Methods of forming and increasing an enterprise's own capital. Ways to increase an organization's equity capital
No less important for assessing a bank is the indicator of the share of equity capital in the bank’s total liabilities.
USC is the share of equity capital in the currency of the bank’s balance sheet (a simplified indicator of capital adequacy);
Sk - the amount of the bank's equity capital;
VB is the bank's balance sheet currency.
This indicator allows you to find out how much the bank's liabilities are covered by its own funds. The content of the USC is a certain limiter on the bank’s activities in terms of attraction, therefore its calculation is a very important stage in the analysis process. The significance of this indicator is explained by the fact that, according to the instructions of the Bank of Russia, not a single commercial bank can operate in the market if its own capital covers risky assets by less than 10%. Thus, the amount of risky assets and equity capital determines the bank’s ability to operate in the market - the more risky assets, the more equity capital the bank should have. However, we know that assets are financed by borrowed funds from the bank, so we can say that the bank should attract funds to invest in risky assets as long as they are covered by its own capital in the amount of 10 kopecks. per 1 attracted ruble. In reality, the bank can attract more, but it will not be possible to place them in profitable, and, therefore, risky assets with unchanged equity capital.
During the analysis process, the following conclusions can be obtained.
The share of equity in the balance sheet currency is growing. The reasons for this increase may be different, depending on this, the comments on the results of the analysis are also different. If the growth is due to an increase in the volume of equity capital at a higher rate than the balance sheet currency, then this circumstance indicates an increase in the reliability of the bank. If the increase in the share is due to a decrease in the volume of the balance sheet currency, then the comments in this case will have a negative connotation, because a decrease in the volume of raised funds may lead to a loss of market share, and, consequently, a bank’s competitive advantages.
The share of equity capital is decreasing. Regardless of the reason, the identified circumstance of the bank’s activity is negative, and this issue requires a solution in the short term.
Let's calculate the share of equity capital using banks as an example and explore the possibilities of banks in the future to attract resources on the market.
| Share of equity capital, % | 2007 | 2008 | 2009 |
| Jar | 12,0 | 10,9 | 13,0 |
| Bank B | 13,0 | 13,0 | 12,0 |
| Bank B | 19,0 | 18,8 | 19,0 |
So, the analysis showed that the bank with the largest share of its own capital in liabilities is Bank B. The coverage of attracted funds with its own capital is 18-19%, which is a high figure. From this we can conclude that the bank still has significant attraction potential, which will be limited when this indicator reaches 10%.
Bank A had an extremely low share of equity capital in 2008, as a result of which it was forced to suspend its activities in the market, which was reflected in the volume of balance sheet currency (in particular, attracted capital), which in 2009 decreased by 9%. At the same time, the bank increased its equity capital by 7.3%. These actions of the bank allowed it to operate within the framework of regulatory values - the share of equity capital increased to 13%. Naturally, the bank can continue to increase the volume of borrowings on the market, but to do this it should also increase the volume of its own capital.
Bank B is a proportionally growing bank, the volume of its attracted resources grows simultaneously with its own capital, so the share of equity capital remains at a stable level - 13%, while the bank has reserves for further expansion of its attracted funds.
Each of the banks has its own structure of equity capital, which in some respects is similar between banks and in others - differences.
So, what is similar for all analyzed banks is that retained earnings in their equity capital structure is extremely low - no more than 10%. Bank A has the lowest share of retained earnings in the structure of equity capital - 3.1%, but taking into account the profit of the current period, this figure will be equal to 4.66%. Profit is an extremely important source of equity capital formation and indicates the bank’s own development potential. The low profit volume of Bank A also determines its low share of the reserve fund - 12.5%. The bank with the highest own growth potential can be called Bank B - the share of its retained earnings is 5.1% (taking into account the profit of the current period of 6.1%), and the reserve fund is 36.7%. Analyzing profit as a source of equity capital formation, it should be noted that only Bank B had last year’s profit in the amount of 122,904 thousand rubles, which is 3.5% in the bank’s capital structure. This fact is explained by the fact that this bank has been operating effectively in the market for a long time, as a result of which profit was generated.
Authorized capital, being the most reliable source of funds, also occupies different weights in the analyzed banks. Bank B has the largest share of the authorized capital, which is 57.4%. Probably, such a high share is explained by the fact that this bank was created through the capital of a large plant, and therefore has significant support from it.
Brief conclusions on banks can be entered into a more truncated table, using which you can estimate the equity capital of each of the presented banks
* the summation of statutory and additional follows from the fact that essentially the concept of “additional” comes from “add to the statutory”.
So, this table allows, first of all, to determine the degree of diversification of the bank’s sources of equity capital. The bank with the most optimal equity capital structure is Bank B. The equity capital of this bank is formed in approximately equal shares from the authorized capital (plus additional capital) and from profits. As we have already indicated, profit is an extremely significant source of the bank’s equity capital, which allows the bank to capitalize at the expense of internal resources. Bank B, despite the fact that its equity capital is the smallest in the sample of banks, also has a fairly proportionally structured equity capital. Although its profit is only 6.1%, the bank has a significant reserve fund, the source of which is net profit. Thus, the share of profit in the bank’s own capital also occupies an important place.
The bank with the greatest distortions in the capital structure is Bank A - the main share in its capital is occupied by funds from the owners, which indicates that the bank has extremely limited own sources of growth.
When assessing banks, the following preliminary conclusions can be briefly drawn:
1. The most stable bank in terms of its development is Bank B, since it:
It is the market leader in terms of balance sheet currency;
Has the largest amount of equity capital, growing dynamically;
Its equity structure is optimally balanced; in particular, a significant share is occupied by the profit of the current period, the profit of previous years and retained earnings, while the bank still has share premium as an addition to the authorized capital, which in total amounts to 57.11%.
2. Bank B is a stably growing bank because it:
Has an actively growing balance sheet (as a result of actively attracting client funds);
The bank can be called aggressively growing, since the growth rate of its balance sheet currency is 46.6%, and its equity capital is 48%;
The bank has a very high growth potential of its resource base, since the share of equity capital is 19%;
In the capital structure, the bank has: a) the largest share of authorized capital compared to other banks, equal to 57.4%; b) the largest share of reserve capital (36.7%); c) the largest share of retained earnings (5.1%).
3. A weakly developing bank can be called Bank A (therefore, the bank offers the highest rates on deposits, which was indicated as the initial conditions for comparing banks in the sample), since:
The amount of its own capital did not allow the bank to increase the volume of services provided, and therefore the bank was forced to increase the amount of equity capital and reduce the volume of attracted resources:
The increase in equity capital occurred due to the investment of additional funds from the owners, as a result, the share of its authorized and additional capital in the aggregate amounted to 69.0%;
The share of profit in the structure of equity capital is extremely low, which indicates that the bank does not have its own sources of development.
Once again, I would like to draw the attention of readers to the fact that this assessment is only preliminary and conditional, having significant errors, because It is not possible to calculate equity capital taking into account all items.
A very important mandatory assessment of equity capital, complementing the understanding of the bank’s condition, is the adequacy of equity capital. In general terms, a bank's capital adequacy is the ability of the bank's own capital to cover losses associated with the occurrence of a risk. In other words, it is the bank's ability to protect itself from risk. Thus, this indicator allows us to determine whether the bank is able to survive the occurrence of risk events.
The amount of equity capital is regulated and controlled by the Bank of Russia. Of course, control over the amount of equity capital would be significantly simplified if the Bank of Russia established a uniform amount of equity capital for all banks. But banks are different, and their risks are also different, so it is impossible to establish a single amount of equity capital, because for some this value will be sufficient, but for others it will be too large or too small. This is the only reason why the regulator uses the relative amount of equity capital to control banks, where its size is made dependent on risk (more precisely, risky assets). Therefore, in science they say that sufficiency reflects the stability of the bank, its reliability, the degree of its exposure to risk and allows us to give an overall assessment of the bank.
However, the equity capital adequacy indicator is not a strict indicator of the bank’s reliability and protection of the interests of its depositors and creditors. The value of this indicator has real significance only in a systematic analysis of the bank’s activities, that is, only in conjunction with other analytical indicators. This disclaimer is presented in this lesson because a number of banks, the activities of which are currently terminated by the Bank of Russia, had capital adequacy within the limits of standard values, but other indicators did not allow these banks to continue their activities. Therefore, using only the capital adequacy indicator, it is impossible to give an objective assessment of the bank’s reliability.
So, returning to the indicator of equity capital adequacy, it should be said that the regulator has established that the bank must have equity capital of at least 10% of the value of its risky assets, where by risky assets we mean funds that are placed with a certain risk of non-repayment . Thus, the more such risky assets, the more equity capital the bank must have in order to maintain the ratio of 10 kopecks. capital per 1 ruble of risky assets.
The calculation formula for capital adequacy (standard N1) is specified by the Bank of Russia in Instruction No. 110-I “On mandatory bank standards.”
K is the bank's own capital; Kr i - risk coefficient of the i-th asset; A i is the bank’s i-th asset; Рк i - the amount of the reserve for possible losses or the reserve for possible losses on loans, on loans and equivalent debt of the i-th asset; KRV - the amount of credit risk for contingent credit obligations; KRS - the amount of credit risk for derivatives transactions; РР - the amount of market risk; code 8930—the bank’s claims to the counterparty for the reverse term portion of transactions that arose as a result of the acquisition of financial assets with the simultaneous assumption of obligations for the reverse sale; code 8957 - requirements for persons associated with the bank; code 8992 - reserves for futures transactions created in accordance with the requirements of regulation No. 254-P
The denominator of the formula is the bank’s risks, consisting of a significant number of terms. The most significant of these terms is Ai, i.e. a specific asset, the degree of risk of which is determined by Instruction 110-I. In this document, the Bank of Russia classified all bank assets into 5 groups, each of which is taken into account in the calculation of the formula only in a certain percentage, for example:
Each group includes certain types of assets that are involved in the calculation of the N1 standard. For example, assets of risk group 1 include:
| Funds in correspondent and deposit accounts with the Bank of Russia |
| Required reserves transferred to the Bank of Russia |
| Bank funds deposited for check payments |
| Cash and equivalent funds, precious metals in storage and in transit |
| Accounts of ORTS settlement centers in Bank of Russia institutions |
| Funds in savings accounts upon issue of shares |
| Accounts of credit institutions for cash services of branches |
| Investments in bonds of the Central Bank of the Russian Federation (Bank of Russia), not encumbered with obligations |
| Investments in government debt obligations of countries from the group of developed countries, not encumbered with obligations |
| Funds of Authorized banks that have permission to open and maintain special accounts of type “C”, deposited with the Bank of Russia |
According to the Bank of Russia, assets of this group are the least risky, so little equity capital is required to cover them; In this regard, the risk coefficient is set so low - no more than 2%.
However, the bank has various assets, and the riskiest ones, which are fully included in the calculation of the N1 standard, are assets of risk group 5. This same group is the most significant in terms of resources, because This includes loans to legal entities and individuals who do not have collateral in the form of government securities, guarantees from the Government of the Russian Federation, or guarantees from “parent” foreign banks.
The above formula is good for everyone, except for one thing - its practical use by our readers can only be carried out if there is an extensive information base, which in most cases represents bank secrecy. But calculating capital adequacy is a very important stage in analyzing the bank’s condition. To solve this problem, you can use the already calculated capital adequacy indicator, presented by a specific bank in the public domain. However, these data, as a rule, are presented in “off line” mode (i.e. for past periods), and, therefore, do not reflect the current state of the bank (an example of such information is reporting form No. 0409135: see the end of the document under the serial number 2-Standard N1).
To obtain our own assessment of capital adequacy in the current period, we will use a coefficient that, with a large degree of conditionality, allows us to make an assessment.
Where CD- sufficiency ratio;
Sk- the amount of the bank’s own capital;
Ar - working assets (rice).
The Kd indicator shows what share of equity capital falls on one ruble of working assets or how much working assets are covered by the bank’s own capital.
The peculiarity of this formula is that the calculation does not take into account specific asset items that have a risk coefficient, but total working assets, where working assets are understood as investments by the bank of funds in order to generate income. When proposing this formula for calculation, we proceeded from the fact that any placed funds (performing assets) essentially represent a risk for the bank, and we conditionally accepted that this risk is equal to 100%, i.e. in the denominator we take into account all working (read - risky) assets reflected in the bank’s Form No. 101.
We agree that the result obtained will have high errors, and will be significantly lower than the result as if we had used the Bank of Russia formula. Therefore, if, as a result of applying our formula, we obtain a Kd coefficient within 10-11%, then H1 will certainly be higher, since not all assets are used in the denominator of H1. In the same case, if the Kd indicator is below 10%, we will need to make a decision on cooperation with the bank very carefully, because the N1 result of the Bank of Russia will be at a critical value - somewhere around 10%, or even lower.
So, let's calculate the equity adequacy ratio of banks A, B and C.
| Jar | Bank B | Bank B | |
| Own capital (thousand rubles) | 2 563 978 | 3 423 560 | 1 561 783 |
| Risk-weighted assets* (Ar) (thousand rubles) | |||
| Capital adequacy ratio ( CD, %) | 14,3 | 13,6 | 19,6 |
* Account balances of form No. 101 are taken into account when calculating the volume of risk assets: 20311, 20312, 20315, 20316, 30110, 30114, 30118, 30119, 319, 320, 321, 322, 323, 441, 442, 442, 444, 4 45, 446, 447, 448, 449, 450, 451, 452, 453, 545, 455, 456, 457, 460, 461, 462, 463, 464, 465, 466, 467, 468, 469, 470, 471, 4 72, 473, 501, 502, 503, 506, 507, 512, 513, 514, 515, 516, 517, 518, 519. When calculating the amount of risky assets, reserve accounts (passive accounts) are not taken into account.
As the analysis showed, CD is within standard values, which does not cause caution in cooperation with banks. But for a more detailed assessment, this analysis should be supplemented with a study of the dynamics of the coefficient CD over several periods, which will allow us to determine the bank’s development trends in terms of equity capital management. As a result of the analysis, the following data can be obtained:
The sufficiency ratio is growing dynamically. In this case, it is necessary to determine the reasons for growth, which may be a consequence of such bank actions: 1) the credit institution increases its own capital while simultaneously reducing the volume of risky assets; 2) the bank increases its own capital at a higher rate than risky assets. In the first case, despite the fact that stability is growing, the bank risks receiving less income as a result of a decrease in the volume of placed assets. The second case characterizes the bank positively, because There is a balanced growth of both equity capital and the asset portfolio.
The adequacy ratio is falling; Regardless of the reasons, this fact negatively characterizes the bank’s activities.
So, using these approaches to assessing a bank, we will analyze the dynamics of the capital adequacy ratio of Banks A, B and C.
Analysis of the data obtained showed that the bank with the highest capital adequacy value is Bank B, whose Kd is 19.6%. Such a high value of Kd was formed probably because the bank, being a “pocket” bank, has a high volume of owner funds and insignificant risky assets, because focused on a narrow circle of clients, limited by the financial and industrial group of which it is a member. A high value of Kd Bank B is observed throughout the entire analyzed period.
Bank A during the analyzed period has a Kd equal to 14.3%, which is within the acceptable values. This level of Kd was achieved by the bank as a result of a decrease in the volume of risky assets (which showed a decrease in the bank’s balance sheet currency) and an increase in equity capital. Examining the dynamics of the CD of Bank A, we can say that in 2008 this indicator had a critical value of -11.3%, which did not allow the bank to increase assets in the future. Probably in this regard, management decided to suspend activities to attract and allocate resources and increase the amount of equity capital.
Bank B, being a stable bank, has no fluctuations in Kd, which allows a positive assessment of the ongoing resource management policy in this bank.
Capital adequacy analysis can be expanded using, for example, the safety factor (SR).
The importance of this indicator is that it allows one to evaluate fixed capital as a stock of the highest quality, which should account for more than half of the bank’s equity capital. Therefore, the bank that has KN ranges from 6% or more.
However, in our case it is not possible to use this formula, because We do not have a grouping of equity capital into main and additional. But such data can be obtained if the bank’s reporting form 135 is publicly available, or, for example, using the resource http://www.miko-bank.ru/files/reports/F134-0907.rtf.
However, when analyzing equity capital, you need to understand that we are using a ready-made reporting form, which the bank has embellished, but reporting, unfortunately, does not allow us to find out where the “cosmetic surgery” was performed. In practice, capital indicators can be improved, for example, by “undercreating” reserves for loans of risk groups II-V. Or by “make-up” of bad loans, for example, by making repayments on them not in equal payments throughout the entire term, but at the end of the contract. Thus, the bank, without receiving payments from the borrower, may not record a deterioration in the quality of the loan during the year. As a result of such actions, interest payments continue to be recorded on the bank’s balance sheet, and the absence of the need to create additional reserves reduces the pressure on capital. Another common “cash-free” way to increase capital is the revaluation of real estate included in capital. Recently, Sberbank and Uralsib have already done this. In addition to revaluation, there are many more credit and deposit schemes in which banks form capital at the expense of funds from related structures that received loans from the bank.
In business, the bank's own capital is a significant source of resources, but not all of its value can be used in the bank's turnover as a working resource. In this regard, when analyzing equity, it is necessary to distinguish between gross equity and net equity.
Equity net (SK net) is considered as own funds, which can be used as a resource for lending or conducting other active operations that generate income for the bank. Concept equity - gross (SK gross) wider, because includes net funds and immobilized (distracted) own funds.
Net equity capital is calculated using the formula:
The higher the value SK net, the more efficiently the bank operates, since it has the opportunity to use its own resources in active operations to generate income.
As a result of the calculation, net equity capital may be a negative value. This means that the bank is building a portfolio of tangible and intangible assets at the expense of depositors, which negatively characterizes the development of the bank. In this case, we can conclude that the bank “ate” itself and began to use the clients’ financial resources.
Immobilized funds include funds diverted from turnover that brings real income to the bank.
1. Capitalized assets include tangible and intangible assets minus accrued depreciation, business reputation, as well as investments in the creation (manufacturing) and acquisition of intangible assets (accounts of form No. 101: (60401 minus 60601); 60402; 60701; (60901 minus 60903); 60905).
2. Financial investments bank in shares (shares):
2.1. part of a credit institution’s investments in shares (shares) of subsidiaries and dependent legal entities (including non-resident credit institutions) acquired for investment (if the shares owned by the credit institution account for more than 20% of the authorized capital of the issuing organization registered in the established procedure as of the date of calculation of the credit institution’s capital);
2.2. investments in the authorized capital of resident credit institutions in the organizational and legal form of a limited (or additional) liability company, as well as a closed joint-stock company;
2.3. investments in the authorized capital of resident credit institutions in the organizational and legal form of an open joint-stock company, with the exception of investments not exceeding 1% of the authorized capital of the credit institution - issuer of shares, determined on the basis of the latest published reports of the credit institution - issuer of shares, with simultaneous compliance with the following conditions: a) shares are traded on the organized securities market of the Russian Federation; b) the credit organization - investor and the credit organization - issuer of shares are not part of the same banking (consolidated) group; c) investments of a credit organization - investor in the authorized capital of a credit organization - issuer do not exceed 5% of the amount of equity (capital) of the credit organization - investor, determined as of the date preceding the date of calculation of equity (capital);
2.4. investments in shares (shares) specified in subclauses 2.1 - 2.3, sold with a simultaneous obligation to repurchase them while simultaneously granting the counterparty the right to defer payment.
The specified investments of the credit institution in shares (shares) are taken into account for the reduction of fixed capital based on data from balance sheet accounts 50605, 50618, 50705, 50718, 601A, 60201, 60202, 60203, 60204 (accounts are taken into account for the calculation of fixed capital minus reserves for possible losses) .
Thus, we can say that the amount of immobilized assets can be calculated using the formula:
ImR- immobilized resources: F- financial assets; CA- capitalized assets.
The amount of immobilized funds acts as a negative factor in banking activities, and the higher it is, the lower the level of profitability of banking operations, because an increase in the volume of immobilized resources leads to a narrowing of the bank’s entire resource base, and, consequently, to an increase in the costs of replenishing it.
To assess the quality of your own funds, you should determine immobilization coefficient (Kim), which shows what share of immobilized assets accounts for one ruble of the bank’s equity capital.
where ImR is immobilized resources, SK gross is equity capital - gross.
It is believed that a bank can be classified as financially stable if Kim is no more than 0.5 (or 50%). This is explained by the fact that the remaining part of the equity capital invested in active operations can generate income for the bank.
We will analyze the immobilized assets of the banks we analyze
| Jar | Bank B | Bank B | ||
| 1 | Capitalized assets, including | 812 643 | 947 912 | 264 595 |
| 1.1 | Fixed assets (plus 60401) | 853 486 | 1 066 255 | 280 588 |
| 1.2 | Earth (plus 60404) | 0 | 0 | 0 |
| 1.3 | Depreciation of fixed assets (minus 60601) | 69 751 | 213 033 | 15 993 |
| 1.4 | Investments in buildings, creation of fixed assets and intangible assets (plus 60701) | 24 814 | 34 832 | 0 |
| 1.5 | Intangible assets (plus.60901) | 4 654 | 72 764 | 47 |
| 1.6 | Amortization of intangible assets (minus 60903) | 560 | 12 906 | 2 |
| 2 | Financial investments | 0 | 205 863 | 0 |
| 2.1 | Funds contributed to the authorized capitals of other organizations (plus 60202) | 0 | 205 863 | 0 |
| Total immobilized resources (line 1+line 2) | 812 643 | 1 153 775 | 264 595 | |
| Bank's equity capital | 2 563 978 | 3 423 560 | 1 561 783 | |
| Immobilization coefficient (Kim) | 0, 31 | 0, 33 | 0,17 | |
| Own capital - net | 1 751 335 | 2 269 785 | 1297 188 |
As can be seen from the table, the immobilization coefficient in the analyzed banks is below 0.5, which corresponds to the specified standards. Consequently, banks allocate more than half of their own capital to profitable operations, which positively assesses the capital management policy of banks. In the structure of immobilized assets, there is a prevailing share of capitalized assets in fixed assets and intangible assets. And if we consider the dynamics of the volume of immobilized assets, we can note that their growth/decrease is associated with the growth of fixed assets.
| 2007 | 2008 | 2009 | ||||
| Immobil.assets, | Kim | Immobil.assets, | Kim | Immobil.assets, | Kim | |
| Jar | 843 054 | 0,38 | 797 992 | 0,33 | 812 643 | 0,31 |
| Bank B | 1 425 932 | 0,44 | 1 066 255 | 0,31 | 1 153 775 | 0,33 |
| Bank B | 200 638 | 0,19 | 205 432 | 0,19 | 264 595 | 0,17 |
Analysis of the table data showed that in all periods studied, the immobilization coefficient was within acceptable values, i.e. did not reach 0.5. Only Bank B in 2007 had a critically high share of immobilized assets, reducing its net equity capital - 0.44. However, in 2008 the situation changed for the better, the bank reduced the volume of capitalized assets through the sale of property, and Kim became equal to 0.31. Bank B for all analyzed periods had an insignificant amount of immobilized assets, which exerted insignificant pressure on the return on equity. This fact is probably explained by the fact that the bank, which is part of the financial and industrial group, does not need fixed assets, because receives them from the parent company for rent.
At the end of the analysis, it is necessary to evaluate each of the banks selected for the study, combining the results of the analysis.
So, Bank B- market leader in terms of balance sheet currency;
Has a steadily growing growth rate of services provided on the market;
Has the potential for growth of the resource base in relation to equity capital;
Has the largest amount of equity capital, steadily growing in dynamics;
The structure of equity capital is optimally balanced;
Has a stable average capital adequacy;
The immobilization coefficient is normal, however, in general, it tends to decrease.
A steadily growing bank is Bank B, because:
Has an actively growing balance sheet currency;
Has a very high growth potential of the resource base;
In the capital structure, the bank has the largest share of authorized capital compared to other banks, equal to 57.4, and the largest share of retained earnings (5.1%);
Has a consistently high equity capital adequacy ratio - above 19%;
It has a low immobilization coefficient, which positively characterizes the bank.
Jar can be characterized as having growth potential:
The bank is narrowing its sphere of influence in the market as a result of a reduction in the volume of attracted resources (the balance sheet currency has a declining trend);
The amount of its own capital did not allow the bank to increase the volume of services provided, and therefore the bank was forced to increase the amount of equity capital and reduce the volume of attracted resources;
The increase in equity capital occurred due to the investment of additional funds from the owners; as a result, the share of its authorized and additional capital in total amounts to 69.0%;
The share of profit in the structure of equity capital is extremely low, which indicates that the bank does not have its own sources of development;
There is an unstable dynamics of the bank's capital adequacy indicator, reaching a critical value of 11.3%, after which there was an increase due to the receipt of additional resources by the owners;
The decreasing immobilization coefficient (from 0.38 to 0.31) characterizes the bank positively.
Thus, research has shown that among the banks in the sample, the most reliable and steadily developing bank, which seems to be the least risky for the client, is Bank B. Bank B, which occupies an extremely small market share, can also be considered as a servicing bank, since its main financial characteristics characterize it positively. Bank B currently has growth potential, and this is probably why it charges high interest rates on deposits in order to restore the customer base lost during the crisis. However, the bank is in the process of emerging from a crisis situation, so we would not advise clients to enter into long-term agreements with it.
At the end of the analysis of equity capital, a number of coefficients characterizing its quality can be calculated (Table 3).
Table 3. Indicators characterizing the bank’s equity capital
| Indicator name and code | Formula for calculating the indicator | Interpretation of the indicator |
| Equity utilization ratio | SK/Back, Back - loan debt, SK - bank's equity capital | Shows how much equity capital is used in operating operations |
| Capital protection ratio | Kz/SK, where Kz is protected capital Kz = Fixed assets + Active balances of capital investments |
Shows how much the bank's capital is protected from inflation through investments in real estate |
| Excess (shortage) of sources of own funds | SK/Ia, where Ia is immobilized. assets | The optimal value is more than 1, the growth of the indicator in dynamics indicates the bank’s purposeful activities towards improving the financial position |
| Profit share ratio in capital | (SK-Uf)/SK, where Uf is the authorized capital | Shows what part of bank capital is formed from profits |
| Ratio of attracted deposits from the population | SK/Vn, where Vn is the population’s deposits | Characterizes the level of protection of bank deposits by the bank’s own capital |
| Return on equity (ROE) | Pr/SK, where Pr is the bank’s profit (accepted for calculation from form 102 “Profit and Loss Statement”) | Shows the efficiency of using equity capital |
The proposed approaches to the analysis of equity capital primarily solve the problems of assessing the bank by future clients, investors, shareholders, counterparties who want to form a preliminary opinion about the bank as an object of future financing, lending or cooperation. The advantage of this method is that to obtain a preliminary estimate, the user does not need to look for detailed financial statements of the bank, which is usually difficult; he can limit himself to only forms No. 101 and No. 102 available for receipt. Naturally, to make a decision on financing or cooperation, more accurate and detailed information about the bank is needed, but the use of this method by the user will be sufficient to select a bank among many.
To be continued.
Estimate:
2 0
An increase in current assets saysOdifferent trends in the financial and economic activities of the enterprise. To give a correct assessment of this phenomenon, it is necessary to consider the influence of each element included in the structure of current assets. We will tell you what you should pay attention to in this article.
What does an increase in current assets show?
What current assets are made up of and what share each type accounts for can be seen in Section II of the enterprise’s balance sheet. It is necessary to analyze the structure of working capital by their groups and in dynamics, comparing the data with the readings of previous reporting periods and taking into account the specifics of the enterprise’s commercial activities.
Let's consider the most likely changes in the amount of each element of working capital.
- 1. The increase in materials and raw materials intended for production can indicate:
- or about increasing production, which is a positive factor;
- or the accumulation of excess inventories, which leads to a decrease in asset turnover and should be considered as a negative phenomenon.
2. A constant increase in the volume of finished products may indicate unsatisfactory performance of the sales department, a decrease in demand for products, and incorrect pricing policies. “Locked” funds in unsaleable inventories of products is a sure way to reduce the solvency of the enterprise and its dependence on attracting money from outside. This indicator is an alarming signal for management and requires timely decisions.
3. An increase in accounts receivable in general may also indicate positive dynamics - for example, an enterprise has developed an effective scheme for selling its goods on credit. For analysis, receivables should be differentiated:
- to “normal” - current, which is determined by the nature of the enterprise’s work; its growth may be associated with an increase in sales volumes, which is a positive trend;
- doubtful - overdue, which indicates an increase in unpaid debts of buyers. In the presence of a growing volume of doubtful debts, it is necessary to review sales and credit policies for buyers and pay attention to working with bad debts. The result of a large number of debts for which there is no payment is the same as when warehouses are overstocked. The company does not receive enough of its own funds to finance its further activities.
4. An increase in the volume of financial investments made by an enterprise can also be interpreted in two ways:
- on the one hand, this fact may indicate that the company has a large amount of free cash that can be invested for growth;
- on the other hand, excessive enthusiasm for financial investments can lead to the diversion of funds from core activities and insufficient activity of the enterprise in these activities.
An increase in current assets and their share in the property of an enterprise is, in general, a positive phenomenon, but it should not become a reason for a decrease in the turnover of funds and the solvency of the organization, as well as a factor in reducing business activity.
What does a decrease in current assets indicate?
A decrease in current assets also indicates ambiguous changes occurring in the financial condition of the company. Let's consider the most likely cases of a decrease in each element of the structure of funds in circulation and their impact on the results of the enterprise's activities.
1. A decrease in inventories and raw materials, as well as goods and finished products, may indicate a curtailment of production, a lack of working capital, or unsatisfactory performance of the supply department.
2. A decrease in accounts receivable is generally viewed as a positive phenomenon. But it would be correct to evaluate it in connection with the volume of revenue:
- if receivables decrease along with a drop in sales, then this is a natural process, but the fact is not positive - such a joint decrease almost always indicates that the business is “slowing down”;
- if, with a decrease in receivables, revenue remains at the same level or grows, then we can conclude that the company’s settlement policy with customers has improved. This is a positive aspect.
3. A decrease in cash flows can put the enterprise in a state of insolvency and the inability to pay off its obligations on time. This fact in itself is, of course, negative. However, it is most often a consequence of the circumstances that we discussed above:
- a decrease in inventory turnover (i.e., an increase in their reporting indicators);
- deterioration in the quality of receivables (i.e., growth in receivables);
- incorrect investment policy (which can be traced by the growth in the volume of financial investments).
Results
From the above we can conclude that there must be a certain amount of working capital for each type necessary for the effective functioning of the business. That is, there must be an optimal norm, indicators above or below which will negatively affect the condition of the enterprise.
It is impossible to say unambiguously whether the increase in current assets is a positive trend without a detailed consideration of the changes in the constituent elements. Analysis and assessment of the state of funds in the turnover of the enterprise should be carried out taking into account the characteristics of the organization’s activities in order to make the necessary management decisions in a timely manner.
Analysis of the financial condition of the enterprise
Assignment for the calculation part.
The financial condition of an enterprise is expressed in the ratio of the structures of its assets and liabilities, i.e., the enterprise’s funds and their sources. The main tasks of financial condition analysis are to determine the quality of the financial condition, study the reasons for its improvement or deterioration over the period, and prepare recommendations to improve the financial stability and solvency of the enterprise. These tasks are solved on the basis of a study of the dynamics of absolute and relative financial indicators and are divided into the following blocks:
- structural analysis of assets and liabilities;
- financial stability analysis;
- analysis of solvency (liquidity);
The information sources for calculating indicators and conducting analysis are annual financial statements. (Option 16)
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Balance sheet |
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ASSETS |
Line code |
for the beginning of the year |
at the end of the year |
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1 |
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I. Non-current assets |
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Intangible assets |
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Fixed assets |
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Construction in progress |
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Profitable investments in material assets |
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Long-term financial investments |
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Other noncurrent assets |
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Total for Section I |
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II. Current assets |
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including |
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raw materials, supplies and other similar assets |
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animals for growing and fattening |
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costs in work in progress |
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finished products and goods for resale |
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goods shipped |
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VAT on purchased assets |
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Accounts receivable (payments expected more than 12 months after the reporting date) |
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Accounts receivable (payments expected within 12 months after the reporting date) |
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Short-term financial investments |
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Cash. |
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including |
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current accounts |
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foreign currency accounts |
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other funds |
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Other current assets |
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Total for Section II |
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BALANCE |
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PASSIVE |
Line code |
for the beginning of the year |
at the end of the year |
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1 |
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IV. Capital and reserves |
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Authorized capital |
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Extra capital |
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Reserve capital |
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Social Sphere Fund |
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Special-purpose financing |
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Retained earnings from previous years |
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Uncovered loss from previous years |
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Retained earnings of the reporting year |
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Uncovered loss of the reporting year |
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Total for Section IV |
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V. Long-term liabilities |
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Loans and credits |
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including |
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bank loans |
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Other long-term liabilities |
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Total for Section V |
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VI. Short-term liabilities |
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Loans and credits |
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including |
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bank loans |
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other loans |
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Accounts payable |
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including |
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suppliers and contractors |
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bills payable |
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debt to subsidiaries and affiliates |
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debt to the organization's personnel |
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debt to state extra-budgetary funds |
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debt to the budget |
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advances received |
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other creditors |
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Debt to participants (founders) for payment of income |
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revenue of the future periods |
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Reserves for upcoming expenses and payments |
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Other current liabilities |
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Total for Section VI |
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BALANCE |
General assessment of the dynamics of the financial condition of the enterprise.
For a general assessment of the dynamics of the financial condition of an enterprise, balance sheet items should be grouped into separate specific groups based on liquidity (asset items) and maturity of liabilities (liability items). Based on the aggregated balance sheet, an analysis of the structure of the enterprise’s property is carried out, which in a more orderly form is conveniently carried out in the following form:
Aggregated balance.
Table 1.
|
Assets |
For the beginning of the year |
At the end of the year |
Passive |
For the beginning of the year |
At the end of the year |
|
1. Immobilized assets |
1. Own capital |
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2. Mobile, current assets |
2. Borrowed capital |
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2.1. Inventories and costs |
2.1. Long-term loans and borrowings |
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2.2 Accounts receivable |
2.2. Short-term loans and borrowings |
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2.3. Cash and securities |
2.3. Accounts payable |
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Total |
Total |
- total value of the enterprise's property = currency, or balance sheet total;
- the cost of immobilized assets (i.e. fixed and other non-current assets) = the total of section I of the balance sheet asset;
- cost of working (mobile) assets = total of section II of the balance sheet asset;
- the amount of receivables in the broad sense of the word (including advances issued to suppliers and contractors) = lines 230 and 240 of section II of the balance sheet asset;
- the amount of free cash in the broad sense of the word (including securities and short-term financial investments) = lines 250 and 260 of section II of the balance sheet asset;
- cost of equity = section III of liabilities and lines 640,650 of section V of liabilities of the balance sheet;
- the amount of borrowed capital = the sum of sections IV and V of the liabilities side of the balance sheet without lines 640,650;
- the amount of long-term loans and borrowings, intended, as a rule, for the formation of fixed assets and other non-current assets, Section IV of the balance sheet liabilities;
- the amount of short-term loans and borrowings, intended, as a rule, for the formation of current assets, = line 610 of section V of the liabilities side of the balance sheet;
- the amount of accounts payable in the broad sense of the word = lines 620,630 and 660 of section V of the balance sheet liability.
General assessment of the dynamics and structure of balance sheet items
Analysis of the structure of enterprise assets.
Table 2.
Analytical grouping and analysis of balance sheet asset items
|
Balance sheet asset |
At the beginning of the period |
At the end of the period |
Growth rate % |
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|
1. Property - total |
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|
1.1 Immobilized assets |
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1.2 Current assets |
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1.2.1 Reserves |
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1.2.2. Accounts receivable |
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1.2.3 Cash |
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The total assets of the enterprise during the analyzed period increased by 76,730 thousand rubles. (or their growth rate compared to the beginning of the period was 160.88%). The increase in the enterprise's assets occurred due to an increase in the size of non-current assets by 38,476 thousand rubles. or by 195.84%, with a simultaneous increase in the volume of current assets by 38,254 thousand rubles. or 144.54%.
The balance sheet currency reflects the property “power” of the enterprise, therefore it is believed that the larger the balance sheet currency, the more reliable the enterprise. An increase in the size of the enterprise's property (i.e., non-current and current assets) indicates a positive change in the balance sheet.
The largest share in the structure of total assets falls on current assets (65.18% at the beginning of the analyzed period and 61.23% at the end), therefore the enterprise has a “light” asset structure, which indicates the mobility of the enterprise’s property.
Fixed assets. Non-current assets of the enterprise during the analyzed period increased by 38,254 thousand rubles. or by 195.84%. The increase in non-current assets occurred mainly due to a significant increase in the size of fixed assets, an increase in the volume of unfinished construction, the emergence of long-term financial investments, as well as an increase in the size of intangible assets.
Thus, the increase in the share of non-current assets in the structure of total assets made the balance sheet more “heavier”. Enterprises with a “heavy” asset structure have a high share of overhead costs (due to depreciation and maintenance costs of fixed assets associated with their ongoing repairs and payment for utilities) and are especially sensitive to changes in revenue. However, such enterprises, due to the increased share of depreciation charges in the cost structure, can have money without having a profit (since the sources of cash flow from core activities are profit and depreciation). This is due to the fact that depreciation is part of the enterprise’s costs as part of the cost price, which is not an expense item because does not require payment. However, the property of depreciation charges is such that they can be fully converted into cash only in the case when the company does not have losses.
The structure of non-current assets during the analyzed period has changed significantly, although at the same time the main part of the enterprise's non-current assets falls on fixed assets. The largest part of non-current assets is represented by production fixed assets and unfinished construction, which characterizes the enterprise's orientation towards creating material conditions for expanding the main activities of the enterprise. The emergence of long-term financial investments reflects the financial and investment development strategy.
Current assets. The analyzed enterprise is characterized by a high share of current assets in the structure of the enterprise's total assets (68.15% at the beginning of the year and 61.23% at the end). The current assets of the enterprise during the analyzed period increased by 38,254 thousand. rub. or by 144.54%. The increase in current assets was due to an increase in short-term receivables, inventories, long-term receivables of other current assets, cash and VAT.
The structure of the enterprise's current assets as part of property during the analyzed period remained quite stable. Thus, the largest share invariably falls on inventories (51.28% at the beginning of the year and 38.77% at the end).
The decrease in the level of inventories in the structure of current assets cannot be judged unambiguously, since in fact there was not a decrease, but an increase in the valuation of inventories (by 13,989 thousand rubles), but in comparison with an almost twofold increase in the valuation of immobilized assets in the property structure enterprise (discussed earlier), there was a decrease in the share of inventories in the property structure.
An increase in inventory levels can:
- on the one hand, indicate a decline in the activity of the enterprise, since large inventories lead to the freezing of working capital, a slowdown in its turnover, damage to raw materials and supplies increases, and storage costs increase, which negatively affects the final results of operations. In this case, you should find out whether the inventory contains slow-moving, stale, unnecessary material assets; this can be easily established using warehouse accounting data or balance sheets. The presence of such materials indicates that working capital is at risk of being frozen for a long time in inventories.
- on the other hand, the reason for an increase in the size of inventories can only be an increase in their value due to quantitative or inflationary factors.
A significant share in the structure of inventories is occupied by work in progress. A decrease in work in progress balances may indicate, on the one hand, a decrease in production volumes and possible downtime, and on the other hand, an acceleration of capital turnover due to a decrease in the production cycle.
The share of receivables in the structure of the enterprise's property during the analyzed period increased from 15.3% to 20.39%. An increase in accounts receivable and its share in current assets may indicate an imprudent credit policy of the enterprise in relation to customers, or an increase in sales volumes, or the insolvency and bankruptcy of some customers.
The smallest share in the structure of assets is occupied by cash (0.87% at the beginning of the year and 0.72% at the end), which in principle is a good sign, since cash in accounts or on hand does not generate income; it is needed be available within a safe minimum. The presence of small amounts is the result of proper use of working capital. A slight change in cash balances in bank accounts is due to the balance of cash inflows and outflows.
A comparison of the amounts of accounts receivable and accounts payable shows that the excess of accounts payable over accounts receivable occurred only at the beginning of the period, but at the end of the period, accounts receivable already exceeded accounts payable, which is a sign of a good balance sheet in terms of increased efficiency.
The amount of net working capital (i.e., the difference between inventories, short-term receivables, cash, short-term financial investments and accounts payable (short-term and long-term debt) shows that the enterprise had its own funds during the analyzed period. Low share of long-term and short-term financial investments indicates the absence of diverted funds from core activities.
Analysis of the structure of the enterprise's liabilities.
Table 3.
Analytical grouping and analysis of balance sheet liability items
|
Liability balance |
At the beginning of the period |
At the end of the period |
Absolute deviation thousand rubles. |
Growth rate % |
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|
1. Sources of all property |
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|
1.1 Own capital |
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|
1.2 borrowed capital |
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|
1.2.1 Long-term liabilities |
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|
1.2.2. Short-term loans and borrowings |
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|
1.2.3 Accounts payable |
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The main source of the formation of total assets of the enterprise in the analyzed period are own funds, the share of which in the balance sheet decreased from 72.34% to 70.69%, the share of borrowed funds accordingly increased from 27.66% to 29.31%, which indicates a possible financial instability of the enterprise and the increasing degree of dependence of the enterprise on external investors and creditors. During the analyzed period, there was an increase in equity capital by 52,166 thousand rubles. or growth amounted to 157.21% and borrowed capital by 24,564 thousand rubles. (170.46%). Own capital increased mainly due to an increase in additional capital and authorized capital while simultaneously reducing the amount of targeted financing and revenues. A decrease in the volume of targeted financing and revenues may indicate a loss of interest of investors (in particular, the state) in the activities of the enterprise.
The growth of borrowed capital occurred mainly due to an increase in the size of loans and credits by 10,943 thousand rubles. (177.5%) and accounts payable by 13,621 thousand rubles. (165.67%), which indicates the emergence of new obligations of the enterprise both to the bank and to other creditors.
Attracting borrowed funds into the turnover of an enterprise is a normal phenomenon. This contributes to a temporary improvement in financial condition, provided that they are not frozen in circulation for a long time and are returned in a timely manner. Otherwise, overdue accounts payable may arise, which ultimately leads to the payment of fines and a deterioration in financial condition.
Table 4.
Conventions.
|
Conditional designations |
Passive |
Legend |
|
Long-term financial investments
Inventories and costs Accounts receivable with a maturity of more than 12 months Accounts receivable with a maturity of less than 12 months Short-term financial investments Cash Other current assets |
3. Capital and reserves 4. Long-term liabilities 5. Short-term liabilities Short-term loans and borrowings Accounts payable Consumption funds Other current liabilities |
||
|
Balance |
Balance |
One of the most important characteristics of the financial condition of an enterprise is the stability of its activities in the light of a long-term perspective. It is related to the overall financial structure of the enterprise, the degree of its dependence on creditors and investors. Thus, many businessmen, including representatives of the public sector of the economy, prefer to invest a minimum of their own funds in the business and finance it with borrowed money. However, if the equity-debt structure is heavily skewed toward debt, the business may go bankrupt if multiple creditors simultaneously demand the money back at an “inconvenient time.”
Financial stability in the long term is characterized, therefore, by the ratio of equity and borrowed funds. However, this indicator provides only a general assessment of financial stability. Therefore, a system of indicators has been developed in world and domestic practice.
In market conditions, the balance sheet model, on the basis of which indicators reflecting the essence of financial stability are considered, has the form:
F + Z + (R.A. - Z) = Andc+ KT + kt + kr + rp, (1)
F- fixed assets and other non-current assets;
Z- inventories and costs;
(R.A.- Z) - cash, short-term financial investments, settlements (accounts receivable) and other assets;
ANDc- sources of own funds;
kt- short-term loans and borrowed funds;
KT- long-term and medium-term loans and borrowed funds;
kr + rp- settlements (accounts payable) and other short-term liabilities.
Considering that long-term loans and borrowed funds are used primarily for the purchase of fixed assets and capital investments, model (1) is transformed and has the following form:
Z + (R.A.- Z) = [(Andc+ KT) – F] + [ kt + kr + rp] (2)
From this we can conclude that, subject to the limitation of inventories and costs Z by the value [(ANDc+ KT) – F]:
Z£ [(ANDc+ KT) – F] (3)
the condition for the solvency of the enterprise will be met, i.e. cash, short-term financial investments (securities and other assets) will cover the short-term debt of the enterprise [ kt + kr + rp]:
(R.A.) > (kt + kr + rp) (4)
So, using the example of the analyzed balance:
at the beginning of the year 85896 > (14121+ 20742) – the condition is met,
at the end of the year 124150 > (25064 + 34363) – the condition is met.
The most general indicator of financial stability is the surplus or shortage of sources of funds for the formation of reserves and costs, obtained in the form of the difference in the value of sources of funds and the value of reserves and costs. This refers to the provision of certain types of sources (own, credit and other borrowed), since the sufficiency of the sum of all possible types of sources (including short-term accounts payable and other liabilities) is guaranteed by the identity of the totals of the asset and liability of the balance sheet.
The total amount of inventories and costs Z of the enterprise is equal to the sum of lines 210 and 220 of section II of the balance sheet asset.
To characterize the sources of reserves and costs, several indicators are used that reflect the different degrees of sufficiency of different types of sources:
1. availability of own working capital, equal to the difference in the amount of sources of own funds and the amount of non-current assets:
E c= Andc – F (5)
at the beginning of the year: E c = 91179 – 40146 = 51033 thousand rubles,
at the end of the year: E c = 143345 –78622 = 64723 thousand rubles.
2. the presence of own and long-term borrowed sources of formation of reserves and costs, obtained from the previous indicator by an increase in the amount of long-term and medium-term loans and borrowed funds:
E T= (Andc + KT) – F= E c +KT (6)
at the beginning of the year: E T = 51033 + 0 = 51033 thousand rubles,
at the end of the year: E T = 64723 + 0 = 64723 thousand rubles.
3. the total value of the main sources of formation of inventories and costs, equal to the sum of the previous indicator and the value of short-term loans and borrowed funds:
ES = (ANDc+ KT) – F + kt = E T + kt (7)
at the beginning of the year: E S = 51033 + 14121 = 65154 thousand rubles,
at the end of the year: E S = 64723 +25064 = 89787 thousand rubles.
If in formula (2) short-term debt is transferred to the left side of the balance sheet model, then the latter will take the following form:
RA – (kt + rp) + kr = (ANDc+ KT) – F (8)
On the left side of the equation we have the difference between the working capital of the enterprise and its short-term debt, on the right - the value of the E T indicator.
Three indicators of the availability of sources for the formation of reserves and costs (formulas 5-7) correspond to three indicators of the provision of reserves and costs with sources of their formation:
1. surplus (+) or shortage (-) of own working capital:
[ ± E c]= E c - Z (9)
at the beginning of the year: E c - Z = 51033 – 64629 = - 13596 thousand rubles. – lack of own working capital,
at the end of the year: E c - Z = 64723 – 78618 = - 13895 thousand rubles. – lack of own working capital.
2. excess (+) or deficiency (-) of own and long-term borrowed sources of formation of reserves and costs:
[ ± E T ]= E T - Z = (E c + KT) – Z (10)
at the beginning of the year: E T – Z = 51033 – 64629 = - 13596 thousand rubles. – lack of own and long-term sources for the formation of reserves and costs,
at the end of the year: E T – Z = 64723 – 78618 = - 13895 thousand rubles. – lack of own and long-term sources for the formation of reserves and costs.
3. surplus (+) or deficiency (-) of the total amount of the main sources for the formation of reserves and costs:
[ ± ES]= ES- Z = (E c + KT + kt) – Z (11)
at the beginning of the year: E S - Z = 65154 – 64629 = 525 thousand rubles. – lack of total value of the main sources for the formation of reserves and costs,
at the end of the year: E S - Z = 89787 – 78618 = 11169 thousand rubles. – lack of total sources for the formation of reserves and costs.
Calculation of three indicators of the provision of reserves and costs with sources of their formation allows us to classify financial situations according to the degree of their stability. When identifying the type of financial situation, the following three-component indicator is used:
S = { S(± Ec), S(± ET), S(± ES)}, (12)
where the function S(X) is defined as follows:
ì 1 if x³ 0
S(X) = í (13)
î 0 if x<0
For the entire analyzed period, the three-component indicator had the following form: S = (0, 0, 1)
ì [ ± E c] < 0
í [ ± E T] < 0 (14)
î [ ± ES] > 0
Table 5.
Analysis of financial stability.
|
Indicators |
Conditional designations |
Start period |
At the end of the period |
Changes period |
|
1. Source of own funds |
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|
2. Fixed assets and investments |
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|
3. Availability of own working capital |
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|
4. Long-term loans and borrowed funds |
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|
5. Availability of own and long-term borrowed sources of formation of reserves and costs |
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|
6. Short-term loans and borrowed funds |
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|
7. The total value of the main sources of reserves and costs |
||||
|
8. Total inventory and costs |
||||
|
9. Surplus (+) or deficiency (-) of own working capital |
||||
|
10. Excess (+) or deficiency (-) of own and long-term borrowed sources of inventories and costs |
||||
|
11. Excess (+) or deficiency (-) of the total amount of the main sources of reserves and costs |
||||
|
12. Three-component indicator of the type of financial situation |
The three-component indicator of the type of financial situation characterizes an unstable financial condition associated with a violation of solvency, in which, nevertheless, it remains possible to restore balance by replenishing sources of own funds and increasing one’s own working capital, as well as by additionally attracting long-term and medium-term loans and borrowed funds.
Financial instability is considered normal (acceptable) in this situation if the amount of short-term loans and borrowed funds attracted for the formation of inventories and expenses does not exceed the total cost of inventories and finished products (the most liquid part of inventories and expenses), i.e. Conditions are met:
Z 1 + Z 4 ³ Kt - [ ± ES] (15)
Z 2 + Z 3 £ ET
where: Z 1 – production inventories (p. 211);
Z 2 – work in progress (p. 213);
Z 3 – deferred expenses (p. 216);
Z 4 – finished products and shipped goods (p. 214 + p. 215);
(Kt - [±E S ]) – part of short-term loans and borrowed funds involved in the formation of inventories and costs.
If conditions (15) are not met, then financial instability is abnormal and reflects a tendency towards a significant deterioration in financial condition.
Let's check the financial instability of the enterprise for normality:
Beginning of period:
6516 + 62 + 1039 < 14121 – 525
57011 + 0 > 51033
abnormal financial instability at the beginning of the period.
End of period:
19326 + 418 + 2506 > 25064 – 11169
22250 > 13895
56368 < 64723
By the end of the period, normal financial instability had established in the analyzed enterprise, which reflects a trend towards improving financial condition.
Along with optimizing the structure of liabilities in our situation, sustainability can be restored through a reasonable reduction in inventory levels and costs.
To restore sustainability, it is necessary to in-depth study the reasons for changes in inventories and costs, turnover of current assets, the availability of own working capital, as well as reserves for reducing long-term and current tangible assets, accelerating the turnover of funds, increasing own working capital. Then, based on the current situation, a number of measures can be recommended, for example:
- justified reduction of inventories and costs (to the standard);
- replenishment of own working capital from internal and external sources.
The most risk-free way to replenish the sources of reserve formation should be recognized as an increase in real equity capital through the accumulation of retained earnings or through the distribution of after-tax profits into accumulation funds, subject to the growth of the part of these funds not invested in non-current assets. A decrease in inventory levels occurs as a result of planning inventory balances, as well as the sale of unused inventory items.
Analysis of financial sustainability ratios.
Next, financial ratios are calculated, which make it possible to study trends in changes in the stability of the position of a given enterprise, as well as to carry out a comparative analysis based on the reports of several competing companies. These include:
1. Autonomy coefficient, characterizing the independence of the enterprise from borrowed sources of funds, it is equal to the share of equity capital in the total balance sheet.
K a = I s / B (16)
For the analyzed enterprise, the value of the autonomy coefficient is:
for the beginning of the year - K a = 91179 / 126042 = 0,723
at the end of the year - K a = 143345 / 202772 = 0,706
The normal minimum value of the coefficient is estimated at 0.5, which means that all the obligations of the enterprise can be covered by its own funds. The value of this coefficient for the analyzed enterprise exceeds the normative value, however, its decrease reflects a tendency towards an increase in the enterprise’s dependence on borrowed sources of financing the economic circuit and is therefore assessed negatively.
2. Debt to equity ratio equal to the ratio of the amount of the enterprise's liabilities to the amount of its own funds.
K s/s = (B – I s) / I s (17)
For the analyzed enterprise, the value of the ratio of equity and borrowed funds:
at the beginning of the year - Kw/s = (126042 – 91179) / 91179 = 0.38
at the end of the year - K salary = (202772 – 143345) / 143345 = 0.415
The relationship between the autonomy coefficient and the debt/equity ratio can be expressed as follows:
K z/s = 1 / K a – 1 (18)
from which follows the normal restriction for the ratio of borrowed and equity funds K z / c £ 1. This condition for the analyzed enterprise is satisfied both at the beginning and at the end of the year. The growth of this indicator reflects a trend toward an increase in the share of the enterprise’s liabilities in the balance sheet structure, which means an increase in the enterprise’s financial dependence on borrowed sources.
With an increase in the share of borrowed funds, the enterprise loses stability, because:
- an increasingly large part of the capital belongs not to the enterprise, but to creditors who can dictate their terms;
- the greater the share of borrowed funds, the less likely it is to receive funds from additional sources of financing: financial organizations “will not give more,” and it will not be possible to increase equity capital by issuing shares, since shareholders will have great doubts about paying dividends due to the need pay high interest on borrowed funds.
3. Ratio of mobile and immobilized assets calculated by the formula.
K m/i =R.A. / F (19)
For the analyzed enterprise, the ratio of mobile and immobilized assets is:
at the beginning of the year - K m/i = 85896 / 40146 = 2.14
at the end of the year - K m/i = 124150 / 78618 = 1.58
The value of this indicator is largely determined by the industry characteristics of the circulation of funds. A sharp decrease in this ratio is a consequence of changes in the structure of non-current and current assets of the enterprise.
Combining these restrictions, we obtain the final form of the normal restriction for the debt-to-equity ratio:
K a / c£ min(1, Km/i) (20)
4. Maneuverability coefficient equals the ratio of the enterprise’s own working capital to the total amount of sources of own funds.
K m = E s / I s (21)
For the analyzed enterprise, the agility coefficient is:
at the beginning of the year - K m = 51033 / 91179 = 0.56
at the end of the year - K m = 64723 / 143345 = 0.452
It shows what part of the organization’s equity capital is in mobile form, allowing relatively free maneuvering of capital. High values of the agility coefficient positively characterize the financial condition, however, there are no normal values of the indicator established in practice. A value of 0.5 can be considered as an average guideline for optimal coefficient levels.
5.Coefficient of supply of inventories and costs from own sources, equal to the ratio of the amount of own working capital to the cost of inventories and expenses of the enterprise.
K o = E s /Z (22)
For the analyzed enterprise, the ratio of supply of inventories and costs from own sources:
at the beginning of the year - K o = 51033 / 64629 = 0.79
at the end of the year - K o = 64723 / 78618 = 0.82
For industrial enterprises, the normal limitation of the indicator is as follows: k o ³ 0.6 ¸ 0.8. In addition, the coefficient of supply of inventories and costs from its own sources should be limited from below by the values of the autonomy coefficient so that the organization does not find itself on the verge of bankruptcy: k o ³ k a. For the analyzed enterprise, this condition is met.
6. Industrial property ratio, equal to the ratio of the sum of the costs of fixed assets, capital investments, equipment, inventories and work in progress to the total balance sheet - net (that is, minus losses, debt of the founders for contributions to the management company, the cost of shares purchased from shareholders).
To the address = (F1 + F2 + F3 + Z1 + Z2) / B (23)
where F1 – fixed assets,
F2 – capital investments,
F3 – equipment,
Z1 – production inventories,
Z2 – work in progress.
For the analyzed enterprise, the coefficient of property for production purposes:
at the beginning of the year - To p.im. = (40146 + 6516 +57011) / 126042 = 0.823
at the end of the year - To p.im. = (78622 + 19326 + 56368) / 202772 = 0.761
The following indicator limitation is considered normal:
Kp.m.³ 0,5 (24)
The calculated indicators correspond to the normal value, however, during the analyzed period there was a tendency towards a decrease in this value. This is a negative sign, because if the indicator decreases below the critical limit, it is necessary to replenish equity capital (for example, by increasing the authorized capital, which is possible and the enterprise tried to do, since the authorized capital of the enterprise increased during the analyzed period) or attracting long-term borrowed funds to increase production property, if the financial results in the reporting period do not allow for a significant replenishment of sources of own funds.
7. Long-term leverage ratio, equal to the ratio of the amount of long-term loans and borrowed funds to the amount of the enterprise’s own funds and long-term loans and borrowings.
To d.pr. = CT / (I s + CT) (25)
It allows you to approximately estimate the share of borrowed funds when financing capital investments. For the analyzed enterprise, the coefficient of long-term borrowing will be equal to 0, since the enterprise does not use long-term sources of financing in its activities.
8. Short-term debt ratio expresses the share of the enterprise's short-term liabilities in the total amount of liabilities.
lK.Z = (Pt – fp) / (KT + Pt) (26)
For the analyzed enterprise, the short-term debt ratio is:
at the beginning of the year - l K.Z = (14121 – 0) / (0 + 14121) = 1
at the end of the year - l K.Z = (25064 – 0) / (0 + 25064) = 1
Based on the calculated coefficients, we can conclude that the company’s liabilities are short-term in nature. This creates certain difficulties for the enterprise. The balance between the sizes of receivables and payables is disrupted, since receivables are distributed between long-term and short-term (and the share of long-term is greater), and payables are exclusively short-term in nature.
9. Coefficient of autonomy of sources of stock formation and costs shows the share of own working capital in the total amount of the main sources of reserves and costs.
aa.Z= E s / (E s +Kt + KT) (27)
For the analyzed enterprise, the coefficient of autonomy of sources of formation of reserves and costs:
at the beginning of the year - a a.З = 51033 / (51033 + 14121 + 0) = 0.783
at the end of the year - a a.З = 64723 / (64723 + 25064 + 0) = 0.761
10. Accounts payable and other liabilities ratio shows the share of accounts payable and other liabilities in the total amount of liabilities of the enterprise.
bK.Z = (kr + rp) / (KT + Pt) (28)
For the analyzed enterprise, the ratio of accounts payable and other liabilities:
at the beginning of the year - b K.Z = (20742 + 0) / (0 + 14121) = 1.47
at the end of the year - b K.Z = (34363 + 0) / (0 + 25064) = 1.371
Table 6
Coefficients characterizing the financial stability of the enterprise.
|
Financial ratios |
Conditional designations |
Restrictions |
To the beginning of the year |
Finally of the year |
Changes in a year |
|
Autonomy coefficient |
|||||
|
Debt to equity ratio |
|||||
|
Ratio of mobile and immobilized assets |
£ min(1, K m/i) |
||||
|
Maneuverability coefficient |
|||||
|
Security ratio inventories and costs |
|||||
|
Property ratio industrial purposes |
|||||
|
Long term coefficient raising borrowed funds |
|||||
|
Short-term debt ratio |
|||||
|
Autonomy coefficient sources of formation |
|||||
|
Accounts payable and other liabilities ratio |
Values of indicators of the structure of sources of funds (l K.Z , b K.Z), among other things, also lies in the fact that they are also used in the interrelation of individual indicators of liquidity of financial stability, on the basis of which conclusions are drawn about the positive dynamics of the main financial ratios.
Analysis of balance sheet liquidity.
Balance sheet liquidity is defined as the degree to which an enterprise's liabilities are covered by its assets, the period of transformation of which into cash corresponds to the period of repayment of liabilities.
Depending on the degree of liquidity, i.e. the rate of conversion into cash, the assets of the enterprise are divided into the following groups:
A1. The most liquid assets are cash and short-term financial investments:
A1 = d + ft (29)
For the analyzed enterprise, the most liquid assets are:
at the beginning of the year – A1 = 588 thousand rubles.
at the end of the year – A1 = 1074 thousand rubles.
A2. Quickly realizable assets – accounts receivable, the repayment period of which is expected within 12 months and other current assets:
A2 = dt + ra (30)
For the analyzed enterprise, quickly realizable assets:
at the beginning of the year - A2 = 19,749 thousand rubles.
at the end of the year - A2 = 41981 thousand rubles.
A3. Slowly selling assets – the remaining items of Section II plus the item “Long-term financial investments” from Section I:
A3 = RA – A1 – A2 + fT = Z + dT + fT (31)
Where fT- long-term financial investments.
For the analyzed enterprise, slowly sold assets:
at the beginning of the year - A3 = 85896 – 1102 – 19749 + 0 = 65045 thousand rubles.
at the end of the year - A3 = 124150 – 1462 – 41981 + 3634 = 84341 thousand rubles.
A4. Hard-to-sell assets – articles of Section I minus long-term financial investments:
A4 = F - fT (32)
For the analyzed enterprise, assets that are difficult to sell are:
at the beginning of the year - A4 = 40146 thousand rubles.
at the end of the year - A4 = 74988 thousand rubles.
Balance sheet liabilities are grouped according to the urgency of their payment:
P1. The most urgent liabilities are accounts payable and other short-term liabilities:
P1 =Pt – Kt - fP (33)
For the analyzed enterprise, the most urgent obligations are:
at the beginning of the year - P1 = 20,742 thousand rubles.
at the end of the year - P1 = 34363 thousand rubles.
P2. Short-term liabilities – short-term loans and borrowings:
P2 = Kt (34)
For the analyzed enterprise, short-term liabilities:
at the beginning of the year – P2 = 14121 thousand rubles.
at the end of the year - P2 = 25064 thousand rubles.
P3. Long-term and medium-term liabilities – long-term loans and borrowings:
P3 = KT (35)
For the analyzed enterprise, long-term and medium-term liabilities:
at the beginning of the year – P3 = 0
at the end of the year – P3 = 0
P4. Constant liabilities – sources of own funds:
P4 = Ic= And +fp (36)
For the analyzed enterprise, permanent liabilities:
at the beginning of the year – P4 = 91179 thousand rubles.
at the end of the year - P4 = 143345 thousand rubles.
Grouping of assets and liabilities of an enterprise by degree of liquidity.
Table 7.
|
beginning of the year |
the end of the year |
beginning of the year |
the end of the year |
Payment surplus or deficiency |
As a % of the group total |
||||
|
beginning of the year |
the end of the year |
beginning of the year |
the end of the year |
||||||
|
The most liquid assets of A1 |
Most urgent obligations P1 |
||||||||
|
Quickly realizable assets A2 |
Short-term liabilities P2 |
||||||||
|
Slowly selling assets A3 |
Long-term liabilities P3 |
||||||||
|
Hard to sell assets A4 |
Constant liabilities P4 |
||||||||
Columns 7 and 8 present the absolute values of payment surpluses or deficiencies at the beginning and end of the reporting period:
Dj = Aj- Pj , j = 1, ….., 4, (37)
In columns 9 and 10 - respectively their values, taken as a percentage of the totals of the liability groups:
Dj/ Pj* 100 = (Aj- Pj) / Pj * 100 (38)
To determine the liquidity of the balance sheet, you should compare the results of the given groups for assets and liabilities. The balance is considered absolutely liquid if the following ratios exist:
ì A1³ P1
í A2³ P2 (39)
ï A3³ P3
î A4£ P4
In the analyzed balance sheet, the first inequality of system (39) has the sign opposite to that fixed in the optimal variant; the liquidity of the balance sheet differs from absolute. At the same time, it is impossible to talk about compensating for a lack of funds in one group of assets with an excess in another group, since compensation in this case takes place only in value, and in a real payment situation, less liquid assets cannot replace more liquid ones. Thus, we can conclude about the low liquidity of the balance sheet, the low ability of the enterprise to fulfill its short-term (current) obligations, i.e. pay “invoices”.
Comparison of the most liquid funds and quickly realizable assets with the most urgent obligations and short-term liabilities allows you to find out current liquidity. Comparison of slowly selling assets with long-term liabilities reflects promising liquidity. Current liquidity indicates the solvency (or insolvency) of the enterprise for the period of time closest to the moment under consideration. Prospective liquidity is a forecast of solvency based on a comparison of future receipts and payments (of which only a part is represented in the corresponding groups of assets and liabilities, so the forecast is quite approximate).
For a comprehensive assessment of balance sheet liquidity as a whole, it is used general liquidity ratio, calculated by the formula:
fl = (a 1 A1+a 2 A2+a 3 A3) / (a 1 P1 +a 2 P2 +a 3 P3) (40)
Where aj – weighting coefficients that are subject to the following restrictions:
ì a 1 > a 2 + a 3
í a 2 > a 3 (41)
î a 3 > 0
In Western accounting and analytical practice, the critical lower value of the indicator is given - 2, but this is only an approximate value, indicating its order, but not its exact normative value. The overall balance sheet liquidity indicator shows the ratio of the sum of all liquid funds of the enterprise to the sum of all payment obligations (both short-term and long-term), provided that various groups of liquid funds and payment obligations are included in the specified amounts with weighting coefficients that take into account their dependence in terms of timing receipt of funds and repayment of obligations.
Using the general liquidity indicator, changes in the financial situation of the enterprise are assessed from the point of view of liquidity. This indicator is also used when choosing the most reliable partner from several potential partners based on reporting.
Let a 3 = 0.2; a2 = 0.3; a 1 = 0.5, then the value of the general liquidity indicator for the analyzed enterprise will be:
at the beginning of the year – fl=
at the end of the year - fl=
This ratio shows how many rubles of the enterprise’s current assets are per ruble of current liabilities. During the analyzed period, the overall liquidity indicator of the enterprise decreased slightly (0.11).
However, the general liquidity indicator does not give an idea of the enterprise’s capabilities in terms of repaying short-term obligations. Therefore, to assess the solvency of an enterprise, the following indicators are used:
1.absolute liquidity ratio, is the most stringent liquidity criterion, showing what part of short-term debt obligations can be repaid immediately. It is determined by the ratio of the most liquid funds to the amount of the most urgent obligations and short-term liabilities.
K a . l . = (d + ft) / (Pt – fp) (42)
For the analyzed enterprise, the absolute liquidity ratio is:
at the beginning of the year – K AL =
at the end of the year - K AL =
The normal limit for this indicator is:
TOa.l³ 0,2 (43)
This condition is not met. The value of the indicator equal to 0.02 means that every day 2% of the enterprise’s short-term liabilities are subject to repayment or, in other words, in the case of maintaining the cash balance at the level of the reporting date (mainly by ensuring a uniform receipt of payments from counterparties) short-term debt that occurs at the reporting date can be repaid in 50 days (1 / 0.02).
It should be noted that the level of the absolute liquidity ratio itself is not a sign of poor or good solvency. When assessing its level, it is necessary to take into account the rate of turnover of funds in current assets and the rate of turnover of short-term liabilities. If means of payment turn over faster than the period of possible deferment of payment obligations, then the solvency of the enterprise will be normal. At the same time, a constant chronic lack of cash leads to the fact that the enterprise becomes chronically insolvent, and this can be regarded as the first step on the path to bankruptcy.
The main factor in increasing the level of absolute liquidity is the uniform repayment of receivables.
2. liquidity ratio (intermediate coverage ratio) can be obtained from the previous indicator by adding accounts receivable and other assets to the numerator:
Kl= (d + dt + ft + ra) / (Pt – fp) (44)
For the analyzed enterprise, the liquidity ratio is:
at the beginning of the year – K l =
at the end of the year - K l =
The liquidity ratio (intermediate coverage ratio) shows what part of the current debt the organization can cover in the near future, subject to full repayment of receivables. The estimate of the lower normal bound for the liquidity ratio is:
Kl³ 0,8 ¸ 1,0 (45)
The obtained values do not satisfy the given restrictions; in addition, even the emerging trend towards an increase in this ratio does not characterize the company on the positive side, since the increase in the value of the ratio was mainly associated with an increase in accounts receivable.
To increase the level of the ratio, it is necessary to promote an increase in the provision of inventories with own working capital and to reasonably reduce the level of inventories. The value of this particular coefficient most accurately reflects the current solvency of the enterprise.
3.coverage ratio equal to the ratio of the cost of all mobile (working) assets of the enterprise (less deferred expenses) to the amount of short-term liabilities:
KP= R.A. / (Pt – fp) (46)
For the analyzed enterprise, the coverage ratio is:
at the beginning of the year – Kp=
at the end of the year - Kp=
The coverage ratio shows the payment capabilities of the enterprise, assessed subject to not only the timeliness of settlements with debtors and favorable sales of finished products, but also the sale, if necessary, of other elements of material current assets. In contrast to the absolute liquidity ratio and the intermediate coverage ratio, which show instantaneous and current solvency, the coverage ratio reflects the forecast of solvency for a relatively long term. The following limitation is considered normal for the coverage ratio:
KP³ 2 (47)
During the analyzed period, the coverage ratio decreased, but remained above the norm. To increase the level of the coverage ratio, it is necessary to replenish the enterprise's own capital and reasonably restrain the growth of non-current assets and long-term receivables.
Table 8.
Analysis of financial ratios
|
Financial ratios |
Conditional designation |
restrictions |
Beginning of period |
End of period |
Changes over the period |
|
General liquidity ratio |
|||||
|
Absolute liquidity ratio |
|||||
|
Liquidity ratio |
|||||
|
Coverage ratio |
Conclusions and proposals for further development of the analyzed enterprise.
During the reporting period, at the analyzed enterprise, the size of the balance sheet currency, which is the main indicator of the property “power” of the enterprise, increased significantly, however, the structure of the balance sheet itself became more “heavy”, and therefore more sensitive to revenue, although at the same time due to an increased share of depreciation charges in the cost structure, an enterprise can have money without having profit (since the sources of cash flow from core activities are profit and depreciation).
The largest part of non-current assets is represented by production fixed assets and unfinished construction, which characterizes the enterprise’s orientation towards creating material conditions for expanding the main activities of the enterprise. High growth rates of long-term financial investments reflect the financial and investment development strategy. On the one hand, increasing capacity and making long-term investments of funds is a good sign, indicating the enterprise’s desire to work for the future; on the other hand, carrying out such operations in conditions of an unstable financial condition can lead the enterprise to “freezing” funds, and, consequently, worsen the financial condition enterprises. Certain concerns are also caused by a significant increase in the cost of raw materials and supplies while reducing the level of work in progress.
However, there are also positive aspects. For example, a low share of long-term and short-term financial investments indicates the absence of diverted funds from core activities.
An increase in the share of borrowed funds in the structure of an enterprise's liabilities indicates an increase in the degree of dependence of the enterprise on external investors and creditors. A decrease in the volume of targeted financing and revenue may indicate a loss of interest of investors (in particular, the state) in the activities of the enterprise. In addition, a negative symptom is a large share of debt to the budget and extra-budgetary funds, which can lead to the application of sanctions by government authorities (blocking an account, imposing penalties on property). In addition, delays in payments on these payments also entail penalties, such as the accrual of penalties, the interest rates for which are quite high.
The three-component indicator of the type of financial situation characterizes an unstable financial condition, however, by the end of the reporting period, the enterprise managed to reach a normal level of financial instability from an abnormal level, which means that the enterprise, as a whole, improved its condition, although largely due to an increase in its own funds, rather than sales of products .
Thus, financial instability has become normal and reflects a trend towards improving financial health.
In addition, it should be noted the low liquidity of the balance sheet, i.e. the low ability of the enterprise to fulfill its short-term (current) obligations, i.e. pay “invoices”.
In this situation, the company should develop a program to restore normal solvency, as well as to increase the liquidity of the balance sheet, since the current financial condition leaves much to be desired. A number of measures can be recommended, for example:
- acceleration of capital turnover in current assets, which will result in a relative reduction in turnover per ruble;
- justified reduction of inventories and costs (to the standard);
- replenishment of own working capital from internal and external sources;
- the most risk-free way to replenish the sources of reserve formation should be recognized as an increase in real equity capital through the accumulation of retained earnings or through the distribution of after-tax profits into accumulation funds, subject to the growth of the part of these funds not invested in non-current assets;
- uniform repayment of accounts receivable. To implement this measure, it is necessary to find new ways to collect receivables, such as mutual offsets, reducing the provision of deferred payments, selling overdue receivables to banks (factoring);
- raising funds to pay off debts to the budget and extra-budgetary funds;
- in order to reduce costs and increase the efficiency of the main production, it is advisable to abandon in some cases some types of activities serving the main production (construction, repairs, transport, etc.) and switch to the services of specialized organizations; it is necessary to consider the possibility of transferring such auxiliary production to rent;
- if an enterprise makes a profit, but is still left with low solvency, it is necessary to analyze the use of profits, so contributions to the consumption fund can be considered as a potential reserve for replenishing the enterprise’s own working capital;
- conducting marketing analysis to study supply and demand, sales markets and forming on this basis the optimal range and structure of product production, possibly even searching for new suppliers;
- In order to reduce the deficit of its own working capital, a joint-stock enterprise may try to replenish it by issuing and placing new shares and bonds. However, it must be borne in mind that the issue of new shares may lead to a fall in their value and this may cause bankruptcy. Therefore, in Western countries they most often resort to issuing convertible bonds with a fixed percentage of income and the possibility of exchanging them for shares of the enterprise.
Bibliographic list of used literature:
- Vitvitskaya T. Electronic money in Russia / Economics and Life. – 1994. - No. 10.
- Drobozina. Finance. Money turnover. Credit. M.: Finance and Statistics. - 1997.
- European market of plastic cards / World of cards. - 1997. - No. 4.
- Kovalev V.V. “Financial analysis: Capital management. Choice of investments. Reporting analysis. – 2nd ed., revised. and additional – M.: Finance and Statistics. - 2000.
- Kovalev V.V. “Introduction to financial management.” – M.: Finance and Statistics. - 1999.
- Lileev D. Plastic money / Business people. - 1993. - No. 10.
- Makaev A. Solve common problems together / World of Cards. - 1996. - No. 4.
- K. Markelov “Smart machines for banks and offices.” - 1993.
- Microprocessor cards: new markets /World of cards. - 1997. - No. 4,
10. Yu.Perlin, D.Sakharov, Yu.Tovb. ATM. What it is? /Electronic money. - 1997.
11. Savitskaya G.V. “Analysis of the economic activity of an enterprise: 4th ed., revised. and additional – Minsk: New Knowledge LLC. - 1999.
12. Spetsivtseva A.V. New plastic money. M. - 1994.
13. M. Sorokin “Development of magnetic cards in Russia” / Banking technologies. - 1995. - No. 7.
14. Usoskin V.M. Bank plastic cards... M. - 1999.
15. Financial management: theory and practice: Textbook / Ed. E.S. Stoyanova. – 5th ed., revised. and additional – M.: Publishing house “Perspective”. - 2002. – 656 p.
16. S. Tsuprikov “Microprocessor payment cards for development directions” / Banking systems. - 1995. - No. 31.
17. Sheremet A.D., Negashev E.V. “Methodology of financial analysis.” – M.: INFRA – M. – 1999.
18. Visa Internationa /Russian market of plastic cards. - 1996. - No. 9.
19. VISA International in Russia / World of cards. - 1996. - No. 9.
20. UEPS /Universal Electronic Payment Systems. – 1997.
In practice, there are two ways to increase equity capital: profit accumulation And attracting additional capital on the financial market.
Profit accumulation can occur through the accelerated creation of reserve and other bank funds with their subsequent capitalization or through the accumulation of retained earnings from previous years. The last way to increase capital is the cheapest and does not affect the existing management structure of the bank. However, using a significant part of the profit received to increase equity capital means a reduction in current dividends to shareholders and may lead to a fall in the market value of shares of banks created in the form of OJSC.
If the bank's own funds are used to increase its authorized capital (their capitalization), a decision must be made to distribute these funds among the participants in proportion to the number of bank shares already owned by each shareholder.
Raising additional capital by the bank created in the form of an LLC, can occur on the basis of additional contributions to the authorized capital of both its participants and third parties, who thereby become participants in this bank (unless this is prohibited by its charter). Attraction of additional capital by joint-stock banks can be carried out by placing additional shares.
The decision to increase the authorized capital is made by the general meeting of shareholders (participants) or the board of directors of the bank in accordance with its charter. Moreover, such a decision can be made only after registration of the previous change in the amount of its authorized capital. The increase in the authorized capital must be agreed upon with the territorial branch of the Bank of Russia, which controls the legality of participation and payment by participants of their shares (shares) in the capital of the bank. The sale of shares (shares) of a bank to legal entities and individuals in order to increase its authorized capital can be carried out by paying them in cash and at the expense of tangible assets belonging to them.
The following funds can be used to capitalize own funds:
Bank share premium
· Funds received as a result of revaluation of fixed assets on the bank's balance sheet;
· Free unused funds of the accumulation fund and special fund. appointments;
· Remains of retained earnings from previous years (based on the decision of the general meeting of shareholders);
· Accrued but unpaid dividends to shareholders (by decision of the general meeting of shareholders);
Release procedure includes several stages:
1. Making a decision to issue shares;
2. Approval of the decision to issue shares and preparation of a prospectus for the issue of shares.
An issue prospectus is drawn up if the shares will be distributed among an unlimited number of persons or among a known circle of persons whose number exceeds 500;
3. State registration of an issue of shares or registration of a prospectus;
4. Disclosure of information contained in the prospectus in a printed publication for the purpose of notifying investors about the upcoming placement of shares;
5. Placement of shares;
6. State registration of a report on the results of the issue of shares;
7. Disclosure of information about the results of the issue in the press.
The decision to issue shares is made by the General Meeting of Shareholders or, on its instructions, by the Board of Directors. The board of directors approves the issue of shares and, if necessary, draws up a prospectus.
[Equity capital (EK) is funds owned directly by the bank, as opposed to borrowed funds that the bank raised temporarily. The insurance company includes: 1. ordinary and preferred shares (non-cumulative, perpetual shares); 2. share premium; 3. reserve capital (accumulated profit); 4. retained earnings. The peculiarity of the IC bank is that the IC of banks = 10%.
Functions.
1. Protective. Means the possibility of paying compensation to investors in the event of liquidation. jar. The insurance system allows you to maintain the bank's solvency by creating a reserve of assets that allow the bank to function despite the threat of losses. Theme protective f-ii is especially relevant today, because no effect created. syst. insured. deposits, eq. situation unstable, other factors drive. to banking bankruptcies and loss of funds by investors. In a crisis, the presence of an insurance company is the first condition for the bank's reliability.
2. Operational. Successful for a start. To work, the bank needs start-up capital, which is used to purchase land, buildings, equipment, as well as create a financial institution. reserves for unexpected losses. SC is also used for these purposes.
3. Regulating. It is associated with the special interest of society in the successful functioning of banks, as well as with laws and regulations that allow state. authorities to monitor ongoing operations.
Methods for increasing equity capital: 1. Profit, capitalization of dividends. 2. Additional issue of shares (simple and privileged), attraction of new shareholders 3. Subordinated loans
* In foreign practice To increase the capital cost, issuing bonds is widespread.
Adequacy of own capital. The value of the SC in absolute values: since 1994 – ECU; from 01/01/09 – ?, from mid-2009 – rubles. The minimum size of the capital is 180 million rubles, the minimum amount of equity. Wed (capital) of the bank is 180 million rubles.
In order to correctly assess the level of sufficiency of the insurance system a relative indicator is used. Own capital adequacy ratio (H 1). .
5 asset risk groups:
-Zero risk. Cash on hand (2% risk), in a correspondent account with the Central Bank, in a reserve account with the Central Bank, investment in Central Bank bonds in government debt obligations of economically developed countries.
-10% risk. Investments in Russian Federation debt obligations (GKOs, OFZs).
-20% risk. Investments in debt obligations of constituent entities of the Russian Federation and local authorities, funds in correspondent accounts in other commercial banks.
-50% risk. Loans with reliable collateral secured by government securities and loans on interbank loans for up to 30 days.
-Others (100% risk). Loans to clients.
Standard values N 1: 10% (for large banks) and 11% - minimum values. N 1 - international standard (developed by the Basel Committee of Banking Supervision). By international standards, H 1 = 8%.
Sources of SC formation:
Currently in use two-tier capital structure concept. It includes 2 levels: basic (main) and additional. Basic sources: formation of authorized capital; bank share premium(the difference between the exchange rate of the share and the par value); bank funds formed from its profits ( with the exception of material incentive funds, funds through which banks provide loans to their employees); current year profit based on the results for the quarter, and profit of previous years.
Additional sources: Increase in the value of bank property, due to the revaluation of property; Bank funds formed from the profits of the current year and previous years, not confirmed by an audit; Profit of the current year or previous years, not confirmed by an audit; Subordinated loan.]
The minimum amount of equity (capital) is set for the bank in the amount of 300 million rubles.
The amount of equity (capital) of a non-bank credit organization applying for bank status as of the 1st day of the month in which the corresponding application was submitted to the Bank of Russia must be at least 300 million rubles.
A license to carry out banking operations, granting a credit organization the right to carry out banking operations with funds in rubles and foreign currency, to attract funds from individuals and legal entities in rubles and foreign currency as deposits (hereinafter referred to as the general license), can be issued to a credit organization that has its own funds (capital) of at least 900 million rubles as of the 1st day of the month in which an application for a general license was submitted to the Bank of Russia.
A bank that had equity (capital) of less than 180 million rubles as of January 1, 2007, has the right to continue its activities provided that the amount of its equity (capital) does not decrease compared to the level achieved as of January 1, 2007.
The amount of own funds (capital) of a bank that meets the requirements established by part four of this article must be at least 90 million rubles from January 1, 2010.
The amount of own funds (capital) of a bank that meets the requirements established by parts four and five of this article, as well as a bank created after January 1, 2007, from January 1, 2012 must be at least 180 million rubles.
The amount of own funds (capital) of a bank that meets the requirements established by parts four to six of this article, as well as a bank created after January 1, 2007, must be at least 300 million rubles from January 1, 2015.
If the size of the bank's own funds (capital) decreases due to a change by the Bank of Russia in the methodology for determining the size of the bank's own funds (capital), a bank that had own funds (capital) of 180 million rubles or more as of January 1, 2007, as well as a bank created after 1 January 2007, within 12 months they must reach the value of their own funds (capital) in the amount of 180 million rubles, and from January 1, 2015 - 300 million rubles, calculated according to the new methodology for determining the amount of the bank’s own funds (capital), determined by the Bank of Russia, and a bank that had equity (capital) of less than 180 million rubles as of January 1, 2007 - the larger of two values: the amount of equity (capital) it had as of January 1, 2007, calculated using a new method for determining the amount of equity funds (capital) of the bank, determined by the Bank of Russia, or the amount of own funds (capital), established by parts five to seven of this article, as of the corresponding date.
23. Bank deposits: main types of deposits, their classification, procedure for registration and insurance.
A deposit is a form of expression of the bank’s credit relations with depositors regarding the latter’s provision of their own funds to the bank for temporary use. The bank's attraction of funds to deposits is formalized by a written agreement. The written form of the agreement is considered to be complied with if the deposit is certified by a savings or deposit certificate or other document issued to the depositor that meets the requirements of the law or banking regulations. Bank deposit accounts are varied and their classification can be based on a variety of criteria. For example, by source of deposit, by purpose, by degree of profitability, etc. However, the criteria most often used are: 1) category of the depositor; 2) form of withdrawal of deposit.
Bank deposits by depositor category are divided into:
· Deposits of individuals
Peculiarities:
ü only those banks that have a special license and that have worked in the banking services market for at least 2 years from the date of registration have the right to open.
ü A bank deposit agreement with an individual is a public contract. Public contract- an agreement concluded by a commercial organization and establishing its obligations for the sale of industrial and industrial goods, which such organization must carry out in relation to everyone who contacts it. In relation to banks, this means that a bank deposit agreement must be concluded with any individual who contacts the bank. When concluding this agreement, the bank has no right to give preference to any person.
ü The bank is obliged to issue the deposit amount to a citizen, an individual, upon his first request. The terms of the agreement with such a person regarding the refusal to issue funds upon first request to the depositor are void. For legal entities, the method and timing of return of the deposit are determined solely by the agreement.
ü A bank deposit agreement with an individual may provide for a number of additional conditions. For example: the right of a depositor to dispose of his deposit by proxy; the right to replace your contribution; the right to the impossibility of the bank changing the interest rates on a time deposit, etc.
ü Return of deposits to citizens by banks in which more than 50% of the voting shares or interests belong to government bodies at any level; the relevant government body bears subsidiary responsibility for the return of such deposits.
ü In accordance with the Civil Code of the Russian Federation (Article 840) and the Federal Law “On Banks” (Article 38), banks are obliged to ensure the return of citizens’ deposits through compulsory insurance. And in development of these laws, in November 2003, the Federal Law “On insurance of deposits of individuals in banks of the Russian Federation” was adopted.
· Deposits of legal entities
According to the form of withdrawal of deposits, they are distinguished:
· Demand deposits– deposits that are placed in the bank on the terms of their return to the depositor upon his first request. Essentially, the funds that the client places in the bank are intended to make current payments. Fund balances on such deposits are characterized by high mobility and variability. Banks either do not pay interest on such deposits at all or at a low level. Despite their high mobility, there is always a constant minimum balance in circulation. This allows the bank to use these funds as a stable credit resource, and for the bank this is the cheapest source of raising funds from outside.
ü Current accounts, open to legal entities, private entrepreneurs and individuals engaged in private practice on the basis of received patents.
ü Current account– an account opened for an individual to carry out settlement transactions not related to business activities or private practice. For example, a card account.
ü Correspondent bank accounts– LORA accounts, which a bank opens for another bank for the purpose of performing settlement transactions through these accounts. For example, an account in the RCC or in other commercial banks.
ü Budget accounts– accounts opened in banks to record operations on cash execution of the state budget of the Russian Federation. Depending on the nature of budget operations, they are divided into: revenue accounts, local budget accounts, and extra-budgetary funds accounts.
ü An individual can also open a demand account, but their share is not high and they are opened mainly for calculating salary and pensions.
· Time deposits. The most stable part of funds raised on a deposit basis. These are DS that are deposited with the bank for a certain fixed period. These deposits are not used to make current payments. The purpose of the deposit is to generate income from funds deposited in the bank. Interest on such deposits is significantly higher and depends on the amount, term of the deposit, and on the depositor’s compliance with the terms of the agreement.
Kinds:
ü Deposits with a fixed repayment period - its term cannot be extended, and if it is not claimed by the depositor within the repayment period, the bank issues it as a demand deposit from the next day.
ü With a conditional return period (or with the right to extend) - a certain billing period is assigned (3 months, 6 months, 1 year), after which the terms of the agreement with the depositor are automatically extended for the next billing period.
ü With prior notice of withdrawal - a minimum period is assigned during which DS cannot be withdrawn from the deposit. After this minimum period, DS can be withdrawn at any time, but subject to prior notification to the bank of the intention to withdraw these funds. Notice periods range from 5 days to 1 month.
· Conditional deposits- deposits opened on other return conditions. In this case, the deposit is withdrawn from the account not depending on any specific calendar date, but depending on the occurrence of certain conditions. That is, these are targeted deposits. For example: children's deposits (up to the age of 18), for the purchase of an apartment (until a certain amount has been accumulated, the deposit cannot be claimed).
According to the Civil Code of the Russian Federation, interest on the amount of a bank deposit is accrued from the day following the day the money is received by the bank until the day before it is returned to the depositor. Interest is accrued quarterly (unless otherwise provided in the agreement). They can be paid, firstly, at the end of the quarter, and secondly, at the end of the deposit period. But in the second case, the interest unpaid for the quarter is added to the principal amount of the deposit, and for the next quarter interest will be accrued on the increased amount. For loans – interest accrual for each month.
Individual deposit insurance system operates in accordance with the Federal Law “On insurance of individual deposits in Russian banks” dated November 28, 2003. its goals are:
Protection of the rights and legitimate economic interests of depositors of Russian banks;
Strengthening confidence in the banking system of the Russian Federation;
Stimulating the attraction of household savings into the banking system of the Russian Federation
Basic principles of operation of this system:
1. Mandatory registration of banks working with individual deposits in this system.
2. Transparency of the operation of this system.
3. The cumulative nature of the formation of the compulsory deposit insurance fund at the expense of regular insurance contributions of participating banks.
4. Reducing the risk of depositors in case of non-return of the deposit by the bank.
The holder of the fund is the DIA (Deposit Insurance Agency), which is a state corporation and non-profit organization.
In accordance with the Federal Law on Deposit Insurance, the deposit insurance system does not apply to all citizens’ deposits, but it does apply to:
1. Funds placed in bank accounts of individuals engaged in entrepreneurial activities without forming a legal entity, if these accounts are opened in connection with the specified activity; placed on the bank accounts of lawyers, notaries and other persons, if such accounts are opened for the implementation of their professional activities.
2. Bank deposits to bearer, incl. certified by a passbook or savings certificate.
3. DS Fl, which are transferred to the bank for trust management.
4. Deposits opened in branches of Russian banks located outside the territory of the Russian Federation.
The compulsory insurance fund is formed at the expense of
· insurance fee to participating banks;
· penalties for late payment of insurance premiums;
· if necessary federal budget funds(in crisis)
· DS and other property that the agency receives for its recourse claims from banks on whose deposits insurance compensation was paid.
Insurance premiums are the same for all banks and are payable from the day the bank is included in the register of the insurance system until the license is revoked and until the day the bank is excluded from the register. The calculation period for payment of insurance premiums is a calendar quarter. Calculation base for the calculation of insurance premiums - this is the chronological average of daily balance sheet balances for accounting deposits for the billing period. For deposits in foreign currency, daily balances are recalculated at the Central Bank exchange rate. By law, the rate of insurance premiums cannot exceed 0.15% of the calculation base, the actual rate is 0.1%. Now there is a gradual decrease in the size of the SV. Payment of the CB is made by the bank within 25 days from the date of the end of the settlement period by transferring the DS from the bank's correspondent account to the Agency's current account at the RCC of the Central Bank.
Article 395 of the Civil Code of the Russian Federation – Liability for failure to fulfill a monetary obligation. Penalties are calculated based on the Central Bank discount rate.
The right of the individual to claim compensation for the deposit arises from the date of the occurrence of the insured event. An insured event is considered:
1. Revocation of the bank’s license.
2. Introduction by the Central Bank moratorium on satisfying creditors' claims jar. It is introduced in accordance with the law on bank bankruptcy in the event of suspension of the powers of the bank’s executive bodies and the appointment of a temporary administration to the bank. The reason for this is presence of signs of bank bankruptcy.
The depositor has the right to contact the Agency from the day the insured event occurs until the day the bankruptcy proceedings are completed. And when a moratorium is introduced, until its expiration date. Compensation for deposits, including accrued interest, is currently paid to the depositor in the amount of 100%, but not more than 700 thousand rubles.
If a depositor has several deposits in different branches of the same bank or in one institution, then the total amount of compensation cannot exceed 700 t.r.
Agency within 7 days from the date of receipt from the bank of the register of its depositors - the individual must publish in the Bulletins of the Bank of Russia and in the local print media about the place, time, and procedure for accepting applications from depositors. In addition, the Agency must send written notification to each depositor about the occurrence of an insured event within 1 month. Payment of insurance compensation is made by the Agency within three days from the date the investor submits the necessary documents, but not earlier than 14 days from the date of the occurrence of the insured event. Documentation: application and document confirming the identity of the depositor. If the investor is not satisfied with the amount (more than 700 rubles), he has the right to go to court. The right of recourse claims against the bank is transferred to the Agency.
The order of satisfaction of requirements:
1. Requirements of the individual entrepreneur + recourse requirements of the Agency.
2. Requirements of employees of the liquidated bank (for payment of salary)
3. claims of all other creditors. If the bank issued any securities, then first of all the repayment of obligations on them.
MINISTRY OF EDUCATION AND SCIENCE OF THE RUSSIAN FEDERATION
MOSCOW FINANCIAL AND INDUSTRIAL ACADEMY (MFPA)
Faculty of Finance
Course work
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Kuznetsov Dmitry Alekseevich |
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Supervisor |
Borsuk Dmitry Sergeevich |
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(FULL NAME.) |
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Head of the department |
Novashina Tatyana Sergeevna |
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(FULL NAME.) |
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MOSCOW 2009
Introduction. 3
Chapter 1. The concept of an organization's own capital 4
1.1 The concept of capital of an organization 4
1.2 Composition and structure of the organization’s equity capital 9
Chapter 2. Increasing the organization's equity capital 15
2.1 Sources of the organization’s own capital 15
2.2 Ways to increase an organization’s equity capital 19
Conclusion. 20
Introduction.
An organization's own capital is one of the main indicators characterizing the financial condition, financial stability and financial independence of the organization.
Own capital is a guarantor of the interests of creditors and investors, as well as an indicator of the efficiency of the enterprise.
It is reflected as a result of the fourth section “Capital and reserves”.
Goals and objectives of the work. The purpose of this course work is to consider the composition and methods of increasing the organization’s equity capital.
We will pay special attention to the composition and sources of the organization's equity capital.
To achieve this goal, the work solves the following: particular problems:
give the concept of an organization's own capital
analyze the composition of the organization’s equity capital;
consider sources and ways to increase the organization’s equity capital
Object of study– composition and methods of increasing the organization’s own capital.
Chapter 1. The concept of an organization's own capital.
1.1 The concept of organizational capital
Capital is one of the most used economic categories in financial management. It is the basis for the creation and development of an enterprise and, in the process of operation, ensures the interests of the state, owners and personnel. Any organization conducting production or other commercial activities must have a certain capital, which is a combination of material assets and funds, financial investments and costs for the acquisition of rights and privileges necessary for the implementation of its economic activities.
It is possible to distinguish two basic approaches to the definition of the concept of “capital”: economic, accounting, within which they are implemented accordingly concept of the physical nature of capital 1 And concept of the financial nature of capital. The first concept says that capital is a set of resources that are a universal source of income for society as a whole and its individual elements, and therefore, when applied to a company, capital is the totality of its production capacity or the total balance sheet for an asset.
According to the second concept, capital is interpreted as the interest of the owners of the company in its assets, and its value is equal to the amount of net assets, that is, the amount of capital is equal to the difference between the amount of assets and the amount of its liabilities. Section of the balance sheet “Capital and reserves”.
In financial analysis and financial management, a certain type of the second approach is widely used, called the financial-analytical approach, according to which capital is understood as long-term sources of financing presented in sections III and IV of the balance sheet - equity and borrowed capital, respectively.
There are three types of long-term capital: owners' capital, borrowed capital, and spontaneous long-term sources. Let's look at the content of these categories.
Capital of the company's owners 2 . This is a valuation of the total rights of the company's owners to a share in its property. In the balance sheet valuation, it is numerically equal to the value of net assets; in market terms coincides with the concept of “market capitalization”. “Capital and reserves” are in the liability side of the balance sheet, and its main components are authorized, additional and reserve, as well as retained earnings.
Borrowed capital - These are funds from third parties provided to the enterprise on a long-term basis. These are mainly bank loans and bank loans. Despite the fact that debt capital is a long-term source of financing, it is temporary.
The general concept of a company's capital usually refers to its various types, of which there are quite a lot. Therefore, it is necessary to consider the classification of 3 capital according to various criteria (Figure 1.1):
Figure 1.1 Capital classification.
According to ownership, a distinction is made between equity and borrowed capital. Equity capital characterizes the total value of the company's funds owned by it. Its composition takes into account the authorized (share), additional, reserve capital, retained earnings and other reserves.
Based on the investment object, a distinction is made between fixed and working capital. Fixed capital represents that part of the capital used by the company that is invested in all types of non-current assets, and not just in fixed assets, as is sometimes interpreted in the literature. Working capital is the portion of a firm's capital invested in the firm's current assets.
Depending on the purpose of use, the following types of capital are distinguished: productive, lending and speculative. Productive capital characterizes those funds of an entrepreneurial firm that are invested in its operating assets to carry out business activities. Loan capital characterizes the funds that are used in the process of carrying out the investment activities of the company, and we are talking about financial investments in monetary instruments, such as deposits in commercial banks, bonds, bills, etc. Speculative capital is used in the process of carrying out speculative financial transactions, i.e. in transactions based on the difference in purchase and sales prices.
The functioning of a company's capital in the process of its productive use is characterized by a process of constant circulation, therefore capital is classified according to the form of its presence in the circulation process, distinguishing capital in monetary, productive and commodity form.
At the first stage, capital in cash is invested in the current and non-current assets of the business firm, thus passing into a productive form. At the second stage, productive capital takes on a commodity form in the process of producing products, works, and services. The third stage is the gradual transition of commodity capital into money capital as the goods, works, and services produced are sold. Simultaneously with the change in forms, the movement of capital is accompanied by a change in its total value. The average duration of a company's capital turnover is characterized by the period of its turnover in days, months, years.
Considering the economic essence of the capital of an enterprise, it should be noted such characteristics as:
The capital of an enterprise is the main factor of production. In the system of factors of production (capital, land, labor), capital has a priority role, because it combines all factors into a single production complex.
Capital characterizes the financial resources of an enterprise that generate income. In this case, it can act in isolation from the production factor in the form of invested capital.
Capital is the main source of the wealth of its owners. Part of the capital in the current period leaves its composition and ends up in the “pocket” of the owner, and the accumulated part of the capital ensures the satisfaction of the needs of the owners in the future.
The capital of an enterprise is the main measure of its market value. This capacity is primarily represented by the enterprise's own capital, which determines the volume of its net assets. Along with this, the amount of equity capital used by the enterprise simultaneously characterizes the potential for it to attract borrowed funds, ensuring additional profit. In combination with other factors, it forms the basis for assessing the market value of the enterprise.
The dynamics of an enterprise's capital is the most important indicator of the level of efficiency of its economic activities. The ability of equity capital to self-expand at a high rate characterizes the high level of formation and effective distribution of the enterprise’s profit, its ability to maintain financial balance from internal sources. At the same time, a decrease in equity capital is, as a rule, a consequence of ineffective, unprofitable activities of the enterprise.
1.2 Composition and structure of the organization’s equity capital
Equity 4 is the valuation of the total rights of the company's owners to a share in its property. Own capital consists of authorized, additional and reserve capital, retained earnings and target (special) funds ( Fig.1).
Equity
Statutory
Spare
retained earnings
(special) funds (funds)
Extra capital
Figure 1. Composition of equity capital
Authorized capital - this term characterizes the total nominal value of the company's shares acquired by its shareholders. The authorized capital of an enterprise is considered as a guarantee of the interests of creditors, and therefore in Russia for some organizational and legal forms of business its value is limited from below: the minimum authorized capital of an OJSC must be at least 1000 times the minimum wage on the date of its registration, and a CJSC - at least 100 times Minimum wage. If, at the end of the next financial year, it turns out that the value of the net assets of the joint-stock company is less than the authorized capital, the company is obliged to declare and register in the prescribed manner a decrease in its authorized capital. If the value of the specified assets of the company becomes less than the minimum amount of authorized capital determined by law, the company is subject to liquidation.
The authorized capital often consists of two parts: equity capital in the form of preferred shares and equity capital in the form of ordinary shares. Most often, preferred shares make up a small part of the authorized capital (25%) and over time are either redeemed by the company or converted into ordinary shares. Due to its stability, the authorized capital, as a rule, covers the most illiquid assets, such as land rent, the cost of buildings, structures, and equipment. The directions for using the authorized capital are not defined by law. The only requirement is that the authorized capital be secured by the organization’s property.
The next element of equity is Extra capital , which reflects:
The amount of additional valuations of fixed assets, capital construction projects and other tangible assets of the organization with a useful life of more than 12 months.
The difference between the selling price of shares, received in the process of forming the authorized capital of a joint-stock company through the sale of shares at a price exceeding their par value, and their par value.
Positive exchange rate differences on contributions to the authorized capital in foreign currency. Behind this source are the owners of common stock.
Additional capital can be used to increase the authorized capital, repay the balance sheet loss for the reporting year, and also be distributed among the founders of the enterprise and for other purposes. In this case, the procedure for using additional capital is determined by the owners, as a rule, in accordance with the constituent documents when considering the results of the reporting year.
A special place in the implementation of creditor protection guarantees is occupied by Reserve capital , the main task of which is to cover possible losses and reduce the risk of creditors in the event of a worsening economic situation. This source of financing is represented by an independent item in the liability side of the balance sheet, reflecting the company’s reserves formed from the net profit. In the balance sheet, reserve capital is represented by two main items: reserves formed in accordance with the law, and reserves formed in accordance with the constituent documents. Reserve capital is created in accordance with the law and the constituent documents of the organization to cover possible unforeseen losses and losses in the future. Reserve capital is a so-called reserve financial source, which is created as a guarantee of uninterrupted operation of the enterprise and respect for the interests of third parties. The presence of such a financial source gives the latter confidence that the enterprise will pay off its obligations. The greater the reserve capital, the greater the amount of losses that can be compensated and the greater freedom of maneuver the enterprise management receives in overcoming losses.
The formation of reserve capital can be mandatory or voluntary. In the first case, it is created in accordance with Russian legislation, and in the second - in accordance with the procedure established in the constituent documents of the enterprise, or with its accounting policies. Currently, the creation of reserve capital is mandatory only for joint-stock companies and enterprises with foreign investment. If an organization has branches and representative offices registered as taxpayers, then they can also form reserve funds. If the constituent documents do not provide for the creation of a reserve fund, then the enterprise does not have the right to create it.
Information about the amount of reserve capital in the balance sheet of an enterprise is of extreme importance for external users of financial statements, who consider reserve capital as a margin of financial strength of the enterprise. An insufficient amount of mandatory reserve capital indicates either insufficient profits or the use of reserve capital to cover losses.
The amount of contributions to reserve capital is established by the meeting of shareholders and is recorded in the constituent documents of the organization. At the same time, joint stock companies and joint ventures are also required to adhere to its minimum limit. The size of the reserve fund must be at least 15% of the authorized capital of the enterprise, and for enterprises with foreign investment no more than 25% of the authorized capital.
For Russian joint stock companies, legislation establishes a clear procedure for the formation of a mandatory reserve fund. They must annually contribute at least 5% of their net profit to the reserve fund. Contributions cease when the fund has reached the volume established by the company's charter.
retained earnings . Retained earnings 5 - net profit not distributed in the form of dividends among shareholders (founders) and not used for other purposes. Typically, these funds are used to accumulate the property of a business entity or replenish its working capital in the form of free cash, that is, ready for a new turnover at any time. Retained earnings can increase from year to year, representing an increase in equity capital based on internal accumulation. In growing, developing joint stock companies, retained earnings over the years take a leading place among the components of equity capital. In terms of its economic content, it is one of the forms of reserve of the enterprise’s own financial resources, ensuring its production development in the coming period. Its amount is often several times the size of the authorized capital. The profit of the reporting period can only be seen in the income statement.
Retained earnings of the reporting year are used to pay dividends to the founders and to make contributions to the reserve fund (if any). In accordance with its accounting policies, an organization may decide to use the profits remaining at the disposal of the enterprise to finance its planned activities.
These activities can be of a production nature in the case of directing funds for the development and expansion of production, modernization of the equipment used, and non-production in nature in the case of using funds for social events and material support for the organization’s employees and other purposes not related to production or long-term or financial investments of the organization
Target (special) funds are created at the expense of the net profit of a business entity and must serve for certain purposes in accordance with the charter or decision of shareholders and owners. These funds are a type of retained earnings. In other words, this is retained earnings that have a strictly designated purpose.
The main source of trust funds is the portion of the profit remaining at the disposal of the enterprise. From the position of financial control, a clear distinction between the funds allocated by the enterprise for production development and consumption needs is of paramount importance. The need for such control is associated with tax incentives that provide for a reduction in taxable profit for that part of it that is aimed at financing capital investments.
The implementation of the organization's policy aimed at accumulating its net profit to finance targeted activities is carried out through the formation of special-purpose funds. The organization determines the number of funds, their name and use independently.
Own capital is characterized by the following additional points:
1. Ease of attraction (you need a decision from the owner or without the consent of other business entities).
2. High rate of return on invested capital, because No interest is paid on funds raised.
3. Low risk of loss of financial stability and bankruptcy of the enterprise.
Disadvantages of own funds:
1. Limited volume of attraction, i.e. it is impossible to significantly expand economic activity.
2. The opportunity to increase the return on equity by attracting borrowed funds is not used.
Thus, an enterprise that uses only its own funds has the highest financial stability, but the possibilities for increasing profits are limited.
Chapter 2. Increasing the organization's equity capital
2.1 Sources of the organization’s own capital.
Depending on the method of formation, the enterprise’s own sources of financing are divided into internal and external(attracted).
Internal sources 6 equity capital are formed in the process of economic activity and play a significant role in the life of any enterprise, since they determine its ability to self-finance. An enterprise that is able to fully or significantly cover its financial needs from internal sources receives significant competitive advantages and favorable opportunities, and reduces its risks.
The main internal sources of financing for any commercial enterprise are net profit, depreciation deductions, sales and rental of unused assets etc. (Fig. 2)
Figure 2. Internal sources of the organization's insurance system
In modern conditions, enterprises independently distribute the profits remaining at their disposal. Rational use of profits involves taking into account factors such as plans for the further development of the enterprise, as well as respecting the interests of owners, investors and employees. In general, the more profits are used to expand business activities, the less the need for additional financing. The amount of retained earnings depends on the profitability of business operations, as well as the dividend policy.
Thanks to this source, it is possible to increase the financial stability of the enterprise and maintain control over the activities of the enterprise. However, it is difficult to control it from external factors: changes in demand, prices, market conditions, etc.
Another important source of self-financing for organizations is depreciation deductions .
They are included in the costs of the enterprise, reflecting the depreciation of fixed and intangible assets, and are received as part of cash for sold products and services. Their main purpose is to ensure not only simple, but also extended reproduction.
The advantage of depreciation charges as a source of funds is that it exists in any financial situation of the enterprise and always remains at its disposal. The amount of depreciation depends on the method of its calculation.
Sales and rentals the fixed and current assets used are of a one-time nature and cannot be considered as a regular source of funds
Other internal sources do not play a significant role in the formation of the enterprise’s own financial resources.
External sources of equity capital 7 (Figure 3) . Enterprises can raise their own funds by increasing their authorized capital through additional contributions from founders and issuing new shares and free financial assistance. Opportunities and methods for attracting additional equity capital significantly depend on the legal form of business organization.
Figure 3. External sources of the organization's equity capital.
Joint-stock companies that are in need of investment can carry out additional placement of shares by open or closed subscription (among a limited circle of investors).
In general, the initial placement of shares (common and preferred) of an enterprise by public subscription (Initial offering - IPO) is a procedure for their sale on the organized market in order to attract from a wide range of investors.
According to the Federal Law “On the Securities Market,” public offering means “the placement of securities through open subscription, including the placement of securities at auctions of stock exchanges and other organizers of trading on the securities market.”
Thus, an IPO of a Russian company is the placement of an additional issue of shares of an OJSC through an open subscription on stock exchanges, provided that the shares have not been traded on the market since the placement. Moreover, in accordance with the Federal Financial Markets Service, at least 30% of the total volume of the IPO must be placed on the domestic market.
The preparation and conduct of an IPO consists of 4 stages, upon completion of which the placement and admission to the stock exchange and subscription to shares occurs.
Financing through the issue of ordinary shares has the following advantages:
The capitalization of the enterprise increases, a market assessment of its value is formed, and favorable conditions are provided for attracting strategic investors.
The issue of shares creates a positive image of the enterprise in the business community, including the international one
This source does not have a fixed maturity date - it is a permanent capital that is not repayable.
Trading shares on stock exchanges provides flexible opportunities for exiting the business.
The general disadvantages of financing by issuing ordinary shares include:
Possibility of losing control over the enterprise
Granting the right to participate in the profits and management of the company to a larger number of owners.
Complexity of organization, high costs of issuing.
Additional issuance could be seen as a negative signal and lead to a fall in prices in the short term.
For individual enterprises, one of the external sources of formation of their own financial resources may be the free financial assistance(as a rule, such assistance is provided only to individual state enterprises at different levels). Other sources include tangible and intangible assets transferred to the enterprise free of charge and included in its balance sheet.
2.2 Ways to increase an organization’s equity capital
Any company goes through several stages in its development. Most often, it begins as a private non-public enterprise - several individuals and legal entities create a company, investing their own funds in its authorized capital. If the intentions of the owners are serious, and the chosen line of business is promising, the profit generated by the company is not used by the owners for consumption purposes, but is reinvested in order to expand the scale of activity. To realize healthy ambitions and ensure the pace of business growth, profit alone is usually not enough, and therefore it is necessary to find additional sources of financing. Since this chapter discusses ways to increase an organization’s equity capital, the only option left for increasing capital is additional contributions from the actual owners and expanding the circle of owners. This is accompanied by organizational and legal changes in the company, the last stage of which is its transformation into a public one.
The most common emission methods are:
Public offering, i.e. placement of shares through brokers or investment institutions that buy the entire issue and then sell it at a fixed price to individuals and legal entities.
Tender sale (one or more investment institutions buy the entire issue from the borrower at a fixed price, and then organize a tender (auction), based on the results of which they set the optimal price for the share);
Sales directly to investors by subscription (carried out by the issuer itself without the involvement of an investment institution)
Target placement method (implemented with small issues of shares, accompanied by lower costs).
Conclusion.
As a result of the study, the following conclusions can be drawn.
Equity is the valuation of the total rights of the company's owners to a share in its property.
Own capital for each enterprise, even invested and in a free state, is that vital part, without which neither the work nor the further existence of the enterprise is possible.
The main source of financing for the enterprise is its own capital (Fig. 1). This composition includes authorized capital, accumulated capital (reserve and additional capital, accumulation fund, retained earnings) and other income (targeted financing, charitable donations, etc.). Retained earnings are the main source.
The enterprise's own capital is formed through internal and external sources of financing.
The main internal sources of financing for any commercial enterprise are net profit, depreciation, sales and rental of unused assets.
External sources of equity capital. Enterprises can raise their own funds by increasing their authorized capital through additional contributions from founders and issuing new shares and free financial assistance.
There are 2 main ways to increase the equity capital of an enterprise: increasing profits and issuing (placing) shares (principal).
Bibliography.
1. Civil Code of the Russian Federation, part 1. Chapter 4. dated November 30, 1994 N 51-FZ.
2. Bogomolets S.R. Accounting / University series 2008 – p.94-100.
3. Efimova O.V. Analysis of equity capital // Accounting – 2006-No. 2. Page 95-101.
4. Kovalev V.V. Course of financial management / 2010 2nd edition – p. 321-329.
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8. http://www.spb-mb.ru/index.php?page=189
3 http://tvoydohod.ru/fin_2.php
Statutory capital, requirements to ways and timing... D–t 81, subaccount " Own shares", K–t 80 – ... to society. Increase statutory capital organizations in accounting...Form and compound information provided...
Analysis own capital organizations
Abstract >> Economics... own capital organizations…………………………………………….........page 37 Conclusion…………………………………………………………………… ……………..page 40 List of used sources... related to increase own capital(especially due to internal sources its formation) ...
