Corporate Finance - is a special kind of economic relations: a set of relationships formed in the conditions of education, referral and targeted use of the money supply that occurs as a natural result of the production and sale of goods or provision of services.
Being an important link in an integrated system, they:
- serve as the foundation for building a source of revenue that could subsidize the state budget;
- are "zero point coordinate" with the establishment of the gross national product;
- pave the way for a future scientific and technological revolution.
There is no doubt that corporate finance, in addition to all of the above, and also perform the function of the donor - that with them happens content "wallet" households (in fact, carried out by sponsoring the population increase in the number of vacancies).
solve specific problems
economic relations at the level of corporations resemble the work of a complex mechanism - failure of a single part can cause the unit to stop all.To pre-empt such a scenario, among other things, it is necessary to solve two problems.Namely - intelligently distribute cash flows and monitor their development actors.
Specifically, the corporate finance (this rule is true for all types of off-farm and mezhproizvodstvennyh links) should:
- structure the revolving fund so that any stage of manufacture or at the stage of consumption was no downtime due to lack ofshortage of funds or supplies (for example the reverse situation: attracted investment spent on the purchase of a new production line, however, delayed the purchase of raw materials for it led to the delay in wages and slow modernization);
- not only to monitor the chain 'formation, distribution and use of money ", but also to monitor compliance with the rules of the Labor Code, closely address the problem of optimizing the available capacity, and so on. N.
Fundamental Principles
Corporation is an organization,which enjoys legal personality.Her strength and power - in the union of the set of equity capital under management in a small group of people.
In terms of material and monetary freedoms and responsibilities, corporate finance - is:
- complete independence, as expressed in the running costs is based on short-term business plans, strategies and LPs;
- open access to own current reserves;
- 100% return on investment (in Vol. H., And in view of modernization);
- opportunity to attract a bank loan;
- responsible for miscalculations and failures;
- building relations with the state (that is, control of revenues and payments to the budget, an analysis of the overall performance, and so on. D.).
Features Corporate Finance: is it always justified rate on large-scale activity?
presence of assets - one of the main conditions for the birth of financial relations.However, despite the fact that the share of economic turnover corporations long ago exceeded 80% in the international market today, there is less than seventy organizations, leading to truly large-scale activities.The lion's share of the legal rights of subjects - companies of modest size.
So corporate finance - is primarily a separation of ownership from management (with obligatory centralization of capital in the hands of Directors), and not at all exorbitant concentration of power.In addition, it should be understood that the separation of powers between management and the owners of the de facto ensures the stability of the economic and industrial structure.
nuances of interaction
economic model based on corporate finance - does not merit a single country.Yes, the United States in some ways served as a model, but globalization has erased borders, and now joint-stock company and its shareholders may well be on different sides of the Atlantic ...
Over the past 20-30 years, the relationship between the parties have not undergone significant changes: as before, there are two large, but not equal groups, which are integrated into a corporate body and can not exist without each other.Their composition is as follows:
- management and major shareholders;
- «minoritarschiki", as well as owners of other securities, business partners, lenders and local authorities (federal) government.
Economic integration involves the development of one of three scenarios:
1. vertical merger , it is the union of several companies involved in the production of a certain product (the role of "goods" is sometimes given to the service).After the conclusion of the union all stages of manufacturing / providing anything follow one another within the same organization features.
2. Horizontal combining - financial relations are established between enterprises of the same type in order to increase the equity market presence and increasing capacity.
3. Conglomerate "commonwealth» - the corporation merge different production lines.The goal - to expand the range in order to meet demand and to provide greater stability cash flows.
basic accounting rules revenue
sales volume represents a certain amount of money or other benefits, accumulated over a specific period of time: monthly, quarterly, half-year and so on (meaning the "materialization" of services rendered and / or incomefrom the sale of manufactured goods).
Corporate Finance - is, among other things, bookkeeping.Here are possible options:
- cash method, in particular, is based on the fact that revenue is positioning as the money supply, recorded in the accounts of the company at the time of sverochnoy operation (when barter material gain from trading activities often takes the form of the product);
- charging circuit, in turn, provides that control is carried out into the turnover, ie the amount received at the disposal of the company, when consumers have financial obligations and immediately identified as profit.
Accounting recognizes revenue as such, provided that:
- its value can be specified;
- eligible for detail spelled out in the contract;
- guaranteed income growth of the corporation at the end of the operation.
role of transfer pricing
Principles of Corporate Finance, underlying the formation of stronger economic ties can not be considered separately from the issue of transfer pricing.This is the so-called special value of goods (raw materials, services), which is set for the related institutions (organizations).Simply put, all the structural branches, aiming for the ultimate goal, operate domestic prices for components and other types of resources.Thus it solves the problem of increasing profits as the units and the enterprise as a whole.
information about transfer pricing within the definition of "trade secret", because in fact set the level of "the competitive limit" for releasing the final product.
Why is it so important to analyze liquidity?
As previously noted, the competent organization of corporate finance implies the timely production of "diagnosis" of available statements.Liquidity analysis - one of the mechanisms of visualization "degree of viability" of the structure dealing with commercial and / or industrial and economic activity.It gives an idea of the potential of the company in the context of short-term liabilities: can or not a corporation, realizing its assets available to fulfill the promises given to partners (creditors, customers).
for preliminary analysis, a special table coverings and calculation formulas coefficients current, quick and absolute liquidity.But a full diagnosis requires consideration of a large number of indicators and should be carried out by highly professional staff.
Financial stability
corporate finance system needs regular monitoring.Even short interruptions in the flow of working capital are a threat to well-established pattern of work (especially in the production chain are no duplicate structural units).
From a financial point of view of the stability of the organization corresponds to the level of its independence from the sources of "replenish the treasury."Such, as you know, there are two: equity and attracted investment.The structure of assets and liabilities is determined by a calculation coefficient (autonomy, agility equipment and so forth.), A tabular comparison.But in any case, the analysis should be to answer the question of the magnitude of the financial risk.
details on internal and external sources of income
Division circulating resources to internal and external must be due to the specifics of individual production processes.In particular, the assets of the economic entity it is advisable to use the year-round cycle of production of goods and / or services;the launch of seasonal production lines more favorable to carry out by "borrowing" of capacities and resources.
If the development of financial policy and its adaptation to legal realities is not accompanied by amendments to the scope and import and export direction, then, regardless of the reliability of internal and external sources of income, increasing the risk of financial instability and reduces the efficiency of management.
Self-regulation - is it good or very bad?
essence of corporate finance is often viewed from the perspective of capitalization (scale).However, unlike the sole business lies somewhat different - in the actual separation (legal and functional isolation) of the management of the group founders.That is, the business activity of the minority shareholders, in fact, reduced to a minimum: they only vote for members of the governing body, who strategize future and turn their billions in the interests of the corporation.Since participants are limited to low-level information, the election of directors, as a rule, limited support for the proposals emanating from the current control.
Conclusion: the absolute self-regulation - a real boon for companies with multiple departments, for this mechanism to avoid intra-bureaucracy.At the same time there is a high likelihood of abuse from "temporary but non-removable" bosses.
