Enterprise equity management policy article. Own capital management. By discipline: Financial management
25. Management own capital
Funds belonging to an economic entity, advanced by it in the creation of net assets of the enterprise, constitute equity capital. The amount of equity capital is also one of the main indicators of the efficiency and economic potential of the enterprise. Own funds are distributed between own non-current and own current assets. Usually the total amount of own funds exceeds the value of non-current assets. Equity includes equity, investments and retained earnings. Equity capital is calculated as the sum of authorized, additional, reserve capital and monetary funds belonging to the company. The formation of equity capital begins at the time of the establishment of the enterprise. In the future, the increase in equity capital is carried out at the expense of internal and external, own and borrowed, sources of funds. The main source is the profit of the enterprise, and in its composition - the accumulation fund of the enterprise. In addition to profit, the source of replenishment of own funds is the issue of shares, the increase in the stability of liabilities, borrowed funds, accounts payable, etc. Own capital management should be preceded by a study of the effectiveness of its management in the previous period. The analysis is necessary to determine the reserves for the formation of own funds. Own capital management involves managing the process of its formation, maintenance and effective use, i.e. management of already formed assets. This involves both the management of equity in general and the management of its structural elements.
Own capital management is connected not only with ensuring the effective use of its already accumulated part, but also with the formation of its own financial resources that ensure the future development of the enterprise. In the process of managing the formation of their own financial resources, they are classified according to the sources of this formation. The composition of the main sources of formation of the enterprise's own financial resources is shown in Figure 1.3.
Rice. 1.3. - The composition of the main sources of formation of the enterprise's own financial resources
As part of the internal sources of the formation of its own financial resources, the main place belongs to the profit remaining at the disposal of the enterprise, it forms the predominant part of its own financial resources, provides an increase in own capital, and, accordingly, an increase in the market value of the enterprise. Depreciation charges also play a certain role in the composition of internal sources, especially at enterprises with a high cost of their own fixed assets and intangible assets; however, they do not increase the amount of the company's own capital, but are only a means of reinvesting it. Other internal sources do not play a significant role in the formation of the enterprise's own financial resources.
As part of the external sources of the formation of its own financial resources, the main place belongs to the attraction by the enterprise of additional share (through additional contributions to the authorized fund) or equity (through additional emission and sale of shares) capital. For individual enterprises, one of the external sources of the formation of their own financial resources may be the gratuitous financial aid(as a rule, such assistance is provided only to individual state enterprises of various levels). Other external sources include tangible and intangible assets transferred to the enterprise free of charge and included in its balance sheet.
The basis of the management of the enterprise's own capital is the management of the formation of its own financial resources. In order to ensure effective management of this process, the enterprise usually develops a special financial policy aimed at attracting own financial resources from various sources in accordance with the needs of its development in the coming period.
The main objectives of equity capital management are:
Determining the appropriate amount of equity capital;
An increase, if required, in the amount of equity capital from retained earnings or an additional issue of shares;
Determining the rational structure of newly issued shares;
Definition and implementation of the dividend policy.
The development of a policy for the formation of the enterprise's own financial resources is carried out according to the following main stages.
1. Analysis of the formation of the company's own financial resources in the previous period. The purpose of this analysis is to identify the potential for the formation of its own financial resources and its compliance with the pace of development of the enterprise.
At the first stage of analysis the total volume of the formation of own financial resources, the correspondence of the growth rate of own capital to the growth rate of assets and the volume of sales of the enterprise, the dynamics of the share of own resources in the total volume of formation of financial resources in the preplanning period are studied.
At the second stage of the analysis sources of formation of own financial resources are considered. First of all, the ratio of external and internal sources of formation of own financial resources, as well as the cost of attracting own capital from various sources, is studied.
At the third stage of the analysis the sufficiency of own financial resources formed at the enterprise in the preplanning period is assessed.
The equity of an enterprise is the financial resources of an individual business entity, owned by it and used to form a certain part of its assets.
Equity is equal to the amount of assets minus the amount of debt. In fact, this is the net worth of capital.
Own capital of divisions on:
Authorized capital. the authorized capital is the union of the contributions of the owners of the enterprise to its property in monetary terms in the amount determined by the constituent documents.
Additional paid up capital. Organizations established in the form of joint-stock companies (except for investment funds) increase their own capital at the expense of share premium, provided by the difference between the selling and nominal value of their own shares. The source of additional capital may also be the sale by the firm of a part of the assets at a price exceeding their book value, or the acquisition by it of the assets of another company at a price below their book value.
Reserve capital is a reserved part of the company's own capital, designed to provide protection against possible losses and unforeseen losses.
Undistributed income (uncovered loss) is the accumulated income of the enterprise since its inception, minus declared and paid dividends. According to its economic content, it is one of the forms of the reserve of the enterprise's own financial resources. This is the part of the profit that was not paid to shareholders in the form of dividends, but was used to finance the activities of the enterprise.
Own capital management is connected not only with ensuring the effective use of its already accumulated part, but also with the formation of its own financial resources that ensure the future development of the organization. In the process of managing the formation of their own financial resources, they are classified according to the sources of this formation. The composition of the main sources of formation of the organization's own financial resources can be represented as follows.
As part of internal sources of formation of own financial resources the main place belongs to the profit remaining at the disposal of the organization - depreciation,
As part of external sources of formation of own financial resources the main place belongs to the attraction of additional capital by the organization through additional emission and sale of shares or through additional contributions to the authorized capital. For individual organizations, one of the external sources of formation of their own financial resources may be the gratuitous financial assistance provided to them.
The organization's equity management process includes:
1. Analysis of the formation of equity capital in the previous period. The purpose of this analysis is to identify the potential for the formation of its own financial resources and its compliance with the pace of development of the organization.
2. Determining Future Equity Needs is carried out as follows:
P sfr- the total need for the organization's own financial resources in the planning period; P to- the total need for capital at the end of the planning period; U ck- planned specific gravity own capital in its total amount; SK n- the amount of equity at the beginning of the planning period; Etc- the amount of profit allocated for consumption in the planning period.
The calculated total need covers the required amount of own financial resources, generated both from internal and external sources.
3. Estimating the cost of raising equity capital from various sources
4. Formation of own capital from internal sources .
5. Formation of own capital at the expense of external sources .
6. Optimization of the equity structure . The optimization process is based on the following criteria:
· Ensuring the minimum total cost of attracting own financial resources.
Ensuring that the management of the organization is retained by the original founders. Growth
Successful implementation The developed policy for the formation of own financial resources is connected with the solution of the following main tasks:
· conducting an objective assessment of the value of individual elements of equity capital;
Ensuring the maximization of the organization's profit formation, taking into account the acceptable level financial risk;
Formation of an effective profit distribution policy (dividend policy) of the organization;
Formation and effective implementation of the policy of additional issue of shares ( emission policy) or attracting additional share capital.
When developing an equity capital formation policy, the following should be taken into account.
Equity capital is characterized by the following main positive features:
Ease of attraction
· Higher ability to generate profits in all areas of activity,
· Assurance financial stability organization development,
However, it has the following disadvantages:
· Limited scope of attraction,
· High price.
Unused opportunity to increase the return on equity by attracting borrowed financial resources,
Equity capital consists of funds owned by an economic entity advanced by it to create net assets. The value of this capital is one of the most significant indicators of economic potential and performance. Own funds divided between current and non-current assets. Usually the total amount of these funds is greater than the value of non-current assets.
Calculation of own capital is carried out as the sum of authorized, reserve and as well as monetary funds belonging to the company. Own capital is organized from the date of foundation of the enterprise with its subsequent increase at the expense of external and internal, borrowed and own sources of funds. The main source is the profit of the enterprise, in addition to it, accounts payable, various loans, and an increase in stable liabilities can act as a source. Management of own capital can be carried out only after a thorough study of the effectiveness of this activity in the previous period. Here it is worth considering not only the capital itself, but also its structural elements.
Own capital management is associated both with ensuring the effective use of the part that has already been accumulated, and with the organization of one's own financial resources, intended to ensure the future development of the enterprise. During the formation of resources, they are classified by sources, which can be internal and external.
Among the former, the main place is given to profit, which remains at the disposal of the enterprise itself, it creates the predominant share of its own financing resources, which makes it possible to ensure an increase in own capital, respectively, and the market value of the company. As part of internal sources, a certain role is assigned, especially for enterprises with a high price of their own fixed assets and intangible assets. It should be taken into account that they do not increase the amount of equity capital of the organization, but only serve as a means of reinvesting it. Own capital management is carried out taking into account the fact that other internal sources are not assigned a significant role in the formation of the organization's resources.
If we talk about external sources of equity capital formation, then an additional share is of primary importance, or one of such sources of equity capital formation for some companies can be financial assistance provided on a gratuitous basis. Other external sources are tangible assets and intangible assets, which are included in the company's balance sheet.
The management of the organization's own capital is carried out on the basis of the management of the creation of its own resources. In order to ensure the effectiveness of this process, a special policy is being developed, which is focused on attracting own resources from different sources according to the needs of its development in the future period.
Own management is carried out according to similar principles. The main tasks in this case are:
Identification of the appropriate amount of capital;
Increasing the capital of the organization through the issuance of additional shares and retained earnings;
Determination of the most rational structure of shares that are just being issued;
Definition of dividend policy and its implementation.
It turns out that the management of equity capital is carried out according to a well-thought-out plan, taking into account all the nuances of the current situation. Each enterprise in this case requires a certain approach.
The article discusses theoretical basis formation and management of own capital. In the course of the work, the problems and methods of managing the enterprise's own capital are highlighted.
Keywords:financial policy of the enterprise, capital, enterprise, own capital, economics, management.
The problem of formation and management of the company's own capital has always been relevant. In connection with the crisis state of the world economy, the need to maintain the effective functioning of the enterprise is a top priority. To accomplish this task, it is necessary to use an integrated approach to the financial policy of the enterprise, the functional direction of which is the policy of managing the enterprise's own capital.
Equity? a set of funds owned by the owners of the enterprise on the basis of ownership, participating in the production process and making a profit. The components of equity are shown in Figure 1
Figure 1. Components of equity
The profit of the enterprise is the main source of replenishment of equity capital. At the expense of profits, accumulation and consumption funds and a reserve fund are created.
Equity capital is characterized by the following positive features:
- Ease of attraction, since decisions related to increasing equity capital (especially through internal sources of its formation) are made by the owners and managers of the enterprise without the need to obtain the consent of other business entities.
- Higher ability to generate profits in all areas of activity, tk. when using it, the payment of loan interest in all its forms is not required.
- Ensuring the financial sustainability of the development of the enterprise, its solvency in the long term, and, accordingly, reducing the risk of bankruptcy.
However, it has the following disadvantages:
- The limited volume of attraction, and, consequently, the possibilities for a significant expansion of the operating and investment activity enterprises during periods of favorable market conditions and at certain stages of its life cycle.
- High cost compared to alternative borrowed sources of capital formation.
- An unused opportunity to increase the return on equity ratio by attracting borrowed funds, since without such attraction it is impossible to ensure that the financial profitability ratio of the enterprise's activities exceeds the economic one.
An enterprise, using only its own capital, ensures absolute financial stability, that is, the autonomy coefficient is equal to one. But at the same time, not using the potential financial opportunities for increasing profits on invested capital, the enterprise limits the pace of its development.
Capital acts as an agent of production, serving future needs. Based on this, it is necessary to include retained earnings (or profit directed to special funds for the development of production) in the composition of equity capital. All this should be expressed in the dividend policy. The definition of proportions and distribution of profits is one of the key issues. It is important for the enterprise both its own development and the payment of dividends to the founders, which contributes to the increase in the price of the enterprise. Achieving the optimal size in the distribution of profits is possible based on the internal growth rates of the enterprise. . A sustainable dividend policy contributes to the improvement of the main financial indicators, which positively affects the level of market value of the enterprise.
The main reference point for equity management is the market value of the business. The higher the price of equity, the higher the value of the enterprise, which indicates the financial stability of the enterprise and the ability to implement the regulatory function of equity.
The efficiency of capital use is expressed by the ability to generate income. The effect of financial leverage shows that the most efficient use of capital is possible at the expense of credit funds, despite the condition of payment. The ratio of own and borrowed capital should have an optimal value for each specific enterprise, taking into account its characteristics. Own capital management covers both the problem of the effective use of its already accumulated part, and the problem of the formation of its own financial resources intended for the future development of the enterprise.
The creation of an optimal capital structure is associated with the choice of profitability and risk ratios, since the use of borrowed money increases the degree of risk and leads to a higher level of expected return. An optimal capital structure is one that balances risk and return.
Capital structure optimization serves essential tool to ensure the effective functioning of the enterprise.
To guarantee the stable development of the enterprise, it is necessary to choose effective methods management of own capital of the enterprise. Based on the recommendations of modern experts, the following main management methods have been formed:
- streaming modeling. It is based on preliminary verification of decisions made within the framework of equity management, using a simulated environment and mathematical methods.
- Internal and external audit, to improve efficiency.
- Periodic analysis of the dynamics of financial indicators, carried out with sufficient frequency.
- Holding comparative analysis. Comparison of the results of accepted management decisions relative to equity with the results of other organizations.
So the use various methods and principles in the management of equity capital will allow you to flexibly respond to various changes in both internal and external environment. In turn, maintaining optimal structure capital will contribute to the growth of the market value of the enterprise.
Bibliography
- Financial management: tutorial/ ON THE. Tolkacheva, T.I. Melnikov. - M.-Berlin: Direct-Media, 2014.
- Enterprise financial management / Savchuk V.P., M.: BINOM, 2003.
- Financial management: theory and practice / Ed. Stoyanova E.S. - M.: Perspektiva, 2013.
- Nikulina Nadezhda Nikolaevna Financial management of the organization. Theory and practice: textbook. manual for university students studying in the specialties "Finance and Credit", "Accounting, Analysis and Audit", "Organization Management" / N.N. Nikulina, D.V. Sukhodoev, N.D. Eriashvili. - M.:, 2009.
MAGAMENT OF THE OWN CAPITAL OF THE COMPANY
MN Timko, GA Portnova
In the article the theory of formation and management of own capital are considered. In the course of work management problems and methods of own enterprise’s capital are covered.
keywords: financial policy of the company, capital, company, equity capital, economy, management.
Equity management- is the management of the formation of the company's own financial resources. For this, a special financial policy is usually developed, aimed at attracting own financial resources from various sources in accordance with the needs of its development in the coming period.
The policy of forming own financial resources is part of the general financial strategy enterprise, which consists in ensuring the necessary level of self-financing of its production development.
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