financial assets. Capital Financial Assets Valuation Model Capital financial assets are
A comprehensive assessment of a financial asset is understood as the determination of its main characteristics.
In this case, first of all, the market value of the asset and the real rate of return that it provides to the investor, or the required rate of return that the financial asset must provide to the investor in accordance with its level of risk and liquidity, are to be assessed.
Valuation of financial assets is carried out both in the primary and secondary markets. In the primary market, it consists in setting such a rate of return on a financial asset that would correspond to the degree of its risk, market interest rates, and the issuer's credit rating. In the secondary market, this is the revaluation of a financial asset, the adjustment of its market price in such a way that a financial asset of a certain level of risk provides a certain level of income.
The current market value of a financial asset is determined by the amount of future payments on the asset, discounted through the current structure of market interest rates. Often this value is called the estimated market value, since it may not be equal to the current market value of the asset, established in the market as a result of balancing supply and demand for this asset. The correspondence between the current market value and the estimated market value depends on the choice of the discount rate and the accuracy of determining the expected cash flows for each specific financial asset.
The estimated market value of any financial asset can be determined as the present value of the expected cash flows from the asset. Discounted at an interest rate determined by the level of risk of the financial asset and current market interest rates. In general, the assessment of the market value consists of three stages:
- Calculation of a certain or an estimate of an uncertain expected cash flow and an assessment of the likelihood of an investor receiving this cash flow;
- Determining the interest rate to discount the expected cash flow;
- Direct calculation of the present value of the cash flow using the amount of cash flow and the interest rate.
The discount rate has two components:
- Safe interest rate;
- The risk premium for investing in this asset;
If the financial asset is a debt obligation, the discount rate is determined based on existing interest rates for similar obligations and reflects the expected return on the financial asset.
The mechanism for valuing shares differs from the mechanism for valuing other financial assets, since shares are perpetual instruments of ownership, the profitability of which depends on many factors that are related not only to the current state of the corporation, but also to expected changes in its activities in the future. The market value of the shares of a particular corporation is primarily formed by factors directly related to the activities of the corporation and the expectations of market participants regarding the prospects for its development.
The main factors that determine the market value and profitability of a share include the efficiency of the financial and economic activities of the corporation, the competitive position in the market, the dividend policy pursued by the management of the corporation, the state of the industry in which the corporation operates, the state of the economic system as a whole, and other reasons. In addition to assessing the market value of a share using the above algorithm, there are several more methods for assessing the current value of shares:
- The method of "actual value of a share" is based on the analysis of the ratio of the current market price of a share to the value of the corporation's profit per share.
- The method of "market valuation of assets" provides for the valuation of the corporation's assets in order to clarify the actual value of the shares. This method is usually used in the case of consolidation and acquisition of corporations.
- The MOKA capital asset valuation model makes it possible to take into account the risks that accompany the activities of corporations, to estimate the expected return on shares based on risk-free market interest rates and the risk inherent in a particular share.
- Describe the essence of the difference between instruments of property and instruments of debt.
- What is the main purpose of the futures market.
- List the market conditions that affect the real returns on fixed and floating income instruments.
- List the types of financial instruments by maturity.
- Specify the factors that affect the liquidity of a financial asset.
- How is income from a financial asset determined?
- What are the types of income on a financial asset?
- Define the nominal and real returns on a financial asset.
- How does the taxation mechanism affect the circulation of a financial asset.
- Describe the stages of market valuation of a financial asset.
- What are financial assets?
- Define issuers and investors.
- What are the main financial instruments?
- What are derivative financial instruments?
- Define property instruments.
- Define loan instruments.
- What is the maturity of a financial asset?
- Define the liquidity of a financial asset.
- What is the essence of asset income.
- What is the essence of the profitability of a financial asset.
- Determine the risk level of the financial asset.
- What is the essence of the valuation of financial assets?
More on the topic Valuation of financial assets.:
- 1.7.3. Assessment of the financial condition in order to determine the possible bankruptcy and the extent of the crisis
is tangible property used in business or commercial activities over a fairly long period.
Capital assets refer to the vast scale of assets that are necessary for immediate operation or those that are of great value to their owner. Ideally, these assets should be in operation for a fairly long time.
Capital assets are commonly understood as daily used assets.
Types of capital assets
- Land plot.
- Building.
- Real estate (from a residential building to a commercial building and an industrial complex).
- Equipment (any type that is used in the operation of the business).
- Equipment for industry.
- Vehicles used to deliver goods, equipment or finished goods.
- Equipment (computer, office equipment).
- Furniture, cars.
- Investments.
As you already understood, capital assets include a wide range of not only property objects, but also furniture, and even equipment. Everything that is used for production purposes (all types of buildings, structures, vehicles, machinery, tools and equipment). In addition, capital assets include even raw materials, and all exploitable materials, energy and ideas.
All that has been listed mainly indicates that in the modern economy the boundaries of the concept of "main" are extended to both physically tangible and intangible objects.
Capital assets of the enterprise
In order to carry out economic activities, in the possession of any enterprise must be certain property objects that belong to it legally. Any property owned by the enterprise, and that which is reflected on its balance sheet, is commonly called assets.
Thus, the capital assets of an enterprise represent the economic resources exploited in economic activities to generate income and profit.
Classification of enterprise assets
- stock of raw materials;
- equipment;
- low-value and fast-wearing items;
- stock of finished goods.
- technical, technological, managerial knowledge, which are formalized in the form of technical documentation;
- licenses;
- Trademarks – rights to use trade names;
- trademarks.
3) Financial assets:
- (national or foreign);
- all forms of debt;
- long-term and short-term cash.
The valuation of capital assets is a description of the relationship between possible risks and expected returns. The capital asset valuation model is mainly used for the pricing of securities with sufficient high level risk.
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For the convenience of studying the material, the article is divided into topics:
Inventories are the least liquid item of current assets.
In order to sell products, two tasks must be solved:
1) find a buyer;
2) wait for the delivery payment.
Analysis of the article "Inventory" allows us to draw important conclusions about the activities of the enterprise. One of the important indicators in this case is the share of inventories in the composition of both current assets and the assets of the enterprise as a whole.
The enterprise must maintain the optimal volume of inventories, the value of which, as in the case of cash, is determined under the influence of two opposite trends:
1) have a surplus;
2) not have a surplus.
An excessive proportion of inventories indicates problems with the sale of products, which can be caused by various reasons, including:
1) low quality products;
2) violation of production technology;
3) insufficient study of market demand and conjuncture;
4) the choice of inefficient implementation methods.
One way or another, an excessive proportion of inventories leads to losses, since:
1) significant in volume liquid funds are tied up in a low-liquid item;
2) the enterprise is forced to increase the cost of storing and maintaining the consumer properties of inventories;
3) long-term storage in a warehouse reduces consumer qualities inventories and may lead to their obsolescence;
4) the deterioration of the quality of the goods leads to the loss of customers.
Insufficient proportion of inventories can lead to interruptions and even stop production, non-fulfillment of orders, loss of profit. Inventories are included in the reporting at cost, which refers to all costs of acquisition or production.
At the same time, they use different methods ratings:
1) at the cost of each unit of inventory;
2) by average (weighted average) cost;
3) at the cost of first-time purchases (FIFO);
4) at the cost of the latest purchases (LIFO).
When reading the balance sheet, it is necessary to pay attention to which methods of estimating inventories were used at the enterprise in reporting period, since the use of separate methods allows you to manipulate the profit indicator. Methods for estimating inventories are discussed in detail in the chapter "Invested Capital Management". The company's balance sheet may contain an item "Deferred expenses", which fixes the rights and requirements of the company to receive from its partners in the coming period, not exceeding a year, certain services paid in advance. This article focuses on all types of short-term advance payments (rent, insurance, commissions). Deferred expenses are reflected in the balance sheet at cost to the extent that, as of the balance sheet date, has not yet been used. It should be noted that the inclusion of this item in the balance sheet is criticized by many economists, since deferred expenses cannot be converted into cash in the usual way (by sale), and, therefore, they do not have liquidity.
Financial asset ratios
One of the most important information sources, according to which certain management decisions are made in the organization, is financial reporting. The information specified in it is used in the study of the activities of the enterprise. It evaluates the company's financial assets and liabilities. The cost at which they are reflected in the balance sheet has a significant impact on the adoption of certain administrative decisions. Let's carry out further the financial analysis firm assets.Major financial assets include:
1. Cash on hand.
2. Contributions.
3. Deposits in banks.
4. Checks.
5. Investments in securities.
6. Shareholdings third party companies giving the right to control.
7. Portfolio investments in securities of other enterprises.
8. Obligations of other firms to pay for delivered products (commercial loans).
9. Equity participations or shares in other companies.
The main financial assets make it possible to characterize the property values of the firm in the form of cash and instruments belonging to it.
1. National and foreign currency.
2. Accounts receivable in any form.
3. Long-term and short-term investments.
Exceptions
The category under consideration does not include inventories and some funds (fixed and intangible). Financial assets involve the creation of a valid right to receive money. Possession of these elements forms the possibility of receiving funds. But in view of the fact that they do not form the right to receive, they are excluded from the category.
Administration
Financial asset management is carried out in accordance with a number of principles. Their implementation ensures the efficiency of the enterprise.
These principles include:
1. Ensuring the interaction of the asset management scheme with the overall administrative system of the organization. This should be expressed in the close relationship of the first element with the tasks, accounting, and operational activities of the company.
2. Ensuring multivariate and flexible management. This principle suggests that in the process of preparing administrative decisions on the creation and subsequent use of funds in the investment or operating process, alternative options should also be developed within the acceptable limits of the criteria approved by the company.
3. Ensuring dynamism. This means that in the process of developing and implementing decisions in accordance with which the financial assets of the organization will be used, the impact of changes in external factors over time in a particular market sector should be taken into account.
4. Focus on achieving the company's strategic goals. This principle suggests that the effectiveness of certain decisions should be checked for compliance with the main task of the company.
5. Ensuring a systematic approach. In the course of decision-making, asset management should be considered as an integral element of the overall administrative system. It provides the development of interdependent options for the implementation of a particular task. The latter, in turn, are connected not only with the administrative sector of the enterprise. In accordance with these decisions, a financial asset of production, sales and innovation management is created and subsequently used.
Price
In a direct form, a financial asset is evaluated after data collection, due diligence, market research, reporting and forecasting of the enterprise development. The traditional method of determining the cost is formed in accordance with the purchase or production price minus depreciation. But in situations where there is a fluctuation of indicators (fall or increase), the cost of funds may have a number of inconsistencies. As a result, the financial asset is periodically revalued. Some enterprises carry out this procedure every five years, others - every year. There are companies that never do it. However, asset valuation is essential.
It manifests itself mainly in:
1. Improving the efficiency of the company's administrative system.
2. Determining the value of the company when buying and selling (completely the entire enterprise or part of it).
3. Company restructuring.
4. Development of a long-term development plan.
5. Determining the solvency of the enterprise and the value of collateral in case of lending.
6. Establishing the amount of taxation.
7. Making informed administrative decisions.
8. Determining the value of shares in the purchase and sale of the company's securities on the stock market.
The financial asset is treated as an investment in the instruments of other entities. It also acts as an investment in transactions that in the future provide for the receipt of other funds on potentially favorable terms.
A financial asset that provides for the right to demand money under an agreement in the future is:
Bills to be received.
Receivables.
Amounts due on loans and bonds receivable.
At the same time, the opposite party acquires certain financial obligations. They suggest the need to make future payments under the contract.
Financial asset ratios
In the study of reporting and the study of the results of economic activity of the company, a number of indicators are used. They are divided into five categories and reflect different aspects of the state of the company.
Thus, there are coefficients:
1. Liquidity.
2. Sustainability.
3. Profitability.
4. Business activity.
5. Investment indicators.
Net current financial assets
They are necessary to maintain the financial stability of the company. The net capital ratio reflects the difference between current assets and short-term debt. If the first element exceeds the second, we can say that the company can not only repay the debt, but also has the opportunity to form a reserve for the subsequent expansion of activities. The optimal indicator of working capital will depend on the specifics of the company's activities, its scale, sales volume, inventory turnover rate, receivables. With a lack of these funds, it will be difficult for the company to repay debts on time. With a significant excess of the net current asset over the optimal level of demand, they speak of the irrational use of resources.
Index of Independence
The lower this ratio, the more loans the company has and the higher the risk of insolvency. Also, such an indicator indicates the presence of a potential danger of a company having a shortage of money. The indicator characterizing the dependence of an enterprise on external loans is interpreted taking into account its average value for other industries, the firm's access to additional sources of debt, and the specifics of the current production cycle.
Profitability indicator
This coefficient can be found for different elements of the company's financial system. In particular, it may reflect the ability of the firm to generate sufficient revenue relative to the current assets used. The higher this indicator, the more efficiently the funds are used. The return on investment ratio determines the number of monetary units that the company needed to receive one ruble of profit. This indicator is considered one of the most important indicators of competitiveness.
Other criteria
The turnover ratio reflects the effectiveness of the company's use of all the assets that it has, regardless of the sources from which they came. It shows how many times during the year there is a complete cycle of circulation and production, which brings the corresponding result in the form of profit. This figure varies greatly across industries. Earnings per share is one of the most important indicators that affect the market value of the company. It reflects the share of net income (in money) that falls on an ordinary security. The ratio of share value to profit shows the amount of monetary units that participants are willing to pay for a ruble of income. In addition, this ratio reflects how quickly investments in securities can bring profit.
CAMP scoring model
It acts as a theoretical basis for some of the financial techniques used in managing risk and return in long-term and short-term investments in stocks. The main result of this model is the formation of an appropriate ratio for an equilibrium market. Most important point the scheme assumes that in the selection process, the investor does not need to take into account the entire risk of the stock, but only non-diversifiable or systematic. The CAMP model considers the profitability of a security, taking into account the general state of the market, its behavior as a whole. The second assumption of the scheme is that the investor makes a decision considering only risk and expected return.
The CAMP model is based on the following criteria:
1. The main factors for evaluating an investment portfolio are the expected profitability and the standard deviation for the time of holding it.
2. Assumption of nonsaturation. It consists in the fact that when choosing between equal portfolios, preference will be given to the one that is characterized by higher profitability.
3. Risk elimination assumption. It lies in the fact that when choosing from other equal portfolios, the investor always chooses the one with the smallest standard deviation.
4. All assets are infinitely divisible and absolutely liquid. They can always be sold at market value. In this case, the investor can purchase only part of the securities.
5. Transaction taxes and costs are infinitesimal.
6. The investor has the ability to borrow and lend at the risk-free rate.
7. The investment period is the same for everyone.
8. Information is instantly available to investors.
9. The risk-free rate is the same for everyone.
10. Investors value standard deviations, expected returns, and stock covariances equally.
The essence of this model is to illustrate the close relationship between the rate of return and the risk of a financial instrument.
Types of financial assets
Every year more and more people become investors (or join the club of investors). On the one hand, of course, this is due to the growth of marketing campaigns, but still the main premise is that many methods have arisen to multiply capital (I think this is the main motive to double capital and live comfortably). At the same time, the small contribution has become significantly lower than, for example, it was ten years ago. And now let's look at one extremely fundamental question that any investor who wants to profit from his own investments (investment) asks for himself.What is Financial Assets?
The answer to this question lies from the origins of the English language, from the word Financial assets - which has several meanings: part of the company's assets, which is financial resources, which can be: securities and cash.
As well as financial assets - include cash on hand; checks; deposits; bank deposits; insurance policies; investments in securities; portfolio investments in shares of other enterprises; obligations of other enterprises and organizations to pay money for the supplied products (referred to as commercial credit); shares or shares in other enterprises; stakes in other enterprises (firms), giving the right to control.
Where can I invest and what are the risks?
So, let's look at the main types of assets, their pros and cons. We will also talk about how one or another type of asset is risky. I think it's better to start with the most common and safe methods, the purpose of which is to save capital.
1. It has both pluses and minuses of a bank deposit, it is reliability and low interest.
2. Average reliability in mutual funds - Mutual Investment Funds, there are also many subspecies in this type of financial asset.
3. If you are a millionaire, hedge funds are definitely for you. Hedge funds have an average reliability, and a higher percentage.
4. Domestic hedge funds - OFBU, which means General Funds of the Banking Authority. Low interest and undeveloped.
5. Another asset with a large capital investment is real estate where a huge fortune is required to be invested, but real estate is less risky than previous assets. If you decide to invest in these assets, then I advise you to read the article - why foreign real estate is useful for investment.
6. precious metals Well, from time immemorial it has been considered the most profitable type of financial asset.
7. Trust management a very good financial asset, where you do not need to think about how to multiply capital. But the difficulty lies elsewhere? How to find a good, profitable manager or management company!
8. Self-trading in shares, in other words, trading, where you can manage the asset yourself, but the difficulty in choosing a trading strategy.
9. Independent Forex Currency Trading Well, we will not discuss here, my resource contains so many articles about forex trading that it is enough to have at least basic knowledge about the market.
10. The penultimate instrument of a financial asset is futures trading, where there are moderate risks, and the investment method itself is not complicated.
11. Completes our list of types of financial assets trading options where there are a number of advantages compared to futures.
Finally, we looked at eleven relevant types of financial assets. I will say a few words about how to start investing.
Naturally, a new investor is recommended to invest a huge part of the money in low-risk assets. And only sometimes run over to the most aggressive (and, of course, the most profitable) strategies. However, the most basic thing for any investor (from a newcomer to a specialist) is not to forget about the diversification of investment capital. Remember that without diversification, you will not increase your funds, and you may even lose.
That is, never put the whole fixed capital in one category of an asset, especially when the style is about medium- and high-risk financial assets.
If you decide to sell without the help of others, then do not rush to open a real account. In order to personally start receiving, you have to sell for more than one year, until the necessary knowledge and the necessary experiment appear. And yet, the more experienced you become, the less you risk, swell into the most risky assets. That is, sometimes you will gain more significant earnings without increasing the risk of losing capital.
Financial asset risk
There is no business without risk. Risk accompanies all the processes going on in the company, regardless of whether they are active or passive. The highest profit, as a rule, is brought by market operations with increased risk. However, everything needs a measure. The risk must be calculated up to the maximum allowable limit. As you know, all market estimates are multivariate. It is important not to be afraid of mistakes in your market activities, since no one is immune from them, and most importantly, do not repeat mistakes, constantly adjust the system of actions from the standpoint of maximum profit. Guiding principle at work commercial organization (manufacturing enterprise, commercial bank, trading company) in the transition to market relations is the desire to obtain as much profit as possible. It is limited to the possibility of incurring losses. In other words, this is where the concept of risk comes in.It should be noted that the concept of “risk” has a rather long history, but various aspects of risk began to be studied most actively in the late 19th and early 20th centuries.
Essence, types and criteria of risk
In any economic activity, there is always a risk of monetary losses arising from the specifics of certain business transactions. The risk of such losses is represented by financial risks.
Financial risks are commercial risks. Risks are pure and speculative. Pure risks mean the possibility of a loss or a zero result. Speculative risks are expressed in the possibility of obtaining both positive and negative results. Financial risks are speculative risks. An investor, making a venture capital investment, knows in advance that only two types of results are possible for him - income or loss. A feature of financial risk is the likelihood of damage as a result of any operations in the financial, credit and exchange areas, transactions with stock securities, i.e. the risk that arises from the nature of these operations. Financial risks include credit risk, interest rate risk - currency risk: the risk of lost financial benefits.
Credit risks - the danger of non-payment by the borrower of principal and interest due to the creditor.
Interest risk is the danger of losses by commercial banks, credit institutions, investment funds and selening companies as a result of the excess of interest rates paid by them on attracted funds over the rates on loans granted.
Currency risks represent the danger of currency losses associated with a change in the exchange rate of one foreign currency against another, including the national currency in the course of foreign economic, credit and other foreign exchange transactions.
The risk of lost financial benefit is the risk of indirect (collateral) financial damage (lost profit) as a result of failure to carry out any activity (for example, insurance) or business activity stoppage.
Investing capital is always accompanied by a choice of investment options and risk. The choice of various options for investing capital is often associated with significant uncertainty. For example, a borrower takes out a loan, which he will repay from future income. However, these incomes are unknown to him. It is quite possible that future income may not be enough to repay the loan. In investing capital, you also have to take a certain risk, i.e. choose a certain level of risk. For example, an investor must decide where he should invest his capital: in a bank account, where the risk is low, but the returns are small, or in a more risky, but significantly profitable event (selling operations, venture capital investment, purchase of shares). To solve this problem, it is necessary to quantify the amount of financial risk and compare the degree of risk of alternative options.
Financial risk, like any risk, has a mathematically expressed probability of a loss, which is based on statistical data and can be calculated with a fairly high accuracy. To quantify the amount of financial risk, it is necessary to know all the possible consequences of any individual action and the likelihood of the consequences themselves - the possibility of obtaining a certain result.
There are ways to reduce the degree of risk:
Diversification - the process of distributing invested funds between various capital investment objects that are not directly related to each other in order to reduce the degree of risk and loss of income; diversification allows you to avoid part of the risk when allocating capital between various types of activities (for example, the purchase by an investor of shares of five different joint-stock companies instead of shares of one company increases the likelihood of receiving an average income by five times and, accordingly, reduces the degree of risk by five times).
Acquisition additional information about choices and results. More complete information allows you to make an accurate forecast and reduce risk, which makes it very valuable.
Limitation is the establishment of a limit, that is, the maximum amount of expenses, sales, loans, etc., used by banks to reduce the degree of risk when issuing loans, business entities for selling goods on credit, providing loans, determining the amount of capital investment, etc. . With self-insurance, the entrepreneur prefers to insure himself, rather than buying insurance from an insurance company; self-insurance is a decentralized form, the creation of in-kind and monetary insurance funds directly in business entities, especially in those whose activities are at risk; The main task of self-insurance is to promptly overcome temporary difficulties in financial and commercial activities.
Insurance is the protection of the property interests of economic entities and citizens in the event of the occurrence of certain events (insured events) at the expense of monetary funds formed from the insurance premiums they pay. The legal norms of insurance in the Russian Federation are established by law.
Long-term financial assets
Long-term financial assets are assets that have a useful life of more than one year, are acquired for use in the activities of an enterprise and are not intended for resale. For many years, the term "fixed assets" was common in relation to long-term assets, but now this term is used less and less, as the word "fixed" implies that these assets exist forever.While there is no strict minimum useful life for classifying an asset as non-current, the most commonly used criterion is that the asset can be used for at least one year. This category includes equipment that is used only during peak or emergency periods, such as a power generator.
Assets not used in the ordinary course of business of the entity should not be included in this category. For example, land held for resale or buildings no longer used in the ordinary course of the business should not be included in property, plant and equipment. Instead, they should be classified as long-term real estate investments.
Finally, if an item is held for sale to customers, then regardless of its useful life, it should be classified as inventories and not as buildings and equipment. For example, a printing press held for sale would be classified as inventory by the machine manufacturer, while a printer that purchased the press for use in the ordinary course of business would classify it as property, plant and equipment.
Tangible assets have a physical form. Land is a tangible asset and, since its useful life is not limited, it is the only tangible asset that is not subject to depreciation. Buildings, structures and equipment (hereinafter fixed assets) are subject to depreciation. Depreciation is the allocation of the cost or revalued amount (if the asset is subsequently revalued) of a durable tangible asset (other than land or natural resources) over its estimated useful life. The term refers only to human-made assets.
Natural resources or depleting assets differ from land in that they are acquired for the resources that can be extracted from the land and processed, rather than for the value of their location. Examples of natural resources are iron ore in mines, oil and gas in oil and gas fields, timber reserves in forests. Natural resources are subject to depletion, not depreciation. The term depletion refers to the depletion of resources by extraction, clearing, pumping or other extraction and the way the costs are allocated.
Intangible assets are long-term assets that do not have a physical form and in most cases relate to legal rights or other benefits from which future economic benefits are expected to flow to the entity. Intangible assets include patents, copyrights, trademarks, franchises, business expenses and goodwill. Intangible assets are classified into assets with a limited life (for example, a license or a patent), the cost of which is transferred to the expenses of the current period by depreciation by analogy with property, plant and equipment; and assets with an indefinite life (such as goodwill or certain brands) whose carrying amount is tested annually for recoverability. If the recoverable amount of an asset decreases and falls below the carrying amount, the difference is recognized as an expense in the current period. Although current assets such as receivables and prepaid expenses do not have a physical form, they are not intangible assets, as they are not long-term.
The remaining portion of the actual cost or amount of an asset is usually referred to as the book value or book value. The latter term is used in this book in relation to long-term assets. For example, the carrying amount of property, plant and equipment is equal to their cost less accumulated depreciation.
Long-term assets differ from current assets in that they support the operating cycle, and are not part of it. They are also expected to generate benefits over a longer period than current assets. Current assets are expected to be realized within one year or operating cycle, whichever is longer. It is assumed that long-term assets last longer than this period. Management issues related to accounting for long-term assets include sources of funding for assets and methods of accounting for assets.
Short-term financial assets
Short-term assets (current assets, current assets) are the capital of an enterprise (company, firm), which can be easily converted into cash and used to pay off short-term obligations within a period of up to one year.Short-term assets are current assets that are necessary for the daily operation of an enterprise (company, firm). The task of such capital is to cover current expenses as they arise and ensure the normal operation of the organization.
Short-term assets - the rights and assets of the organization, which during the calendar year must be converted into paper equivalent to solve current problems. As a rule, short-term assets are most company capital.
Essence, sources, functions of short-term assets
Short-term assets are a set of property values of the company that contribute to the maintenance of the entire business process, ensure normal operation and timely coverage of short-term liabilities during the reporting period (usually one calendar year).
But such a definition does not fully reveal the essence of short-term assets. It is important to bear in mind that, together with the advance of a certain amount of capital, a similar process takes place in the value funds of additional goods that are produced in the course of the company's activities. This is why many highly profitable organizations increase their short-term asset advances by a certain percentage of their net income.
In the case of unprofitable companies, the volume of short-term assets at the end of the circuit may decrease. The reason is certain expenses during the production period. Thus, short-term assets are funds invested in cash for the formation and further use of the company's working capital and circulation funds. At the same time, the main task is to reduce the volume of such injections to the minimum amounts that ensure the normal operation of the organization and the implementation of all programs and settlements with creditors.
The essence of short-term assets can be represented in the form of cash funds, which are based on financial relations. In turn, the company's financial resources form the basis for further changes in the volume of short-term assets.
Financial relations at the stage of formation of short-term assets manifest themselves in the following cases:
In process statutory fund organizations;
- during the period of application of the company's financial resources to increase the volume of short-term assets;
- when investing the balance of current assets in securities or other objects.
In practice, short-term assets are formed at the stage of company establishment, so the primary sources of such capital include:
Company, which is formed from the contributions of its founders;
- share investments;
- budget resources;
- support from sponsors.
All these are initial short-term assets, the volume of which may change during the life of the company. Here, much depends on a number of factors - the conditions of calculations, the volume of production, and so on.
Additional sources of replenishment of short-term assets include:
During the life of the enterprise, short-term assets perform two main functions:
1. Production. "Advanced" in working capital, short-term capital maintains the company's activities at a stable level, ensures the normal flow of all processes and fully transfers its value to manufactured products.
2. Estimated. The peculiarity of this function is participation in the completion of the circulation of capital and the transformation of the commodity form of assets into ordinary money.
Current assets are a combination of cash and material resources. In this regard, the stability of the entire company largely depends on the correct management of such assets and the clarity of their organization.
In this case, the organization of short-term assets is as follows:
1. The composition and form of short-term capital is determined.
2. The required amount of working capital is calculated and an annual increase in such needs is provided.
3. The sources of formation of short-term capital are determined, and a rational scheme for further financing is formed.
4. Assets are placed in the main areas of the company's production.
5. Disposition of short-term assets and constant control of their volume.
6. Persons are appointed who are responsible for the effective use of short-term assets.
Classification and structure of current assets
The system of short-term assets is not integral - it consists of many different elements that form its final structure.
The main components of the structure of short-term assets include:
1. The main stocks of the company - materials, costs for the sale of goods, fattening animals (for agribusiness enterprises), work in progress, already finished products, materials, shipped goods, future costs (during the reporting period), other inventories and expenses. Among the components listed above, special attention should be paid to shipped goods. This category can be considered in several directions - the payment period that has not yet arrived, and the payment period that has already passed. This element of short-term assets is negative, because it arose due to a violation of the company's settlement and economic activities, deterioration in contractual and settlement discipline. In addition, such problems are often associated with the appearance of defective products or violations in the assortment.
2. Long-term assets, the main purpose of which is further sale.
3. VAT, which is calculated for services, works and goods purchased by the company.
4. Short term investments.
5. Money and its equivalent.
6. Short-term receivables.
7. Other current assets.
Short-term assets can be conditionally divided into borrowed, own and attracted.
In a complex, this entire group should be used to solve priority tasks in the production process:
1. Equity capital acts as a source of formation of the company's constant needs in the amount of the standard and money.
2. The enterprise, as a rule, covers its temporary need for short-term assets at the expense of commercial and bank loans, which refers to borrowed capital.
3. In turn, the attracted capital is accounts payable. At the same time, the attracted capital differs from borrowed capital. The latter is characterized by the principle of payment. The essence of the attracted capital is in the ordinary deferred payment for certain period.
Short-term assets depend on the planning and operating principles of the company, which makes it possible to distinguish two types of such capital:
1. Normalized assets - capital that can and should be planned for the future. Such short-term assets include finished goods, work in progress, goods for resale, inventories.
2. Non-standardized assets are funds in bank accounts, short-term investments, receivables, and so on.
Short-term assets can also be divided by the degree of liquidity. So, you can allocate capital:
Absolute liquidity (money);
- high liquidity (short-term investments and receivables). This category includes those assets that can be quickly converted into a cash equivalent;
- medium liquidity - goods, finished products;
- weak liquidity. This includes work in progress, household supplies, equipment, inventory, materials, and so on;
- low liquidity. Costs planned for the future period, accounts receivable.
Short-term assets can be classified according to the period of operation:
Variable part of assets. This component may change during the period of the company's activity and depend on the season, demand for products and other factors. Here, as a rule, the middle and maximum parts are distinguished;
- the constant part is unchanged and does not depend on any aspects of the company's activities. It is not related to the intended purpose, early delivery of products, the need for seasonal storage, and so on.
Accounting for financial assets
The section "Financial assets" includes 11 groups of synthetic accounts. State institutions use only six, including:020100000 "Funds of the institution";
020500000 "Income calculations";
020600000 "Calculations on issued advances";
020800000 "Settlements with accountable persons";
020900000 "Settlements for damage to property";
021001000 "VAT calculations for acquired material assets, works, services".
Account 020100000 "Institutional funds" is intended for accounting of transactions with funds held on the accounts of institutions opened with credit institutions or with bodies of the Treasury of Russia (in the financial body of the corresponding budget), as well as transactions with cash and monetary documents.
Accounting for temporary funds
Transactions with funds at temporary disposal are reflected in the accounting using the code "3" in the 18th category of the accounts:
320111000 "Funds of the institution on personal accounts in the treasury body";
330401000 "Settlements on funds received under temporary disposal".
For example, these accounts are used for budgetary accounting of financial support for bids and collateral for securing government contracts. In case of refusal of the winning bidder to sign the contract, as well as improper fulfillment of the terms of the contract, the funds are withheld with the subsequent transfer of funds to the budget revenue.
To reflect in the budgetary accounting of the financial security of government contracts in the form of a bank guarantee or a guarantee of a third party, an off-balance sheet account 10 "Securing the fulfillment of obligations" is used.
Funds in temporary disposal must either be returned to the person from whom they were received (from whom they were withdrawn), or transferred to the budget revenue.
Example:
The state institution, being a state customer, announced an open tender, under the terms of which participants must send 54,000 rubles to their personal account to account for funds in temporary disposal. in the form of a security application for participation in the competition. Two organizations (CJSC "Mayak" and LLC "Corporation 21st Century") became participants in the competition and transferred the specified amount. Based on the results of consideration of competitive bids, LLC "Corporation 21st Century" was recognized as the winner, however, the organization refused to conclude a state contract.
Financial assets and liabilities
With light hand idol of financial education, Robert Kiyosaki, the concept of financial assets and liabilities is widely dispersed in the minds of people who strive to become richer and freer. By the way, often from Kiyosaki's books the reader gets a not entirely correct idea of liabilities and assets. Let's deal with these basic concepts properly.To begin with, we note that there are two approaches, two definitions - well-established in accounting and taken root with the light hand of Kiyosaki. The first one is considered correct among people who are really involved in finance, the second one captivates with its simplicity, so let's start with it.
According to Kiyosaki, an asset is "anything that puts money in your pocket" that helps generate passive income ("actively works for you, but you yourself are passive".
Accordingly, a liability is "everything that makes you spend money." A profitable investment gives you an asset - for example, good, steadily growing stocks. We hang a liability around our neck, for example, when we buy a house on credit - we have to constantly pay interest to the bank. Everything is very simple, right?
Let's leave this interpretation for now and move on to the "real", accounting understanding of assets and liabilities. It is only slightly more complicated than the replicated American formula.
Liabilities and assets are two parts of the balance sheet, which is a simple form of summarizing information about the activities and economic situation of a company. No need to be afraid of the phrase "balance sheet".
In fact, this is just a table with which you can quickly find answers to many questions:
What does the company own?
who owns the business?
what is the turnover of the company?
where does the company get the money from?
The column "assets" contains the property of the enterprise:
Working capital (money in the current account, purchased raw materials, spare parts for equipment, etc.)
non-working capital (in other words, fixed capital is buildings and structures in which production takes place, offices, main intellectual property (patents), and so on up to the rights to certain domain names: for example, for the Yandex company, owning the ya.ru domain is more than important part of the capital).
In the column "liabilities" are the sources of property (a very accurate phrase that reflects the essence well. It will still be useful to us.):
Own money: authorized capital (of the owner), undistributed profit;
Borrowed capital - credits, loans for business development;
Shareholder money.
Why are liabilities called sources of assets? Yes, because you can increase assets at the expense of liabilities. These two parts of the table correspond to each other (not without reason it is called the balance sheet). In addition, under conditions of correct (more precisely, legal) business, these two scales constantly remain balanced.
For example: a company takes out a loan of $1 million. This leads to 2 consequences:
A) a million dollars appears in her checking accounts (an increase in column A);
b) a million dollars is added to its liabilities, borrowed capital (increase in column P).
Finally, to make it quite clear, let's turn to the definitions international system financial reporting(IFRS). According to these definitions, the following formula is obtained:
Assets = Liabilities = Equity + Liabilities
So, if everything is pretty clear with liabilities and assets, then such a familiar word "capital" is defined as "this is the share in the company's assets remaining after deducting all its liabilities." Be sure to pay attention to this phrase! (we'll need it later).
Why such a detailed presentation on the pages of a site dedicated to simple financial literacy? There are two reasons for this:
A) Understanding these principles of accounting allows you to better understand the essence of financial liabilities and assets in relation to personal money, the family budget and correctly navigate in relation to its formation.
b) Own business- one of the main ways to achieve financial independence. So it's better to know than not to know basic things about accounting.
Well, actually to the main topic. To the correct understanding of the subject of our conversation in relation to one person. As I said, Kiyosaki's definition seems to me too simplistic and even distorts reality. And this is dangerous - after all, thinking with distorted, incorrect concepts, we will make wrong decisions related to money.
Therefore, I propose to transfer the concept accepted in the accounting world to personal finance.
Then it turns out that:
Assets are what a person owns and uses in his life, regardless of whether it requires expenses or, on the contrary, generates income.
Liabilities are the sum of a person's obligations. That is: all his debts, obligations to pay taxes, insurance premiums, and so on up to the need to make gifts to unloved relatives and undistributed profits.
Distributed profit - ceases to exist in the real world, it turns into assets. The profit accumulated over the years of life is capital.
What is the main difference between these approaches? It's very simple: if we consider the personal budget from the point of view of the concepts adopted in accounting, then the two parts of the table "A" and "P" are so different that they cannot be confused at all.
Assets - really exist. These are things, securities, objects of copyright. Liabilities - only show the attitude of different people and companies to assets. They exist only in relations between people and in their memory, on paper. Is it possible to feel a debt or an overdrawn account? You can only touch paper. What about the accumulated profit over the years? It has turned into real things and is only in our memory (and, for especially accurate people) - in records, money reports.
Financial non-current assets
Financial non-current assets are the property of an organization that is used in business activities for more than one year (or one operating cycle exceeding 12 months).These include fixed assets (balance sheet accounts 01, 02), profitable investments in tangible assets (balance sheet accounts 03, 02), intangible assets (balance sheet accounts 04, 05), expenses for research, development and technological work (balance sheet account 04), long-term financial investments (balance sheet account 58 (sub-account 55/3 "Deposit accounts")), capital expenditures for the acquisition (creation) of non-current assets (balance sheet account 08), incl. construction in progress (sub-account 08/3 "Construction of fixed assets").
Financial non-current assets are the assets of an organization that are classified by the accounting legislation of the Russian Federation as fixed assets, intangible assets, profitable investments in tangible assets and other assets.
So, what assets should be considered by the firm as part of non-current assets? To answer this question, let's turn to the financial statements of the organization, namely the form N 1 "Balance sheet", approved by Order of the Ministry of Finance of Russia N 67n "On the forms of financial statements of organizations."
Non-current assets are reflected in sec. 1 "Non-current assets" of the balance sheet asset and are subdivided as follows:
Intangible assets (line 110);
- fixed assets (line 120);
- Construction in progress (line 130);
- Profitable investments in material assets (line 135);
- Long-term financial investments (line 140);
- Deferred tax assets (line 145);
- Other non-current assets (line 150).
Market of financial assets
The market of financial assets (financial market) is a system of economic relations and a network of institutions that ensure the coordination of demand for financial assets with their supply. In economic theory, the financial market is usually divided into two parts - the money market and the securities market (capital market).Money is a specific object of market purchase and sale, since they themselves are a universal means of payment, performing the functions of a measure of value, a means of circulation and a means of savings (accumulation). Their price is the nominal interest rate (the alternative value of money), which is either paid when receiving loans, or acts as an implicit cost (lost income) of money owners. In the macroeconomic analysis of the money market, the problems of the formation of demand and supply of money, the mechanism for establishing market equilibrium are considered.
Securities are assets that give their owners the right to receive cash income in the future. There are various types of securities. Some of them (for example, bonds) bring their owners a fixed income, others (ordinary and preferred shares, stock options, etc.) - a variable income. Since the analysis of macroeconomic problems focuses on the money market, all other financial assets (except money) are combined into one, called bonds. Bonds, considered in such a broad sense of the word, represent all assets that generate cash income. A more detailed study of the securities market examines the formation of their optimal portfolio, as well as the specifics of pricing for bonds and shares.
In macroeconomic theory, all subjects of the financial market are divided into two groups: banks and the public. This division is due to the specifics of the functional role performed by each subject in the money market. Banks, i.e., the banking system that combines the Central Bank and commercial banks, ensures the supply of money in the economy of each country. The public, which includes all the main macroeconomic actors involved in the circulation of income and expenditure in the economy (households, firms, government agencies, the foreign sector), makes a demand for money. In the securities market, banks and the public can act as both sellers and buyers.
The financial asset market is the most perfect of all national markets. It is more often than others in a state of equilibrium or approaches it. This feature of the market is determined by a number of circumstances, which include: a high degree of liquidity of the objects of purchase and sale, the professionalism of the main market participants (banks and financial intermediaries, through which the public sells and buys securities), market competitiveness.
Periodically arising significant disproportions in the market lead to a situation financial crisis and have a negative impact on the functioning of the entire national economy.
Money and securities markets closely interact with each other. They are a kind of "mirror image" of each other. An increase in the money supply is usually associated with an increase in the demand for securities. An increase in the supply of securities is generated by an increase in the demand for money. When there is a shortage in the money market, there is an excess in the securities market. Conversely, an excess in the money market means a shortage in the securities market. As a result of the interaction of markets with each other, they come into equilibrium at the same time.
Structure of financial assets
Assets are resources controlled by the entity and used for future inflows of economic benefit. Assets are an element financial statements and include fixed capital (non-current assets) and current assets (current).The structure of assets is called the structure of the investment portfolio at the time of its immediate formation. It consists in the share of investments in shares and securities, in documents, in domestic assets, as well as in foreign assets. In the process of assessing the financial condition of the enterprise, an analysis of the structure of assets is carried out, which is based on the current dynamics.
Non-current assets include:
Construction in progress;
main / fixed assets;
intangible assets;
long-term financial investment;
tax deferred assets;
profitable investment;
other non-current assets.
Current assets include:
Debit debt;
short-term financial investment;
reserves;
money supply;
other current assets.
Industry specifics, the degree of automation of production, and the management's investment policy determine the ratio of fixed and working capital. Comparing the growth of current assets with the growth of non-current assets, we can see that the increase in current assets significantly outpaces the rate of increase in non-current assets. Such an analysis of the dynamics and structure of assets is characterized not only by the expansion of the scale of production, but also by a slowdown in turnover, which can cause an increase in requirements in the total volume.
The analysis makes it possible to study the structure of working capital, as well as its placement in production. The diversion of a share of current assets to obtain a loan gives an idea of the true immobilization of a share of funds from production. At the same time, it is possible that the production potential of the enterprise (sales of cars, equipment, fixed assets) will be reduced.
Placement of funds of the organization
The placement of funds is of great importance in increasing the efficiency of financial activity. The results and decisions of production and financial activities, as well as and financial condition of the company. Correct conclusions about the possible causes of changes in the structure of organizational assets will allow a detailed analysis of the composition and structure of assets.
First of all, during the analysis, various changes in the composition, structure, dynamics are studied, after which an appropriate assessment is given. At the same time, changes in each section of the current assets of the balance sheet are analyzed.
The level of liquidity is considered the main feature of the grouping of balance sheet assets. It is he who subdivides all the assets of the balance sheet into fixed capital, long-term assets and current ones. The company's funds are used in internal circulation, as well as abroad - the purchase of securities and shares, receivables.
Analysis of the impact on the FSP of changes and growth in accounts receivable
The growth of the money supply in bank accounts indicates the strengthening of the FSP. The amount of funds should be sufficient to ensure the repayment of absolutely all urgent payments. The result of the incorrect use of working capital can be the presence of huge balances of money supply. They must be put into circulation in order to acquire profitability by expanding own production and investments in securities and shares of various enterprises.
It is very important to analyze the structure of the balance sheet asset and analyze the impact of changes on the FSP. With the expansion of the company's activities, the number of buyers increases, as well as receivables. At the same time, the company has the opportunity to reduce the shipment of products. In such a situation, accounts receivable are reduced. Thus, an increase in debt may not always be negatively assessed.
It is required to distinguish between overdue and normal debts. Arrears can create certain financial difficulties, since the company will begin to feel a clear lack of financial resources necessary to obtain production stock, wages, and other purposes. At the same time, in no case should funds be frozen. This can lead to a significant slowdown in capital turnover. That is why enterprises are interested in reducing the maturity of payments.
In the course of the analysis, it is important to study the dynamics, composition, causes, prescription of the formation of receivables and establish whether there are unrealistic amounts for collection. If they exist, it is urgent to involve a variety of measures to recover funds. This does not exclude the possibility of going to court. For the analysis of receivables, materials are applicable accounting.
Non-payments are of particular relevance in the context of inflation. At the last moment, the receivables of enterprises reach a truly astronomical limit, a significant part of which can simply be lost during inflation. With an inflation rate of thirty per cent a year, at the end of the required period, only seventy per cent of what could be purchased at the beginning of the year can be purchased.
The direct state of the production stock significantly affects the FSP. The presence of small in volume, but mobile stocks means that the smallest amount of cash on hand is placed in stocks. The accumulation of a large stock indicates an immediate decline in the organization's activities. It is important at the same time to carry out an analysis of the structure of the company's assets without fail. The analysis of the company's assets is a division of each expense item of the profit and loss statement, and reveals the directions and patterns of changes over a certain period of time.
Vertical and horizontal structural analysis
In most enterprises, a significant share of the current asset is already finished products. The loss of sales markets associated with competition, as well as the reduced purchasing power of an economic entity, the population, the high cost of goods, and a failure in the production of products lead to long-term freezing of working capital.
With an increase in the total amount of assets in the organization, the enterprise needs to increase its own potential. In the presence of inflation, this is quite difficult to do. Newly incoming stocks are reflected at current cost, and earlier incoming stocks at the date of receipt. It does not overestimate cash.
Structural analysis is divided into: vertical and horizontal. Vertical analysis determines the structure of the final financial indicator and at the same time reveals the impact of each type of asset on the overall result. In the process of analysis, it is possible to identify a certain strategy of an economic entity in relation to long-term investments.
The analysis of current assets is based on internal accounting data. For this, the share of assets with an unlikely sale is determined. Such assets include inventories of products and materials, as well as work in progress. At the moment, one of the main reasons for the decline in production is the decrease in efficiency and low solvency of the enterprise. To analyze the reasons for the formation of product residues, it is required to use analytical data from warehouse accounting and inventory.
Sources of financial assets
Sources of formation of working capital are own, borrowed and additionally attracted funds. Information on the size of own sources of funds is presented mainly in the balance sheet section “Capital and reserves” and in section I f. No. 5 of the appendix to the annual balance. Information on borrowed and attracted sources of funds is presented in section V of the balance sheet liability, as well as in sections 2, 3, 8 f. No. 5 of the appendix to the annual balance.At the expense of own sources, as a rule, the minimum stable part of working capital is formed. The presence of own working capital allows the enterprise to freely maneuver, increase the effectiveness and sustainability of its activities.
The formation of working capital occurs at the time of the creation of the organization and the formation of its authorized capital at the expense of the investment funds of the founders. In the future, the organization's minimum need for working capital is covered by its own sources: profit, authorized capital, reserve capital, accumulation fund and targeted financing. However, due to a number of objective reasons (inflation, growth in production volumes, delays in paying customer bills), the organization has temporary additional needs for working capital, which cannot be covered from its own sources. In such cases, borrowed sources are involved for financial support of economic activity: bank and commercial loans, loans, investment tax credit, investment deposits of employees of the organization, bonded loans, as well as sources equivalent to own funds, the so-called stable liabilities. The latter do not belong to the enterprise, but are constantly in its circulation and serve as a source of the formation of working capital in the amount of their minimum balance. These include: the minimum month-to-month arrears in wages to employees of the enterprise; reserves to cover future expenses; minimum carry-over debt to the budget and off-budget funds; creditors' funds received as an advance payment for products (works, services); funds of buyers on pledges for returnable packaging; carry-over balances of the consumption fund, etc.
Borrowed funds are mainly short-term bank loans, with the help of which temporary additional needs for working capital are satisfied. The main directions of attracting loans for the formation of working capital are: lending to seasonal stocks of raw materials, materials and costs associated with the seasonal production process; temporary replenishment of the lack of own working capital; implementation of settlements and mediation of payment turnover.
Bank loans are provided in the form of investment (long-term) loans or short-term loans. The purpose of bank loans is to finance expenses associated with the acquisition of fixed and current assets, as well as financing the seasonal needs of the organization, temporary growth of inventory, temporary growth of receivables, tax payments, extraordinary expenses.
Short-term loans may be provided by: government agencies; financial companies; commercial banks; factoring companies.
The provision of a loan is regulated by the following regulations - articles 819-821 of the Civil Code of the Russian Federation and the federal law No. 395-1 "On banks and banking activities".
With debt financing, the lender in any case, before opening financing, determines the creditworthiness of the borrower. Creditworthiness is the ability of a person to fully and on time pay off his debt obligations. Creditworthiness should not be confused with solvency, which fixes non-payments. Creditworthiness - forecasting solvency for the future.
Creditworthiness is determined by the following factors:
Moral qualities of the borrower, honesty;
- the borrower's art of working with finances, the reliability of calculations;
- occupation, expected affordable interest on the loan;
- the presence of investments in real estate, the degree of capital immobility, the guarantee of repayment of the loan.
Creditworthiness is determined using the following indicators:
Company liquidity;
- capital turnover;
- stability of the company;
- profitability.
Bank loans to businesses can be different in the following ways:
1. By loan term:
- a short-term loan is issued for a period of less than 1 year;
- a medium-term loan is issued for a period of 1 to 3 years;
- a long-term loan is issued for a period of more than 3 years.
2. According to the reality of lending:
- issued loans - this is the receipt by the borrower from the bank on credit of real amounts of money;
- oval loans are guarantees (guarantees) of banks for the client's obligations to third parties; in case of non-fulfillment of the client's obligations, the bank pays a third party for the obligations of the client, and between itself and the client draws up a transaction as a loan with a certain fee.
3. According to the terms of lending:
- ordinary credit has the usual conditions;
- a soft loan has preferential terms and is provided to certain categories of borrowers or for certain projects; in principle, if the bank is interested in the client and has a special disposition towards him, then we can talk about preferential lending conditions.
4. According to the method (method) of calculating the loan amount:
- the loan amount is calculated based on a certain turnover. Such a calculation is made when the main source of loan repayment is the client's cash flow. In this case, in Russia, on average, the rule is that banks give an average of 1 monthly turnover per year. But often also the consideration of the terms of the loan is approached individually;
- the loan amount is calculated based on a certain balance. This calculation is made when the loan is provided with excellent collateral, which can be firmly relied upon as a source of loan repayment. The maximum loan amount is 50-70% of the value of the collateral;
- the loan amount is calculated in a mixed way. In general, it is important for the bank to know that the loan will be repaid. So, in any case, the bank looks at the financial flows - will the borrower have enough funds to repay the loan.
5. By issuing the amount of credit:
- full credit implies the issuance of the full amount of the loan;
- credit line - a way to limit the maximum loan and issue funds as needed. The credit line is more often used for business development. The advantage for the client is that he may not pay extra interest, temporarily refusing to receive a certain amount, that is, he can take a loan in the size of his own discretion within the limit. Increasing the loan amount within the limit does not require a separate agreement.
6. By the method of loan repayment:
- repayment of the loan amount at the end of the term;
- uniform monthly repayment of the loan amount during the term;
- repayment in accordance with the approved schedule (uneven, possibly with a grace period).
Along with bank loans, the sources of financing of working capital are commercial loans of other organizations, issued in the form of loans, bills of exchange, commodity credit and advance payments.
A commercial loan is provided to the company on a contractual basis by other companies at the expense of temporarily free funds on the terms of mandatory repayment and payment.
Commodity credit is a commercial loan that is provided in commodity form sellers to buyers in the form of a deferred payment for goods sold. With a commodity commercial loan, the source of financing is the funds of the seller company.
Security for a commercial loan is the obligation of the debtor (buyer) to repay within a certain period of time both the amount of the principal debt and accrued interest (if any). The use of commercial credit requires the seller to have sufficient reserve capital in the event of a slowdown in receipts from debtors.
The provision of commercial and commodity loans is regulated by articles 822, 823 of the Civil Code of the Russian Federation. Either approach may be most effective in specific circumstances. The choice of approach is the main task of the company's credit policy.
Combinations of approaches are possible:
1. The usual order of implementation. In the usual scheme, the buyer orders the goods, the goods are shipped, and payment for it is made within the specified time after receipt of the invoice.
2. Bill method. A bill of exchange (draft) is used - a written order from the lender to the borrower to pay the latter a certain amount to a third party (remittent). After the goods have been delivered, the seller (creditor) issues a bill of exchange to the buyer (borrower), who, having received commercial documents, accepts it, i.e., agrees to pay within the period indicated on it.
3. Discount subject to payment within a certain period. For the buyer, in the contract or otherwise, 2 payment terms are established: the first (preferential) - for payment at a discount, the second (final) - the deadline for repaying the debt. The essence of the method is to encourage the buyer to pay during the first term. If the payment is made by the buyer on the first date, the discount will be deducted from the price. Otherwise, the entire amount must be paid within the prescribed second term.
4. Open account. An agreement is concluded, according to which the buyer can make periodic purchases without applying for a loan in each individual case within the limits of the loan amount established for him.
5. Seasonal credit. The approach is usually applied in certain sectors of the economy, for example, in the production of toys, souvenirs and other consumer goods calculated for a certain date. Retailers are allowed to buy items well in advance of the target date in order to organize the necessary stocks before the peak of seasonal sales and defer payment for the item until the end of the sale.
This approach allows the manufacturer to produce products and immediately ship them without burdening the buyer with the need for an urgent payment. For the manufacturer, this means no additional costs for warehousing, storage, etc., since the required volume of products is shipped immediately after production, which begins long before the peak of seasonal sales.
For example, toy manufacturers allow merchants to purchase toys months in advance. new year holidays, and pay for the goods - in January-February.
6. Consignment. In a consignment, the retailer can receive goods without payment. If the goods are sold, there will be an obligation to pay, and if the goods are not sold, the retailer may return the goods to the manufacturer without penalty.
Consignment is usually used when selling new, atypical goods, the demand for which is difficult to predict. Traders do not want to take risks and therefore offer suppliers only such working conditions. For example, when selling new textbooks for institutes, book publishers send their books to retail outlets with the condition that they be returned if they are not purchased.
An investment tax credit is provided to an enterprise by government authorities and represents a temporary deferment of the organization's tax payments. In order to receive an investment tax credit, an organization enters into a loan agreement with the tax authority at the place of its registration.
The investment contribution (contribution) of employees is a monetary contribution of an employee to the development of an economic entity at a certain percentage. The interests of the parties are formalized by an agreement or a regulation on an investment deposit.
The organization's needs for working capital can also be covered by issuing debt securities or bonds. The bond certifies the loan relationship between the bond holder and the person who issued the document. Bonds assume urgency, repayment and payment with a fixed, floating or evenly increasing coupon rate, as well as with a zero coupon (interest-free bonds). Income on interest-free bonds is paid once upon redemption of securities at the redemption price.
According to the terms of the loan, bonds are classified into short-term (1-3 years), medium-term (3-7 years) and long-term (7-30 years). Corporate bonds, as a rule, are high-yielding securities, although their reliability is lower than other securities.
Other sources of working capital formation include enterprise funds that are temporarily not received for their intended purpose (funds, reserves, etc.).
The correct ratio between own, borrowed and borrowed sources of working capital formation plays an important role in strengthening the financial condition of the organization.
The analysis assesses the organization's need for working capital, which is then compared with the amount of available financial sources. At the same time, the analysis of the sources of working capital formation includes not only an assessment of their dynamics, but also a consideration of the structure both as a whole by types of sources, and detailing - by components internal structure.
Determination of the expediency of attracting one or another financial source is carried out on the basis of a comparison of the profitability indicators of investments of this type and the cost (price) of the source. This problem is especially relevant for borrowed funds.
In the process of circulation of working capital, the sources of their formation, as a rule, do not differ. However, this does not mean that the system of formation of working capital does not affect the speed and efficiency of the use of working capital. An excess of working capital means that part of the capital of the organization is idle and does not generate income. The lack of working capital slows down the course of the production process, slowing down the rate of economic turnover of the organization's funds.
The question of the sources of working capital formation is important from another point of view. Market conditions are constantly changing, so the organization's needs for working capital are unstable. It is usually practically impossible to cover them only at the expense of own sources. The attractiveness of the organization's work at the expense of its own sources fades into the background. Experience shows that in most cases the efficiency of using borrowed funds is higher than the efficiency of using own funds. Therefore, the main task of managing the process of formation of working capital is to ensure the effectiveness of attracting borrowed funds.
As noted above, there are many ways and schemes and sources of formation of the organization's assets, in connection with these, the issue of competent management of these sources in the enterprise is quite acute.
Financial assets of banks
The concept of bank assets includes all property of the organization, starting with accumulated finances and ending with receivables. The specifics of the work of commercial institutions that operate in the financial services market is considered to be a large number of receivables of various types, which are issued in the form of loans, loans and loans of other types.The category of bank assets also includes property objects that belong to a commercial organization. This category includes the funds of investors that are used to make a profit, as well as equity jar.
The bank's assets are growing thanks to activities aimed at placing borrowed and own funds, and more specifically, through investment operations and lending. The main criterion for the quality of a banking asset is the profit that it brings.
It is customary to include real estate, securities, investments, loans, as well as all other objects that can be valued in monetary terms, as banking assets.
Banks are the centers where business partnerships mostly start and end. The health of the economy depends to a decisive extent on the accurate and competent activity of banks. Without a developed network of commercial banks, the desire to create a real and efficient market mechanism remains only a good wish.
Commercial banks are a universal credit institution created to attract and place funds on the terms of repayment and payment, as well as to carry out many other banking operations.
The structure and quality of assets largely determine the liquidity and solvency of the bank, and, consequently, its reliability. Capital adequacy and the level of accepted credit risks depend on the quality of bank assets, and the level of accepted currency and interest rate risks depends on the consistency of assets and liabilities in terms of volumes and terms.
The banking portfolio of assets and liabilities is a single entity used to achieve high profits and an acceptable level of risk. Joint asset-liability management provides a bank with a tool to protect deposits and loans from the effects of fluctuating business cycles and seasonal fluctuations, as well as a means to build asset portfolios that help achieve the bank's goals. The essence of asset and liability management is the formation of tactics and the implementation of activities that bring the structure of the balance sheet in line with its strategy.
The quality of a bank's assets affects all aspects of banking operations. If borrowers do not pay interest on their loans, the bank's net income will be reduced. In turn, low income (net profit) can cause a lack of liquidity. With insufficient cash flow, the bank must increase its liabilities simply to pay the administrative costs and interest on its existing loans. Unstable (low) net income also makes it impossible to increase the bank's capital. Poor asset quality directly affects capital. If borrowers are expected to default on their principals, the assets demand their value, and capital is reduced. Too many outstanding loans are the most common reason for bank failures.
Among financial assets, a special role belongs to the so-called capital financial assets - stocks and bonds. It is with the help of these tools that the capital of the company is formed, they are both objects and methods for implementing typical financial processes - mobilization (with the help of the issue of shares and bonds, capital is attracted on a long-term basis) and investment (free cash is invested in stocks and bonds, as in long term as well as short term).
Any product has many characteristics: price, degree of conformity to fashion, consumer qualities, the potential ability to generate income for its owner, etc. A financial asset, being, in principle, an ordinary commodity in the capital market, can also be characterized from various positions, and its main characteristics, no doubt - price, cost, return and risk.
A financial asset has two related absolute characteristics:
First, the announced current market price (R) at which it can be purchased on the market,
Second, the theoretical or intrinsic value (PV).
The difference between these characteristics is quite obvious and understandable. So, for any collector, some little thing found on the market and related to the sphere of his interests can be practically priceless, while for a person who is not interested in this, it is worth nothing.
There are three main theories for the valuation of financial assets: fundamentalist, technocratic, and guesswork.
Fundamentalists believe that any security has an intrinsic value that can be quantified as the discounted value of future earnings in connection with that security (i.e. one must move from the future to the present).
Technocrats, on the contrary, propose to move from the past to the present and argue that to determine the current intrinsic value of a particular security, it is enough to know only the dynamics of its price in the past.
Followers of the theory of "walking at random" believe that the current prices of financial assets flexibly reflect all relevant information, including information about the future of securities. They proceed from the assumption that the current price always absorbs all the necessary information, which, therefore, does not need to be looked for additionally. In the same way, all future expectations are concentrated in the current price. The most common is the fundamentalist theory of estimating the theoretical value of financial assets.
According to this theory, the current intrinsic value (PV) of any security in general view can be calculated using the formula:
infinity FVi
PV=sum ──────────(1)
where FVi is the expected cash flow in the i-th period (usually a year);
r - acceptable (expected or required) return.
A significant drawback of this model is that it does not take into account risks. The financial asset valuation model, which describes the relationship between the profitability and risk indicators of a financial asset and the market as a whole, is called CAPM (Capital Asset Pricing Model), another name is the pricing model in the market of capital financial assets.
The logic of the model is as follows. The main indicators in the market of capital financial assets used by investors are the average market return km, the risk-free return krf, which is usually understood as the return on long-term government securities; the expected return on the security ke, the expediency of the operation with which is being analyzed; coefficient characterizing the marginal contribution of a given share to the risk of the market portfolio, which is understood as a portfolio consisting of investments in all securities quoted on the market, and the proportion of investments in a particular security is equal to its share in the total market capitalization. Average for the market = 1; for a security that is more risky than the market, > 1; for a security that is less risky than the market,< 1.
Obviously, the difference (km - krf) is a market premium for the risk of investing in marketable rather than risk-free assets; the difference (ke - krf) is the expected risk premium for investing in a given security. These indicators are proportionally related through the beta coefficient.
ke - krf = x (km - krf) (2)
Such a representation (2) is convenient for understanding the essence of the relationship between premiums and the risk of the firm's securities. Because in practice we are talking on the assessment of the expected return of a particular security (or portfolio), then formula (2) is transformed as follows.
With regard to transactions with financial assets, it can be argued that they are, of course, risky. The meaning of riskiness in this case is that the investor, investing his capital in certain types of securities, is obliged to be aware that, as a rule, no one guarantees him both the return of the invested funds and the receipt of the expected or promised income. The probability of non-receipt of income is the higher, the less protected from the standpoint of the long-term perspective, solvency and financial stability issuer. In other words, the higher the probability that the issuer may go bankrupt, the higher the risk of investing in its securities. In this sense, the state can be considered the least risky issuer; moreover, when modeling cash flows in capital markets in economically developed countries, it is quite common to interpret investments in government securities as risk-free. It should be noted that in developed countries there is no unanimity regarding what securities should be considered risk-free. Most often, we are talking about either long-term government bonds or short-term treasury bills; For example, in the United States in recent years, government long-term bonds have been used as an analogue of risk-free securities, since the closest correlation is observed between the return on these financial instruments and the return on shares. However, such an approach cannot be taken as an absolute, because, for example, the experience of Russia in 1998 showed that under certain circumstances, even government securities and obligations cannot be considered as risk-free.
In the application to financial assets, the following interpretation of risk and its measures are used: the riskiness of an asset is characterized by the degree of variability of income (or profitability) that can be obtained by owning this asset. The criterion is quite obvious: the more variable the income (yield), that is, the more unpredictable it is, the more risky the asset is. The main measures to assess the variability of some indicator are the range of variation, variance, standard deviation and coefficient of variation.
As a relative indicator, the coefficient of variation is most preferable for spatiotemporal comparisons; the values of other indicators significantly depend on the absolute values of the elements of the estimated variational series. In other words, if the absolute values of the outcomes of two compared risk alternatives differ significantly, the risk measures listed above, with the exception of the coefficient of variation, are not comparable.
The performance of financial asset transactions can be measured in terms of either income or yield. Since at comparative analysis different financial assets income in absolute terms can vary significantly (one of the reasons is the difference in the face values of securities), it is accepted as a basic indicator characterizing the performance of a transaction with a financial asset, to use not income, but profitability. Since the return on an asset is measured as a percentage, i.e., to a much lesser extent depends on its value (for example, face value), any of the above risk measures can be used; the most widely used in practice are dispersion and standard deviation.
The risk cannot be accurately assessed, i.e. it is a very subjective value. This can be seen, if only because, depending on the chosen risk measure, it is possible to obtain different estimates of it.
Investing in financial assets is, in fact, a game in which you can win or lose. A positive result from participation in such a game is expressed in obtaining the expected return. Risk and return are directly proportional: the higher the yield promised by the security, the higher the risk of not receiving it. Since all securities, with the exception of government long-term bonds, are considered risky, the investor, entering the game, pays a certain price for the opportunity to participate in it, equal to the amount of possible losses if his expectations do not come true.
Investors participating in market operations are divided into three categories: risk-neutral, risk-averse, risk-averse. The first group includes investors who are willing to participate in the game provided they pay a fair price; in the second, investors who do not necessarily participate in the game, even if they are required to pay a price less than fair; in the third - investors who are ready to participate in the game, even if it requires paying a price greater than fair.
In addition to the securities market, the fair price is formed through the risk premium mechanism in the form of a premium to the risk-free yield.
The riskiness of a particular security depends on many factors: the general state of the economy of a particular country, the financial soundness and fame of the issuer, the type of business in which the issuer's main resources are invested, the results of its current activities, investment and dividend policy, the structure of funding sources, the need for additional sources, etc. Therefore, it is obvious that securities of various yields and risk levels are traded on the market.
Any reasonable investor tries to eliminate risk as much as possible and therefore, as a rule, invests his money not in any one security, but forms an investment portfolio, which is a set of marketable securities acquired by an individual or legal entity in order to generate income. In such a portfolio, riskier assets are balanced by less risky ones.
Portfolio investment has different purposes; for example, profit maximization or, conversely, risk minimization can be used as a target criterion. However, the most common target setting is formulated as follows: the portfolio includes securities that generally provide the possibility of obtaining an acceptable value of the combination "profitability/risk".
It turns out that the same security, considered in isolation or as an integral part of the portfolio, is characterized differently in terms of its riskiness, namely, the financial asset in the portfolio is less risky compared to the situation when it is considered in isolation. Therefore, any transactions with a specific asset are evaluated from the standpoint of its impact on the risk of the portfolio, and it turns out that if there are several assets competing for inclusion in the portfolio, the choice will not always be made in favor of the asset with the lowest overall risk. The characterization of the riskiness of an asset in the context of portfolio investment is carried out using the so-called general and market risks.
Overall risk refers to a particular financial asset, considered in isolation, and is measured by the dispersion of possible returns relative to the expected return of that asset. Market risk refers to a specific financial asset considered as an integral part of the investment portfolio and represents the share of the risk of this asset in the risk of the portfolio as a whole.
The expected return of a portfolio is a weighted average of the expected returns of its components; the risk indicators of the portfolio and its constituent securities are no longer connected by such a ratio due to the non-linearity of risk measures.
The overall portfolio risk includes diversifiable (non-systematic, company-specific) risk, which can be eliminated by portfolio diversification, and non-diversifiable (systematic, market) risk, which is not eliminated by diversification. It is believed that the portfolio's diversifiable risk can be minimized, for example, by including 10-20 randomly selected types of securities in it.
Since there are usually hundreds or even thousands of different issuers on the market, there are many options for completing a portfolio; it is obvious that, in principle, it is possible to form two portfolios having, for example, the same expected return, but different risk. Therefore, methods for the formation of effective portfolios have been developed. An efficient portfolio is a portfolio that provides the highest return for a given level of risk or the lowest risk for a given rate of return.
Literature: Kovalev V.V. Firm asset management: textbook. M.: Prospekt, 2006. Kovalev V.V. Financial management: theory and practice. 2nd ed., revised. and additional M.: Prospekt, 2009. Lyalin V.A., Vorobyov P.V. Securities market: textbook. Moscow: Prospekt, 2006.
