in asset turnover from 0.47 turnover in 2009 to 0.99 turnover in 2011, and the duration of turnover at this time decreased by 401.42 days. This trend is assessed positively, since the higher the turnover of assets and the shorter the duration of turnover, the more intensively the assets are used in the activities of the enterprise. However, in 2012, asset turnover decreased by 0.3 turnover compared to 2011. And the duration of turnover increased by 152.2 days, which means that funds invested in assets began to generate less income and, consequently, the business activity of the enterprise decreased.

At the enterprise from 2009 to 2011, the turnover of working capital accelerates from 0.78 revolutions to 1.44 revolutions, and the duration of the turnover accordingly decreased from 467 days to 253 days.

Accelerating the turnover of working capital reduces the need of enterprises for working capital and allows the use of monetary and material resources more efficiently. In 2012, the turnover ratio decreases to 0.88 revolutions, which leads to an increase in the enterprise's need for working capital.

The inventory turnover ratio in 2012 compared to 2009 increased by 5.7% and amounted to 7.14%; this situation is assessed positively, since the higher the company’s inventory turnover, the more efficient production is and the less the need for working capital for its organization. While inventory turnover ratios are growing, finished product turnover ratios are falling, so in 2012, compared to 2009, the studied indicator decreased by 1.29 turnover, which indicates a drop in demand for products.

I would like to note that, in general, turnover indicators have increased, but not significantly, so it can be argued that the business activity of the enterprise is not at a high level, which significantly affects the return on capital, which is also not characterized by high indicator values.

Based on the above, we can summarize the analysis of the efficiency of capital use. The company did not effectively use capital to finance current activities. The weighted average cost of capital is higher than economic profitability, which indicates that the policy of raising borrowed funds is not rational, on the one hand, and on the other hand, that the funds raised do not bring such a return that would fully cover the costs of raising funds and ensure the expansion of activities. The reason for this state of affairs is the low return on capital, which in turn depends on the turnover of the enterprise’s funds. Low capital turnover is a consequence of the influence of many factors that need to be monitored and eliminated, because it is in such ineffective capital management that the reasons for the decrease in financial stability and the deterioration in the financial condition of the enterprise Agro-Standard LLC lie.

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Introduction

1. Own capital and its role in the activities of the enterprise

1.1. Economic essence of enterprise capital

1.2. Structure and sources of the enterprise's own capital

2. Analysis of the efficiency of equity capital management using the example of VITORG PLUS LLC

2.1. Brief description of the enterprise

2.1. Equity management analysis

Conclusion

Bibliography

Capital classification

The essence and objectives of capital management

Principles of formation of capital of the created enterprise

Financing schemes for specific sources of capital formation

Cost of Capital Management

Capital structure management. Assessing the efficiency of using borrowed capital. Financial leverage

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