One of the areas of financial management is. The main directions of financial management. Investment policy development

- This is the financial management of the company, aimed at achieving the strategic and tactical goals of the functioning of the given company in the market.

The main issues of financial management are related to the formation of enterprise capital and ensuring the most efficient use of it.

Currently, the concept of "financial management" implies a variety of aspects of enterprise financial management. A number of areas of financial management have received in-depth development and have emerged into relatively independent scientific and academic disciplines:

higher financial computing;
investment analysis;
risk management;
crisis management;
appraisal of the company's value.

A brief history of financial management

Financial management as a scientific direction originated at the beginning of the last century in the United States and at the first stages of its formation considered mainly issues related to the financial aspects of the creation of new firms and companies, and subsequently - the management of financial investments and the problems of bankruptcy.

It is believed that the beginning of this direction was laid by G. Markovitz, who developed in the late 1950s. portfolio theory, on the basis of which W. Sharp, J. Lintner and J. Mossin created a financial asset return assessment model (CAPM) a few years later, linking the risk and return of a portfolio of financial instruments. Further development of this area led to the development of the concept of an efficient market, the creation of the theory of arbitration pricing, the theory of option pricing, and a number of other models for evaluating market instruments. Around the same time, intensive research began on the capital structure and prices of funding sources. The main contribution to this section was made by F. Modigliani and M. Miller. Year of publication of their work “Cost of Capital. Corporate finance. Investment Theory ”1958, is considered a milestone when FM emerged as an independent discipline from applied microeconomics. Portfolio theory and capital structure theory can be called the core of financial management, since they allow you to answer two main questions: where to get money and where to invest.

The role of financial management in managing an organization

Financial management is carried out through financial mechanism, which can be defined as a system of action of financial methods, expressed in the organization, planning and promotion of use.

There are four main elements of the financial mechanism:

State legal regulation of the financial activities of the enterprise.
The market mechanism for regulating the financial activities of an enterprise.
The internal mechanism for regulating the financial activities of the enterprise (charter, financial strategy, internal standards and requirements).
The system of specific techniques and methods used in the enterprise in the analysis, planning and control of financial activities.

represent a system of economic relations associated with the formation, distribution and use of funds in the process of their circulation. The market environment, the expansion of independence of adoption have led to a sharp increase in the importance of financial management in the management of any economic structure.

The concept of "management" can be viewed from three sides:

as a system of economic management of the company;
as a governing body;
as a form of entrepreneurial activity.

The development of market relations in our country, which made it possible for enterprises to independently make management decisions and dispose of the end result of their activities, together with a radical change, the emergence, introduction of new forms of ownership, the improvement of the accounting system, led to an awareness of the importance of financial management as a scientific discipline and the possibility of using it. theoretical and practical results in the management of Russian enterprises and organizations.

Financial management objectives

The main goals of financial management:

increase in the market value of the company's shares;
increase in profits;
consolidation of the company in a specific market or expansion of an existing market segment;
avoiding bankruptcy and major financial setbacks;
improving the welfare of employees and / or management personnel;
contribution to the development of science and technology.

In the process of achieving the set goals, financial management is aimed at solving the following tasks:

1. Achievement of high financial stability of the company in the process of its development. This task is implemented through the formation of an effective policy for financing the economic and investment activities of the company, managing the formation of financial resources from various sources, and optimizing the financial structure of the company's capital.

2. Optimization of the company's cash flows. This objective is achieved through effective management of solvency and absolute liquidity. At the same time, the free balance of monetary assets should be minimized in order to reduce the risk of impairment of surplus funds.

3. Ensuring the maximization of the company's profits. This task is implemented by managing the formation of financial results, optimizing the size and composition of financial resources of the company's non-current and circulating assets, and balancing cash flows.

4. Minimizing financial risks. This task is achieved by developing an effective system for identifying risks, qualitative and quantitative assessment of financial risks, identifying ways to minimize them, and developing an insurance policy.

Some goals and criteria for managing company finances

Improving the well-being of company owners

Market consolidation, financial balance

Maximizing the current
arrived

The economic growth

Criteria

Increasing market value
shares.

Improving return on equity

Positive dynamics and stability of liquidity indicators, financial independence and stability

Growth of indicators of profitability of turnover and
assets.

Business activity growth

Positive dynamics and stability of capital growth rates, turnover and
arrived.

Growth in economic profitability.

The stability of financial indicators
sustainability

Financial management functions

Financial management includes the following aspects of activities:

organization and management of relations between an enterprise in the financial sector with other enterprises, banks, insurance companies, budgets of all levels;
formation of financial resources and their optimization;
placement of capital and management of the process of its functioning;
analysis and management of the company's cash flows.

Financial management includes strategy and management tactics.

Management strategy- the general direction and way of using funds to achieve the goal. This method corresponds to a certain set of rules and restrictions on decision making. Management tactics- these are specific methods and techniques for achieving the set goal within the framework of certain conditions of the economic activity of the enterprise in question.

Financial management functions:

Scheduling function:

development of the company's financial strategy; formation of a system of goals and main indicators of its activities for the long and short term; long-term and short-term financial planning; company budgeting;
formation of pricing policy; sales forecast; analysis of economic factors and market conditions;

The function of forming the capital structure and calculating its price:

determination of the general need for financial resources to ensure the activities of the organization; formation and analysis of alternative sources of financing; formation of an optimal financial capital structure that ensures the value of the company;
calculation of the price of capital;
formation of an effective flow of reinvested profit and depreciation deductions.
investment analysis;

Investment policy development function:

the formation of the most important areas of investment of the company's capital; assessment of the investment attractiveness of individual financial instruments, selection of the most effective of them;
investment portfolio formation and management.

Working capital management function:

identifying the real need for certain types of assets and determining their value, based on the expected growth rates of the company;
formation of an asset structure that meets the requirements of the company's liquidity;
increasing the efficiency of using working capital;
control and regulation of monetary transactions; cash flow analysis;

Financial risk analysis function:

identification of financial risks inherent in the investment and financial and economic activities of the company;
analysis and forecasting of financial and business risks;

Assessment and consultation function:

formation of a system of measures to prevent and minimize financial risks;
coordination and control of the implementation of managerial decisions within the framework of financial management;
organizing a system for monitoring financial activities, implementing individual projects and managing financial results;
adjustment of financial plans, budgets of individual departments;
consulting with the heads of the company's divisions and developing recommendations on financial issues.

Financial management information support

Specific indicators of this system are formed from external and internal sources, which can be divided into the following groups:

Indicators characterizing the general economic development of the country (used when making strategic decisions in the field of financial activities).
Indicators characterizing the conjuncture of the financial market (used in the formation of a portfolio of financial investments, making short-term investments).
Indicators characterizing the activities of competitors and counterparties (used when making operational management decisions).
Regulatory indicators.
Indicators characterizing the results of the financial activities of the enterprise (balance sheet, income statement).
Regulatory and planned indicators.

Financial management methods and functions

Object and subject of financial management

An object is a movement of financial resources and a set of financial relations.

Financial leverage - work, services, information, cost, profit, profitability, income, expenses, costs and profits.

The subjects of financial management are owners, financial director, financial manager.

lecture number 3

Question number 7

Methods - financial analysis, financial appraisal, financial planning.

Financial management functions:

1. budgeting for the smooth flow of capital.

2.providing simple or extended reproduction

3.Ensuring the stability of financial indicators

Enterprise stability indicators:

1.the solvency of the enterprise

2.creditworthiness

3.financial stability

lecture number 3

1. enterprise asset management - sources that earn

Optimization of the asset structure,

Rational use of non-negotiable and circulating assets

Reduction of accounts receivable

Reasonable management of cash flows

2. enterprise liability management - property to replenish assets

Optimization of the capital structure (authorized capital, reserve capital, added capital, retained earnings)

3. manage borrowed capital in a commercial enterprise

4. cost and benefit management

lecture number 3

Question number 9

Financial management information base

1. Own information base

· Balance sheet form No. 1

· Profit and loss statement (form No. 2)

· Statement of cash flows (form No. 4)

Financial legislation

Normative legal regulations of the enterprise:

o commercial and commercial law

o customs legislation

2. Information in the form of legislation

3.5 lecture

Question number 10

Capital structure

Capital: equity, borrowed, fixed, circulating

Capital is value that brings surplus value.

Equity structure:

v authorized capital is the sum of the par value of the company's shares

v own shares

v additional capital - in the form of revaluation of fixed assets

v reserve capital

v retained earnings

Equity:

1. main

2.negotiable

lecture number 6

Question number 11

Borrowed capital

Borrowed capital - a loan received in the form of money or property, received for a certain fee with an obligation to return.

Forms of debt capital:

v bank loan:

Short-term - up to 1 year

Long-term - from over 1 year

v purchase of equipment on the basis of financial leasing

v by selling securities

Question number 12

Main capital

Main capital:

1.Outside current assets -

2. fixed assets and production,

3.intangible assets (licenses)

4.Long-term financial investments in the property of other enterprises

5. construction in progress

Non-current assets include operating (non-current assets):

§ infrastructure

lecture number 6

Question number 13

Working capital

Working capital:

§ monetary funds advanced into working capital - production and circulation funds in order to ensure the continuity of production

According to the economic content, working capital is subdivided:

1.production working capital (raw materials)

2. funds in settlements - sale of products

3. financial current assets - loans provided by other organizations or other organizations provide loans or short-term investments

lecture number 6

Question number 14

Capital management

In the balance sheet, fixed assets are reflected as non-current assets.

Financial management in the management of non-circulating assets provides for financing the physical and obsolescence of equipment outside of circulating assets.

Funding methods:

1.depreciation policy - funds are directed to the restoration of equipment

2.policy of profit reinvestment - net profit is sent to the production development fund

3. the use of operating or financial leasing - the purchase of new equipment or the purchase of equipment for temporary use for a rental fee. After calculating the rent, this company becomes the owner of the equipment

Question # 15

Working capital management

Working capital is the active part of the capital of an enterprise. It has 2 forms:

§ equity capital - stocks of raw materials, materials, finished products, accounts receivable, cash.

Management of this form of capital provides for:

1.manage stocks of raw materials

2.finished product management

3. receivables and payables

4. money management

§ borrowed

Question number 16

Enterprise assets and their classification

Assets - a set of property values used for the purpose of making a profit.

Asset classification:

1.the form of functioning

§ tangible assets - fixed assets unfinished capital investment, purchase of equipment for installation, stocks of raw materials finished products

§ intangible assets - rights to use natural resources, licenses, computer programs for managing production and sales of products

§ financial assets cash

lecture number 7

Question number 17

Management of non-current assets

Outside current assets: buildings, structures.

From the point of view of financial management, it is necessary to ensure their timely and high-quality update.

Fixed assets:

§ active machines and equipment

§ passive - buildings, infrastructure

Non-current assets are financed through depreciation and bank loans

Question number 18

Current asset management

Current assets are cash advanced into circulating production assets, which include stocks of raw materials, materials, accounts receivable, cash and cash equivalents, shares, bonds. Current assets go through 3 phases of movement:

1.Money phase

2.production phase

3.commodity phase

lecture number 7

Question number 19

The economic essence of liabilities and their classification

Capital is viewed from 2 sides: as an active part and as a passive part

Active part - tangible, intangible and financial assets

The passive part of the capital - ensures the fixation of its active part, the borrowed capital

Passive capital structure:

1. authorized capital

2. reserve capital and additional capital

3.Specialized financial funds

4. retained earnings

Debt capital includes bank loans (short-term long-term), property lease, issue and sale of securities

lecture number 8

Question number 20

Management of own passive capital

Equity capital is the financial basis of an enterprise. The initial amount of equity capital invested in the form of company assets is declared in the constituent documents and remains unchanged until re-registration.

Reserve capital - formed from net profit

Additional capital is formed through the acquisition of technological equipment through the revaluation of fixed assets

lecture number 8

Question number 21

The concept of expenses - costs and expenses - payments

Cost Control Objects

Expenses - the total cost of resources used in production and economic activities for current and investment needs. Expenses in the form of expenses and in the form of payments of a current and investment nature.

Lecture number 9

Question number 23

Grouping of expenses involved in the formation of profits

According to the tax code chapter 25

The list of expenses as expenses includes:

1. costs associated with the production and sale of products.

Material costs

Labor costs

Costs of the form of depreciation

2.out selling costs

Question number 24

Variable and fixed costs, their composition and management tasks

Fixed costs - depreciation, rent

Question number 25

The aggregate of costs that form the cost of economic elements

The cost price is the cost of production and sales of products, expressed in monetary terms.

Cost levels:

1.the cost of an individual product -

2.shop cost -

3. production cost -

4. total cost price -

The cost is determined in 2 ways:

1. by economic elements

2. by calculation items - this grouping provides for the accounting of production costs and maintenance of production. Includes the following calculation items:

Raw materials

Fuel, energy

Wage background

Deduction for social insurance

Preparation and mastering of production

General production costs (cleaning, lighting)

lecture number 10

Question number 26

Profit management

Profit is an absolute indicator of production efficiency, determined by determining the difference between the amount of net proceeds and the amount of costs (tangible, intangible) for the production and sale of products.

Lecture number 10

Question number 28

Production profitability

The profitability of production activities is a relative indicator of the intensity of production and characterizes the efficiency of production activities.

Key profitability indicators:

Profitability of production costs (payback of production)

Profitability of sales

Profitability (return on equity)

Question number 29

Concept and structure of income

Income - newly created value Income consists of 2 elements:

Wage fund - reimbursement of human labor costs

The rest is profit

Question # 30

Sources of financial results of the enterprise

Formation of the financial structure of capital where the total need for capital is determined to finance the assets of the enterprise being formed; formation of a target capital structure providing the lowest cost and sufficient financial stability of capital. Management of current assets here the subject of study is the analysis and forecasting of the duration of individual cycles of capital turnover with the allocation of certain types of these assets ...

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MINISTRY OF EDUCATION AND SCIENCE OF THE RUSSIAN FEDERATION FEDERAL AGENCY FOR EDUCATIONState educational institution of higher professional education

RUSSIAN ECONOMIC UNIVERSITY IM. G.V. PLEKHANOV (REU named after G.V. PLEKHANOV)

Interdisciplinary Department of Financial Management

Examination on the subject "Financial Management"

Option number 2

The main directions of financial management ……………………… 3 p.
Task 1 ……………………………………………………………… ...… 5 pages
Task 2 ………………………………………………………… .. ………. 7 pp.
Task 3 …………………………………………………………………… .11 pp.

The main directions of financial management.

Formation of assets for certain types and their total amount as a whole, based on the envisaged volumes of activity of the enterprise and optimization of the composition of assets from the standpoint of the efficiency of their use, as well as liquidity that maintains constant solvency.

Formation of a financial capital structure, where the total capital requirement for financing the assets of the enterprise being formed is determined;formation of the target capital structureproviding the lowest cost and sufficient financial stability of capital.

Current asset management, here the subject of study is the analysis and forecasting of the duration of individual cycles of capital turnover with the allocation of certain types of these assets: stocks of inventories, monetary assets, accounts receivable.

Management of non-current assets,here the subject is to ensure the effective use of fixed assets of the enterprise, which make up the majority of non-current assets. In the process of management, the analysis of the efficiency of using certain types of fixed assets is carried out, the need for financial resources is determined to ensure current and major repairs, as well as replacement due to physical and moral deterioration, and a system is formed to increase the return on assets of existing fixed assets.

Investment management, here the direction of the investment activity of the enterprise is formed, the investment attractiveness of individual real projects and financial instruments is assessed and the most effective of them are selected. Particular attention is paid to the choice of forms (leasing, etc.) and sources of financing. The composition of the sources of investment resources is being optimized.

Management of the formation of own financial resources,here the subject is to determine the need for their own financial resources for the implementation of the economic strategy, maintaining financial stability. Special attention is paid to attracting own sources of equity capital financing (net profit and depreciation charges).

Borrowing management, where the main thing is to determine the total need for borrowed funds, the optimization of the ratio of short-term and long-term debt and the determination of the cost of borrowed funds are carried out.

Financial risk management, here the composition of the main financial risks is revealed, the level of these risks and their unfavorable consequences are assessed for individual operations and economic activities in general, a system of measures for the prevention and minimization of individual risks and their internal and external insurance is being developed, a system for assessing diagnostics of the bankruptcy of an enterprise is being developed ...

2. Task 1.

Determine the impact of the associated effect of financial and operating leverage and assess the financial condition of the enterprise under the conditions specified below:

Profit tax rate - 0.2;

Borrowed funds consist of the following types of loans:

Loan cost,%		Share of the loan
credit
credit
credit
Borrowed funds, cu	750000
Own funds, cu	35000
Total assets, cu	110000
proceeds from sales, cu	150000
As part of costs:
Variables,%;
Constant,%.
Profit, cu	50000

Solution:

EFR = (1-T) (ER-SRSP) ZS / SS, where:

EFR - the effect of financial leverage

ER - economic profitability

PSI - average calculated interest rate

ЗС - borrowed funds

SS - own funds

ER = VP / VA * 100%, where:

VP - gross profit

VA - total assets

ER = * 100 = 45%

EGF = (1-0.2) (45% -14.7%) * = 518.7%

SRSP = (9 * 0.5) + (20 * 0.4) + (22 * 0.1) = 14.7%

ESR =, where:

EOR - the effect of operating leverage

BP - sales proceeds

EOR = = 2.2

EFR = EFR * EOR, where

EPFR - the effect of production and financial leverage

EFPR = 518.7% * 2.2 = 1 141%

Output:

Attraction of borrowed funds (credit) in this case is advisable, because EFR grows taking into account the attraction of a loan and amounts to 518.7%. These borrowings are beneficial for the enterprise, but it is necessary to monitor the differential, since with an increase in leverage, banks tend to compensate for the increase in their risk by raising the price of the loan. The risk indicator for this enterprise is 30.3%. The financial stability indicator is 21.4%.

Objective 2.

The company is considering the possibility of implementing the following investment projects.

	IRR,%	Investment size (million rubles)	ЗК + Ave. Акц + SK	WACC,%
Project A			175+50+275	13,86
Project B			210+60+330	13,86
Project C		1000	350+100+550	27,66
Project D			175+50+275	27,66
Project E		1500	525+15+825	27,66

Sources of investment financing are.

Loan in the amount of 1600 million rubles, rate 20% per annum;
Additional loan in the amount of 800 million rubles, rate of 25% per annum;
Retained earnings in the amount of RUB 2,000 million;
Issue of preferred shares, guaranteed dividend of 25% per annum, placement costs - 6% of the issue volume. The current market price of the preferred share is RUB 1,500.
Issue of ordinary shares. The expected dividend is RUB 24. per share. The current market price of the share is RUB 100. Dividend growth rate - 10% per year. Placement costs 5% of the issue volume.

The company adheres to the following target capital structure in the long term:

Debt capital - 35%,

Preferred shares - 10%,

Equity capital - 55%.

Solution:

We determine the cost of costs for attracting each source of funding in%.

a) we determine the cost of borrowed capital (Кз), taking into account the influence of the tax effect.

Income tax - 20% (0.2)

К1з = bank interest rate * (1-T)

K1z = 20% * (1-0.2) = 16%

K23 = 25% * (1-0.2) = 20%

b) we determine the cost of capital raised by issuing preferred shares.

Kprak =, where:

D - dividend

Р0 - retail price of 1 share

F - placement costs

Kprak = * 100 = 26.6%

c) determine the cost of equity capital using retained earnings.

Kpribnr = + g, where:

Rob = retail price

G - growth rate

Kprinr = (* 100 = 10.24%

d) we determine the cost of equity capital when issuing ordinary shares.

Kskak = + g, where:

D - income from ordinary shares

Р0 - retail price

G - growth rate

F - placement costs

Kskak = (+ 0.1) * 100 = 35.26%

2) Determine WACC - the weighted average cost of capital for each project.

WACC AB = K1z * ZK (%) + Kprak * priv.ak (%) + Kpribnr * SK (%)

WACC WITH DE = K1z * ZK (%) + Kprak * priv.ak (%) + Kskak * SK (%)

WACC A = 16% * 0.35 + 26.6% * 0.1 + 10.24% * 0.55 = 13.86%

WACCB = 16%*0,35+26,6%*0,1+10,24%*0,55=13,86%

WACC WITH

WACCD = 16%*0,35+26,6%*0,1+35,26%*0,55=27,66%

WACCE = 16%*0,35+26,6%*0,1+35,26%*0,55=27,66%

Let's plot the cost of capital graph:


WACC							WACC











27,66
13,86
	A 500	H 600	From 1000	D 500	E 1500	IC (investment value)

WACC - an indicator of limiting capabilities

IRR - indicator of marginal costs

Output:

At a given cost of funding sources of resources, all projects can be implemented. Because marginal capabilities are higher than marginal costs.

Problem 3 ... Find on the Internet the data of financial statements, forms 1 and 2. for any JSC, on their basis, perform an analysis of the financial condition according to the program sent to you, evaluate the indicators obtained.

To solve this problem, the data of financial statements form 1 and 2 for OJSC "Krasnoyarskenergosbyt" are used. And are attached as attachments 1 and 2.

The data has been processed and the conclusion is drawn:

The absolute liquidity ratio of the enterprise OJSC "Krasnoyarskenergosbyt" at a rate of 0.2-0.7 is 1.648, which indicates its liquidity.

The financial stability ratio at a rate of 0.8-0.9 is 0.484, which indicates a large amount of borrowed funds.

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(typical for all types and forms of ownership)

1. Formation of assets for certain types and their total amount as a whole, based on the envisaged volumes of activity of the enterprise and optimization of the composition of assets from the standpoint of the efficiency of their use, as well as liquidity that maintains constant solvency.

2. Formation of a financial capital structure, where the total capital requirement for financing the assets of the enterprise being formed is determined; formation of the target capital structure providing the lowest cost and sufficient financial stability of capital.

3. Current asset management , here the subject of study is the analysis and forecasting of the duration of individual cycles of capital turnover with the allocation of certain types of these assets: stocks of inventories, monetary assets, accounts receivable.

4. Management of non-current assets, here the subject is to ensure the effective use of fixed assets of the enterprise, which make up the majority of non-current assets. In the process of management, the analysis of the efficiency of using certain types of fixed assets is carried out, the need for financial resources is determined to ensure current and major repairs, as well as replacement due to physical and moral deterioration, and a system is formed to increase the return on assets of existing fixed assets.

5. Investment management, here the direction of the investment activity of the enterprise is formed, the investment attractiveness of individual real projects and financial instruments is assessed and the most effective of them are selected. Particular attention is paid to the choice of forms (leasing, etc.) and sources of financing. The composition of the sources of investment resources is being optimized.

6. Management of the formation of own financial resources, here the subject is to determine the need for their own financial resources for the implementation of the economic strategy, maintaining financial stability. Special attention is paid to attracting own sources of equity capital financing (net profit and depreciation charges).

7. Borrowing management, where the main thing is to determine the total need for borrowed funds, the optimization of the ratio of short-term and long-term debt and the determination of the cost of borrowed funds are carried out.

8. Financial risk management, here the composition of the main financial risks is revealed, the level of these risks and their unfavorable consequences are assessed for individual operations and economic activities in general, a system of measures for the prevention and minimization of individual risks and their internal and external insurance is being developed, a system for assessing diagnostics of the bankruptcy of an enterprise is being developed ...

Leverage and its role in financial management

The asset management process aimed at increasing profits is characterized by the category of leverage.

Leverage (lever) - is interpreted in the economy as a factor, a small change in which leads to a significant change in performance indicators.

Types of leverage:

1. Financial leverage characterizes how much you need to attract borrowed funds in order to better use your own. It characterizes the optimal ratio between equity and borrowed funds and shows the extent to which the enterprise has the ability attract borrowed funds.

2. Production leverage (operational leverage).

3. Production and financial leverage .

Financial leverage

Key indicators used in the leverage category:

- Sales proceeds (minus VAT, excise taxes).

Costs of manufacturing products sold:

Conditionally variables;

Conditionally constant.

Balance of income and expenses from non-operating activities

= Gross income before interest and taxes

- Payment of% for loans

= Taxable Income

- Income tax

= Net profit

Indicators	A	B
Assets
Liabilities
Incl. SS
ZS	-	500 at 15% per year
Profit
Return on assets		20 %
CC profitability		gain Δ = 5%
Income tax (not more than 1/3 of the profit)	Max 67	Max 42
Net profit	200 – 67 = 133	125 – 42 = 83
Net return on equity		Δ = 3%

With the same return on assets, different return on equity is due to a different structure of financial sources, and the difference Δ = 5% represents the level of the effect of financial leverage.

Financial leverage effect - this is an increment to the profitability of own funds, obtained through the use of a loan, despite the fact that the latter is paid.

Leverage effect formula:

EFR = (1 - profit tax rate) × (ER - SRSP) ×

EFR - the effect of financial leverage;

ER - economic profitability of the enterprise;

SRSP - average calculated interest rate;

ЗС - borrowed funds

SS - own funds

The PSI increases with each loan, since the rate of each new loan is higher than the previous one due to the increasing risk. It is determined as the weighted average value of the borrowed loans.

This formula is used by banks when assessing creditworthiness (lender risk) /

a) ER - SRSP> 0 - the deal is profitable

EGF is part of the theory of leverage.

Loan borrowing rules:

1. If the new borrowing brings the company an increase in the level of the effect of financial leverage, then it is beneficial for the company. In this case, it is necessary to monitor the condition of the differential, because with an increase in the leverage of financial leverage, banks tend to compensate for the increase in their risk by increasing the price of the loan.

2. The lender's risk is expressed by the amount of the differential. The larger the differential, the lower the risk, and vice versa. Therefore, it is inappropriate to increase the lever arm at any cost, but it is necessary to adjust it depending on the differential.

The optimal value of the EFR is in the range from 1/3 to 1/2 of the level of economic profitability of assets. In this case, the company is able to compensate for tax exemptions and provide its own funds with sufficient return.

Financial management- This is the direction that is engaged in the formation of capital in the company, as well as in charge of the issues of its rational use in order to increase profits.

Financial management concept

Today financial management is a cumulative concept that consists of several areas:

higher computing in finance;
budget analysis;
analysis of the invested funds;
work with risks;
crisis management;
valuation of the organization's shares.

As an activity, management is usually viewed from three sides:

organization's budget management;
government;
type of activity related to entrepreneurship.

The answer to the question of what financial management studies is very simple - managing the company's budget, keeping it competently, distributing funds, and also analyzing and evaluating the existing scheme of working with capital.

History of financial management

Financial management begins its history in the United States at the beginning of the twentieth century. Initially, he dealt with budgeting for young companies, later this area included financial investments in new areas of development, as well as problems that could lead to bankruptcy.

It is believed that the first significant contribution to science was made by Markowitz. In the fifties of the last century, he developed a portfolio of instruments at the level of theory. Two years later, the three scientists Sharp, Lintner and Mossin, based on Markowitz's developments, created an asset valuation method. With its help, you can compare the risks and revenues of a particular organization. Further work in this area made it possible to create a number of tools that help to assess pricing, market and other necessary areas of business.

The next stage of development was the development of Modigliani and Miller. They came to grips with the study of the structure of capital, as well as the cost of possible funding receipts. In 1985, the book "Cost of Capital" was published, which became a kind of borderline.

“Cost of Capital” covers the theory of portfolio financing instruments and capital structure. Simplistically, we can say that the book allows you to get answers to the question - where to get money and where to invest it wisely.

Theoretical foundations and basic concepts of financial management

The finance of any company is a system of economic relations inside and outside of it. In other words, the relations arising from the use of monetary resources are related to financial activities.

Each budget has its own specifics, which depends on many parameters - volume, its structure, duration of the production cycle, costs, economic conditions and even climatic aspects.

What is the role of financial management in the organization

Financial management is a system for working with an enterprise's budget. It, like any system, has its own methods, forms and methods of management. Any decision is made after collecting and processing the necessary information.

It is quite obvious that it is impossible to effectively use finances, and before they can be obtained without a well-developed system for managing them.

It is worth noting that financial management at an enterprise is the most important type of management, since the competitiveness and stability of a company in a modern unstable market depends on its effectiveness (see).

Financial mechanism

Financial management is carried out using a mechanism, which in turn includes methods of formation, planning and stimulation of work with monetary resources.

The financial mechanism is divided into four components:

Control over the activities of the enterprise by the state.
Market regulation.
Internal regulation.
Techniques and methods of a specific nature, developed after receiving information and its interpretation.

Financial management, as a system is divided into two subsystems - the subject and the object.

An object- this is what the activity is aimed at. The objects of financial management are the enterprise's money, its turnover, as well as monetary relations between different structures of one enterprise.

Financial management subjects- this is where any activity comes from. Namely, this is a group of people or one manager who processes the flow of information and develops a control system. In addition, this person is responsible for monitoring and evaluating the effectiveness of the chosen strategy. Also his field of activity includes risk assessment and everything related to income and expenses.

Goals and objectives of financial management

Goals and objectives are two interrelated concepts. Generally speaking, the task always follows from the goal. The goal is a more global action, the achievement of which is carried out by solving specific problems. Thus, the goal is long in time, and the task is small. The goals and objectives of financial management always go side by side, and one cannot be achieved without the other.

For each goal, several tasks are usually prescribed that help to achieve it.

Financial management objectives:

growth in the value of the organization in the market;
increase in company revenues;
consolidation of the organization's position in the current market or the seizure of new territories;
avoiding large financial costs or bankruptcy;
increasing the material wealth of not only the company's management, but also employees;
the realization of the opportunity to invest the company's budget in new areas, for example, science.

The most common tasks of financial management:

Growth in the market value of the company. In order for the company's shares to rise, it is necessary to achieve a strong market position. For this, it is necessary to establish competent financing of not only the economic part. Investing in profitable projects or areas is not unimportant. In addition, you need to take care of optimizing the company's financial affairs and attracting budgeting sources not only through your own profit (see).
Optimization of the company's financial flows. Here the problem is solved by a competent approach to solvency and liquidity. All free finances of the company must be directed to the business in order to exclude the possibility of their depreciation. In addition, it will increase profits.
Reducing the risks associated with the loss of finances. The task is solved by developing an effective system for identifying and assessing risks. And also the development of actions to minimize them or compensate for possible losses.
Profit growth. The problem is solved by optimizing the use of cash flows. An important point is competent calculations of current and non-current assets.

Functions and methods of financial management

Financial management functions:

organization of relations with third-party organizations, control of relations;
obtaining and rational use of material resources;
ways of placing the company's capital;
analysis and adjustment of the company's cash flows.

Financial management also has strategy and tactics. Strategy is the general direction, that is, where the company is heading, tactics is the short-term direction, that is, how the strategy will be implemented. Processes are similar to goals and objectives. An analogy can be drawn: strategy is the formation of goals, tactics is the formation of tasks.

Based on the foregoing, there are the following financial management methods that allow you to perform functions:

Planning:

creation of the company's financial policy, drawing up goals for the long-term and short-term period, drawing up a budgeting plan for the organization;
creating a pricing policy, analyzing sales, predicting market behavior;
tax planning.

Creation of a capital structure, calculation of its cost:

search for needs budgeting of company divisions, search for alternative financing, development of a capital structure that will ensure profit growth;
calculation of the cost of capital;
creating a flow of investments in such a way that the profit from them overlapped depreciation;
investment analysis (see).

Investment investment policy development:

search for growth points and investment of free finance, analysis of possible options, selection of the most profitable one with fewer risks;
development of investment instruments, their management, efficiency analysis.

Working capital management:

based on projected growth points, identifying the needs for individual financial assets for them;
development of such an asset structure so that the company's activities are liquid;
increasing the efficiency of using working capital.
analysis of monetary transactions, their control and implementation.

Dealing with risks:

search for risks;
analysis and ways to avoid risks (see);
development of ways to compensate for financial losses from risks.

Financial management information support

Financial management cannot be effective without working with information. All information received by the financial management department comes through two channels - internal and external. In general, the information necessary for the effective operation of the unit can be divided into several types:

General economic development of the country (necessary for).
Market conditions, that is, the competitiveness of goods (necessary to develop a portfolio of short-term investments).
Information about the performance of competitors and counterparties (important for making management decisions for the nearest future).
Information about standards and regulation of activities.
Indicators of the financial activity of the company itself (profit and loss statements, the so-called P&L report).

Financial management problems

Financial management, like any other direction of enterprise management, has a number of problems. In Russia, a study was carried out, on the basis of which it was possible to identify the main problems. The CEOs and CFOs of more than 250 businesses of all sizes were interviewed. Some of them include no more than 30 employees, in others the staff reaches several thousand.

Problems faced by financial management:

financial management and cash deficit;
drawing up a work plan;
financial management training;
anti-crisis management;
development of a financing strategy;
expense item management;
organizational structure of the finance department;
other tasks of financial management.

Financial management is working with the enterprise's money; accordingly, this type of management is considered effective, in which the profit and profitability of the enterprise increase.

You can assess the effectiveness of financial management by analyzing several groups:

profitability and profitability of the company;
business activity and capital return;
the market value of the company.

To obtain profitability and profitability, companies analyze several indicators:

how efficiently the company makes a profit from its core business;
is there enough own budget (without attracting third-party capital) to carry out activities;
net profit to assets on accounts is compared (the most effective way of assessment);
the profit received from the sale of goods is compared with the costs of its production and sale;
how much each ruble brings in profit.

Business activity and capital return show the effectiveness of the use of attracted funds and invested own finances in other areas. The profit from these actions is estimated.

Market value of the company Is an indicator for external companies such as partners. With its help, third-party organizations can draw conclusions about the effectiveness of the enterprise, as well as make decisions regarding the start of joint activities and partnerships.

Financial Management Baselines

Currently, the Russian market has adopted the standards of Western business conduct. The basic indicators of financial management are:

added value;
gross result of exploiting investments in external sources;
net result of exploiting investments in external sources;
economic profitability of assets.

Added value- is formed by deducting from the cost of all manufactured products (not only sold) for the reporting period the cost of services, materials and third-party organizations. This remainder is the net value added. The higher it is, the more successful the enterprise is.

Gross result- salaries and all related expenses (tax and pension contributions, etc.) are subtracted from the previous indicator. This indicator shows profit without depreciation, income tax and debt financing costs. Describes how successful the company is in its financial activities. Helps to predict future development.

Net result- all costs of restoring your own balance are subtracted from the previous indicator (excluding payment of interest on loans, income tax, loans, etc.). Shows the balance sheet profit of the organization.

Economic profitability- net profit with all deductions of expenses, both their expenses and borrowed funds.

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