The content of corporation finances and principles of their organization. The essence of corporate finance. Functions and principles of organization. Corporate Financial Management Organizational Chart
Topic 1. ECONOMIC CONTENT AND APPOINTMENT OF CORPORATION FINANCE
Corporate finance functions
Corporation monetary relations
Principles of corporate finance organization
Financial mechanism of the organization
Finance corporations, firms- This is a relatively independent sphere of the state finance system, covering a wide range of monetary relations associated with the formation and use of capital, income, monetary funds in the process of the circulation of their funds. It is in this sphere of finance that the bulk of income is formed, which are subsequently redistributed through various channels in the national economic complex and serve as the main source of economic growth and social development of society.
All incomes of subjects of economic relations in the process of reproduction are divided into primary and secondary, received after the redistribution of primary income. They are formed:
1. for a corporation - in the form of profit remaining at their disposal and depreciation charges (net cash flow);
2. for workers (households) - in the form of net wages remaining after taxes and mandatory payments, payments from net profit to shareholders and participants, wages to employees budgetary sphere, payments from off-budget funds social direction;
3. from the state - in the form of redistributed income of the corporation to the budget and off-budget funds.
The role of finance in economic activity corporations is manifested in the fact that with their help are carried out:
1. service of the individual circulation of funds, i.e. change of forms of value. In the process of such a circulation, the monetary form of value turns into a commodity form, after the completion of the production process and the sale of the finished product, the commodity form of value again appears in the original monetary form (in the form of proceeds from the sale of the finished product);
2. distribution of proceeds from the sale of goods (after payment of indirect taxes) to the fund for reimbursement of material costs, including depreciation deductions, labor remuneration fund (including contributions to off-budget funds) and net income acting in the form of profit;
3. redistribution of net income to payments to the budget (profit tax) and profit left at the disposal of the corporation for industrial and social development, payment of dividends to owners;
4. use of the profits left at the disposal of the corporation (net profit) for consumption funds, savings, reserve funds and for other purposes provided for in its financial plan (budget);
5. control over compliance with the correspondence between the movement of material and monetary resources in the process of individual circulation of funds, i.e. the state of liquidity, solvency and financial independence of the corporation from external sources financing.
2. Functions of corporation finance
The corporation's finances perform investment and distribution fund-forming, income distribution, providing and control functions.
Investment and distribution functionfinance is the distribution of financial resources within the corporation, contributing to their most efficient use.
Fund-formingor source function finance corporation is implemented in the course of optimization of the right (passive, source) side of the balance sheet. The sources of financing for the corporation are contributions from owners, loans, borrowings, accounts payable, reinvested profits, donations, targeted contributions, etc.
Income distribution function of financeconsists in the optimal and reasonable distribution of a certain part of the resources by the owners of the corporation or at a level that provides for the expansion of its activities, i.e. reinvesting profits, while refraining from receiving dividends in order to obtain greater returns in the future, or in receiving most of the profit in the form of dividends.
Supporting function of financeis to ensure the satisfaction of the interests of the owners, quantifying these interests in the form of profit as an indirect expression of income and dividends as a direct expression of income.
Control function of financeconsists in financial control over the formation, movement and use of fixed and working capital, financial resources of the corporation in accordance with the development strategy of the corporation, business plan, investment plan... It is implemented both by the enterprise itself and by its owners, counterparties and government agencies.
3. Monetary relations of the corporation
In the process of forming and using the corporation's monetary sources (capital, income, reserves, etc.) wide range monetary relations, expressing the economic content of the sphere of corporate finance and, accordingly, financial relations
This relationship arises between:
1.the enterprise and its investors (shareholders, participants, owners) regarding the formation and effective use of equity capital, as well as payment of dividends and interest;
2. the enterprise, suppliers and buyers regarding the forms, methods and timing of settlements, as well as methods of ensuring the fulfillment of obligations (payment of non-stability, transfer of pledge);
3. enterprise - investor and other corporations and organizations regarding its short-term and long-term financial investments and the payment of dividends and interest on them;
4.an enterprise, financial (credit) institutions and other corporations regarding the attraction and placement of free money (receipt and repayment of loans, loans, insurance payments and insurance claims, obtaining financing against the assignment of a monetary claim, payments to private pension funds, etc.);
5. corporations (subsidiaries and mothers) regarding the intra-corporate reallocation of funds;
6. corporations and founders of trust management of property, as well as beneficial purchasers regarding property received in trust management, and the transfer of profits from such management;
7. corporations and other organizations regarding contributions in accordance with agreements of simple partnership and distribution of profits received by these organizations as a result of their joint activities;
8. corporations and rightholders regarding the payment of remuneration under a commercial concession agreement;
9. the enterprise and its employees regarding wages and payments from the consumption fund;
10. the enterprise and the state regarding the formation of a taxable base for calculating taxes, fees and making these payments;
11.the enterprise and its employees with income tax withholding individuals, unified social tax, as well as other deductions and deductions;
12.the enterprise and the state when paying taxes and fees in budget system and contributions to extrabudgetary funds;
13. the enterprise and the state with financing from the budget and extra-budgetary funds for the purposes provided for by the current legislation.
4. Principles of corporate finance organization
Basic principles of corporate finance organization: principle economic efficiency, principle material responsibility, the principle of financial control, the principle of financial incentives.
The principle of economic efficiencymeans that the corporate financial management system must be economically viable, i.e. direct expenses of the corporation must be justified by direct (dividends) or indirect income (profits).
The principle of material responsibility.In any enterprise, a system of incentive measures and criteria for evaluating the activities of structural units and individual employees is being formed. Individualsthose related to the management of material assets are responsible for the unjustified results of their activities.
Financial control principle.Control systems for the activities of the corporation as a whole, its divisions and individual employees can be built in different ways. Practice shows that financial control is the most effective and efficient. One of the most important methods of control is the conduct of audits. Financial incentive principle (encouragement / punishment) lies in the fact that within the framework of the financial management system, a mechanism is being developed to improve the efficiency of individual units and the organizational structure of the corporation's management as a whole. This is achieved by establishing financial incentives and penalties. This principle is most effectively implemented by organizing responsibility centers, when the leadership of the corresponding center is endowed with certain resources and informal rights in terms of their use.
5. Financial services of the corporation
The financial services of a corporation is the subject of managing the finances (monetary relations) of a corporation. This is a system that is created on the basis of the current regulatory and legal framework, knowledge and experience of employees and uses the financial mechanism of the corporation to ensure the efficiency of activities, good financial condition.
The structure of the financial service depends on the type of management structure used in the enterprise (linear - functional and divisional types).
With the linear - functional type of management in the enterprise, links are created that are endowed only with organizational functions (linear), and management functions are implemented at the upper level by functional services, including financial services. Large corporations have a financial management (department) headed by the CFO.
In countries with developed market economies, the linear - functional type of management structure is applied only to small corporations. At large corporations, a divisional type is used, which has divisional services. As divisional services, corporations create financial accounting centers (FSC).
Any financial management system operates within the framework of existing legislative acts and regulatory framework, starting with laws and decrees of the President and ending with departmental instructions and instructions. In addition, management involves the use of information of a financial nature contained in the accounting statements, coming from commodity - stock exchanges and the credit system.
6. Financial mechanism of the organization
The financial management of a corporation is determined by a financial mechanism.
Financial mechanism of the corporation- it is a system of forms, methods, methods of managing monetary relations between subjects; part of the business mechanism of a corporation.
In accordance with international standard accounting No. 32, a financial instrument means any contract that gives rise to a financial asset for one corporation and a financial liability, or an instrument of capital nature (ie, involving equity) for another corporation.
A financial asset can be cash, a contractual right to receive cash or other financial assets from another corporation; a contractual right to a financial instrument with another entity for the exchange of a capital instrument of another corporation.
Financial management includes the collection of information and its analysis, the implementation of financial planning and forecasting, the quality of which directly affects the effectiveness of cash flow management, the financial stability of the corporation, therefore, its competitiveness and the formation of financial resources.
7... Financial Manager. Its functions and tasks
As a practical field financial management has several major areas:
1) general financial analysis and planning, within the framework of which the formulation of a general financial strategy is carried out;
2) management of investment activities, understood in a broad sense as investments in so-called real assets and investments in financial assets;
3) management of sources of financial resources as an area of \u200b\u200bactivity of the management apparatus, aimed at ensuring financial sustainability corporations;
4) financial management that ensures profitable performance on average;
5) current cash management, within the framework of which financing of current activities and the organization of cash flows are carried out, with the aim of ensuring the solvency of the corporation and the rhythm of current payments.
Thus, financial management is a sphere of activity in the capital market, with the goal of large-scale investment and borrowing of funds, as well as the practical sphere of activity of a specialist in managing the internal and external financial flows of an organization.
Topic 2. CORPORATION AND FINANCIAL MARKET
The corporation is a property complex created for the implementation of entrepreneurial activities, the economic goal of which, in the conditions of market relations, is to meet social needs, make a profit and ensure its financial stability. In terms of its content, the entrepreneurial activity of organizations includes the production and sale of products, the performance of work and the provision of services, operations in the stock market. An economic entity can carry out any one of the types of activities, or several types at the same time.
In the process of entrepreneurial activity, corporations develop economic ties with their counterparties: - suppliers and buyers, joint venture partners, associations and associations, financial and credit systems, etc., as a result of which financial relations arise related to the organization of the production process and sales of products, performance of work and provision of services, formation of financial resources and implementation of investment activities.
The entire set of financial relations of corporations with other participants in entrepreneurial activity, depending on their economic content, can be grouped according to the purpose of these relations and the following groups can be distinguished:
● between the founders at the time of the establishment of the organization regarding the formation of the authorized (share) capital. The specific ways of its formation depend on the organizational and legal form of the organization. But in all cases, equity capital is the initial source of the formation of a certain part of both non-current and circulating assets;
● between corporations arising in the process of production and sale of products according to the profile of the main activity. In particular, these include financial relations between suppliers and buyers of raw materials, materials, finished products, etc., relations with transport organizations during the transportation of goods, with communications enterprises, customs, foreign firms, etc. These relations are fundamental in the economic activities of any corporation, since from their efficient organization the final financial result of its activities largely depends;
● between corporations that are not associated with the main activity, but can have a significant impact on the financial condition of business entities. For example, the sale and lease of property, factors that determine exchange rate differences in foreign exchange transactions, conditions for financial investments, etc.;
● between the corporation and its divisions: subsidiaries, branches, workshops, departments, teams regarding the financing of expenses, distribution and redistribution of profits, the formation of working capital and other funds. This group of relations affects the organization and rhythm of the production process;
● between the corporation and its employees regarding the distribution and use of income, the issue and placement of shares and bonds of this corporation, the payment of interest on bonds and dividends on shares, the collection of fines and compensation for material damage caused, withholding taxes from individuals, etc. This group financial relations affects the efficiency of the use of labor resources;
● between the corporation and the financial system of the state. These relations arise when taxes and other obligatory payments to the budget, the formation of extra-budgetary funds, the provision of tax benefits, the application of penalties by the state in violation of the current legislation, receipt of grants, subsidies, etc. from the budget;
● between the corporation and the banking system. They arise in the process of storing money in commercial banks, obtaining and repaying loans, paying interest on loans, buying and selling foreign currency, and providing other banking services;
● between the corporation and insurance companies and organizations. These relations arise in connection with compulsory and voluntary insurance of property, certain categories of employees, commercial and entrepreneurial risks;
● between the corporation and investment institutions that arise during the placement of investments, privatization of property, etc .;
● between the corporation and the financial and industrial group, holdings, unions and associations of which the corporation is a member. These relations arise during the formation, distribution and use of targeted funds and reserves for financing targeted programs, conducting marketing research, research work, providing financial assistance on a repayable basis to finance investment projects and replenishment working capital... This group of relations is associated with the redistribution of funds and is aimed at supporting and developing corporations;
● between the corporation and audit firms regarding the implementation of an independent analysis of economic activities and for other purposes;
● between the corporation and the public. AT this group relations include financial relations arising from the attraction of temporary workers who are not full-time employees of a particular organization (to perform certain types of work), relations regarding corporatization, i.e. sales of securities to the population and when paying interest, dividends on them, when selling goods, providing services, etc.
Each of the listed groups of financial relations has its own characteristics and scope. However, they are all bilateral in nature, and their material basis is the movement of financial resources. In addition, the diversity of financial relations is reflected in the sources of their formation in enterprises of various organizational and legal forms and forms of ownership.
Corporate finance: essence, functions, principles
1. The essence of corporate finance
To understand the essence of finance of enterprises (corporations), it is necessary to know the essence of finance as such. To understand this category, let us turn to V.D. Melnikov's textbook. To begin with, let's understand the specific features of finance:
1) monetary form;
2)the reproductive nature of financial relations;
)formation and movement of monetary funds for various purposes.
)It is clear that finance is, in short, a set of economic relations in the process of reproduction, as a result of which the newly created social product converted into monetary form is formed into monetary funds for various purposes. But the question arises, at what stage, exactly, does finance begin to emerge? As is known, there are four stages of reproduction or movement of a social product: production, distribution, exchange and consumption. At its core, finance has a direct role in the distribution and exchange stages. At the stage of reproduction, the emergence of the monetary form of the gross domestic product begins. Further, the value is redistributed into three different fixed assets: the compensation fund, the accumulation fund and the consumption fund. Further, part of the value of the product is sent for further distribution for the continuity of the reproductive process, dividing into directions: for objects and means of production, and part for consumption, dropping out of this process. That is, the essence of finance lies in the continuous movement of the value of a social product when this value is formed into targeted monetary funds.
The spontaneous generation of finance occurs precisely at the stage of material production, and this means that the fundamental root of financial relations is precisely the finances of corporations, enterprises, business entities, which are essentially two feathers of the same bird. The main thing is that enterprise finance is the basis of financial relations in general. By definition, enterprise finance is: a set of monetary relations between enterprises, their workers, the state, non-budgetary funds and financial institutions. To understand the essence, let's pay attention to the scheme of the financial system of any country and the Republic of Kazakhstan, including:
Thus, enterprise finance is the main source of funds, which for public finance, for example, in the form of tax receipts (1) and household finance in the form of wages (2). It should be noted that this connection is two-way, since the state can provide enterprises with various subsidies or subsidies (3), just as households can influence the formation of the financial resources of an enterprise through individual investment (4), but, nevertheless, in terms of volume, enterprise finance remains the main flagship in the financial system of any country ... That is, forming the definition of the essence of enterprise finance, we can say that they are the basis in the relations arising in the process of production and sale of finished products, and their transformation into monetary form, followed by formation into targeted monetary funds.
There may be suspicions that this assumption of the particular importance of finance is justified. Then consider the pyramid of relationships in a social system:
It can be seen that production relations are basic for the formation of further stages of social relations. Thus, the final result of industrial relations will be financial, financial relations in a broad sense, including public and household finances. But the basis for the emergence of further financial relations will be precisely the relations of production, which take a priority place in this system.
Let's summarize. The need for enterprise finance is due to commodity-money relations and the operation of the law of value. The material basis of enterprise finance is made up of monetary funds - this is the main feature that determines enterprise finance. The entire system of financial relations acts as a fund formation process in the form of monetary, insurance, reserve, authorized funds, etc.
Thus, the finances of enterprises are monetary relations between enterprises, their workers and employees, the state, the banking system, insurance bodies, off-budget funds and other economic counterparties. As a result of these monetary relations, decentralized funds are created at the horizontal level and centralized funds at the vertical level (local budget, republican budget, extra-budgetary funds).
The finance of enterprises is understood as a set of monetary relations, through which, in a targeted manner, decentralized funds of funds are formed and used to meet the production needs of enterprises and their development.
2. Functions of corporate finance
These functions of enterprises are identical to the functions of finance in general. Namely, reproductive, distribution and control functions. Let's consider them in more detail:
Reproductive function - provides a balance in the value expression of labor, material and financial resources at the stage of capital circulation. That is, any production, not necessarily based on the continuity of production, one way or another, must constantly reproduce its production over and over again, restoring its working capital (compensation fund) and fixed capital (accumulation fund). And at this stage of capital turnover, it is very important to ensure a balance between labor, material and financial resources to maximize profits. It is this function that the reproductive function of enterprise finance performs.
The distribution function is closely related to the reproduction function and ensures a consistent distribution of national income (NI) and gross domestic product (GDP). That is, in macroeconomics it is basically “pay for labor + profit of enterprises”. On the enterprise scale, the distribution function is associated with the distribution of the received value goods sold for the funds of reimbursement, accumulation and consumption. Thus, after allocating funds for depreciation, replenishment of resources (labor and material), various payments to the state of taxes, payments and dividends to shareholders, we can direct the remaining retained earnings both to consumption and to the accumulation fund (basic resources), which is often done in various corporations to increase profits in the future.
Control function - is to implement control through tenge over real money circulation, the formation of funds and their use. Again, on an enterprise-wide basis, the size, volume, structure of reimbursement, accumulation and consumption funds allows additional control over the implementation of the strategy and goals of the corporation, allowing you to analyze the efficiency of the corporation and take further measures to improve efficiency and eliminate errors in the corporation's activities.
3. Principles of corporate finance
Consider the principles of enterprise (corporation) finance. These principles include: the principles of planning, material responsibility, the formation of financial reserves, economic incentives. If you analyze them in detail, then the principle of planning implies the need to build a clear plan when carrying out the financial policy of the enterprise. For the effective functioning of the enterprise, it is necessary to have a plan for the use of financial resources developed by the financial services, which means that planning is needed in the distribution of the value of the product among various monetary funds. The principle of material responsibility means that an enterprise must bear material responsibility for its activities and finances must have real assets, or real security. Further, the principle of the formation of financial reserves implies that the enterprise is obliged to send part of its funds to various reserve funds for the stability of its functioning in the event of any unforeseen circumstances, to compensate for losses or other consequences arising from such cases. The principle of economic incentives is the principle that any subject economic activity in the commercial sphere is focused primarily on making a profit. Thus, it is necessary to take into account such a method as economic incentives to ensure greater returns from labor resources or other assets required in the development policy of the enterprise (corporation). For example, in the case of an enterprise issuing new shares to receive cash, for its better and more efficient placement, it is possible to increase dividends. In this regard, this will create the impression that the shares will be profitable in the future, since the company has the opportunity to increase the level of payments to shareholders due to the increase in its own income and the profitability of the enterprise, which, in fact, will be a kind of economic incentive for potential investors.
4. Tasks of corporate financial services
Next, we briefly define the functions of financial services. To make it easier to understand their functions, we will divide them into three components: planning, monitoring implementation and direct participation in the analysis of the work done.
Planning includes:
a) financial and credit planning, i.e. development of long-term forecasts and plans with a quarterly breakdown and communication to departments;
b) development of a system of financial indicators within the framework of internal payback.
Financial services monitor the implementation of long-term financial plans and forecasts:
a) settlements with buyers in order to obtain proceeds and further settlements with other participants in economic activity;
b) carry out the organization of working capital, to accelerate their turnover;
c) together with marketing services, they conduct research on the demand for products and develop recommendations for the removal of slow-moving goods from production in order to replace them with new ones (production flexibility);
d) study the structure of fixed assets and develop recommendations for increasing the return on assets;
e) create economic incentive funds for material incentives production.
At the end of the work performed, financial services conduct an analysis financial and economic activities by systematic analysis of accounting and operational reporting in order to identify the reasons for deviations from financial plans.
Thus, financial services participate in the work not only in the financial department of the enterprise, but directly or indirectly affect all aspects of the enterprise's work, carrying out various activities in the financial sector to improve production efficiency. That is, performing a wide range of work in order to ensure that all three functions: reproduction, distribution and control functions of finance are properly performed. In other words, in addition to making calculations and developing a credit and financial policy, the finances of enterprises permeate all activities of economic entities.
planning cash corporate
Literature
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Lectures
Section 1. The essence of corporate finance.
Topic 1.1 Theoretical Foundations of Corporate Finance
1. Corporate finance as the main element of the financial system of the state.
2. Functions of corporate finance.
3. Principles of corporate finance.
4. Features of various forms of organization of corporate finance.
5. Financial services of corporations.
1. Corporate finance as the main element of the state financial system.
Corporate finance is a set of monetary relations that ensure the life of a corporation.
Corporate finance (Bocharov V.V.) expresses the system of monetary relations arising in the process of economic activity and necessary for the formation and use of capital, income and monetary funds.
In practice, they manifest themselves in the financial transactions and functions of the corporation. Financial transactions - meaningful actions to form fixed and working capital, corporation funds, their distribution and use.
In theory, a monetary fund is a separate part of the funds of an economic entity, which has received its intended purpose and relatively independent functioning. Cash funds are part of the cash in circulation of the corporation.
Financial functions - the purpose of financial transactions.
Role of corporate finance:
1. servicing the circulation of corporation funds. The monetary form of value turns into a commodity one, and after the completion of the production process it again turns into money.
2.distribution of proceeds from sales to the fund for reimbursement of material costs, the wage fund and net income (profit)
3.Reallocation of net income to payments to the budget and profits remaining at the disposal of the corporation for industrial and social development
4.use of the profits remaining in the corporation for accumulation funds, consumption funds, reserve funds, etc.
5. control over compliance with the correspondence between the movement of material and monetary resources in the process of the circulation of funds (for solvency and liquidity, financial solvency).
The corporation's areas of activity: production (statutory activity), investments, financing.
2. Functions of corporate finance
Main classification: objective and subjective.
Objective financial functions:
Ø Providing
Ø Distribution
Ø Control
The supporting function of finance is manifested in the provision of the corporation with the necessary amount of funds for current economic activities, i.e. in the ability to pay their debts.
The distribution function of finance is manifested in the servicing of the process of the corporation's activities with monetary funds - their distribution among the counterparties of the corporation: suppliers, borrowers, the budget, etc.
The corporate finance oversight function is responsible for ensuring the financial proportions of the corporation. It involves the implementation of financial control over the results of production and economic activities of the corporation, over the implementation of financial plans.
Reproductive function and financial planning function.
Common functions:
1.forming capital, income and funds
2.use of capital, income and funds
According to the classification of M.V. Romanovsky:
1.regulation of cash flows
2.forming capital, cash income and funds
3.use of capital, cash income and funds
Subjective financial functions at the enterprise are determined by the specifics of the activities of each corporation. They reflect, first of all, the realization of the interests of the owners of the corporation, the management of the corporation and other participants in financial relations - partner groups of the corporation.
Most typical functions:
Ø maintaining a given capital structure
Ø rational use of funds
Ø ensuring a given level of production and consumer consumption of profit
3. Principles of corporate finance
The rules by which corporate finance is organized.
1.balance
2.scientific
3.planning
4.objectivity
5.complexity
6. consistency
7.efficiency
8.material liability
9. exercising control over financial and economic activities.
Specific:
For commercial corporations: Self-sufficiency and self-financing. Interest in performance results. Formation of financial reserves. Self management.
4. Features of the organization of corporate finance of various forms.
Corporate finance classifications:
by the goals of the organization- corporate finance, finance of non-profit corporate organizations.
by organizational and legal forms (with the institution of membership) - (for commercial corporate) - finance of public and non-public joint stock companies, finance of a company with limited liability, finance production cooperatives, finance of general partnership, finance of limited partnership, finance of peasant (farmer) households.
(for non-profit corporate) consumer cooperative finance, public organizations, finance of real estate owners associations, finance of Cossack societies and communities of indigenous peoples of the Russian Federation.
by industry - finance of corporations engaged in industrial, agricultural, transport, construction, trade, supply and marketing, etc. activity.
by subjects of ownership - finances of corporations owned by citizens and legal entities in the Russian Federation, the Russian Federation, subjects of the Russian Federation, municipalities, foreign citizens and corporations and joint ownership.
5. Financial services corporations
The financial services of the corporation are the subject of financial management at the enterprise, in management structures they are allocated on the basis of the functional division of labor.
Created at corporations of medium and large businesses.
Financial services provide the following types of work:
· financial security production
· financial management
Providing settlements
The structure of the financial service depends on the type of management structure in the enterprise and the form of financial management.
Historically developed for Russia is the linear-functional type of management structure, in which production links are created, endowed only with organizational functions (linear), and management links, endowed with management functions (including financial ones). The modern financial service is represented by the following departments: planning, financial analysis, accounting (bookkeeping), financial control, department for work with investments; chaired by the CFO.
The divisional type of structure of the financial service is characteristic of market economies. In this structure, dedicated services (divisions) perform not only linear functions, but some or all of them are managerial. Therefore, only strategic management tasks are assigned to the financial service. A variety of these structures (based on Business Unit Management): DFS systems (financial accounting centers).
There are two basic concepts of corporate finance: German (Continental) and Anglo-Saxon (American). The main difference is related to the role that is assigned to accounting and its division into tax (external) and production (management), as well as linkages in the general context of the financial service.
National and transnational corporations in capitalist countries are the main form of organization of production. These are powerful monopoly associations, the scale of economic activity of which can be compared with the gross national product of entire states. So, only 500 assets largest corporations USA in 1988 amounted to 2078.8 billion dollars, sales volume - 2023.1 billion dollars, profits - 115 billion dollars. 1
The main forms of capitalist associations (corporations) are cartels, syndicates, trusts and concerns. AT modern conditions the overwhelming majority of monopolistic associations have the form of a concern 1.
1 (Cartels, syndicates and partly trusts have now lost their significance.)
In the development of capitalist corporations, the financial aspect of their activities is becoming increasingly important. The role of corporate finance management is growing.
The finance of private national and transnational corporations is a system of monetary relations that mediate the circulation of fixed and working capital, the formation and use of profit, depreciation, reserve and other funds, the relationship that arises within the corporation between its divisions, with the market of stock values, as well as with financial credit system. Corporate finance accumulates a significant portion of a country's financial resources. For example, in the United States, the assets of industrial corporations alone are more than twice the expenditure side of the federal budget.
The finances of the largest corporations largely determine the overall financial situation in the country. The principles of organizing the finance of capitalist corporations:
1. Rigid centralization of financial resources. This means that the solution of such cardinal issues financial activities corporations, such as portfolio management of stocks and bonds, their issuance and placement, the processes of mergers and acquisitions by the concern of new companies, the provision and receipt of loans, the implementation of capital investments, the management of cash, usually denominated in various currencies - all this is within the competence of the head a company called a holding company. The centralization of funds provides the corporation with quick maneuverability, the ability to concentrate resources on key areas of scientific and technological progress, giving the highest monopoly high profits.
2. Short, medium and long term financial planning. The most important is short-term financial planning, which is carried out at monthly, quarterly and annual levels. Short-term financial plans reflect all corporate cash flows and the main directions of their spending. These financial plans contain estimates of future sales, prices, discount interest, the amount of loans that the company needs to receive, accounts receivable and payable, and estimated profits. Short-term financial plans show that the corporation has the financial resources necessary to pay the salaries and maintenance of the corporation's staff, pay for raw materials, materials, interest, taxes, dividend payments, etc.
3. Formation of large financial reserves. It is characteristic of capitalist corporations to create numerous reserve funds. These include the general reserve, current, operating reserve, and other reserves. In connection with the instability of the exchange rates of the capitalist countries, a reserve for losses from fluctuations in exchange rates was introduced, as well as a del credere reserve, i.e., losses on doubtful debts... Hidden or secret reserves are also common.
4. Unconditional fulfillment of financial obligations to partners.
The entire financial side of corporations' activities is realized through the formation and use of targeted funds of funds. These include fixed and working capital funds, amortization fund, insurance funds, reserve funds, payroll, pension Fund, fund for charity and social programs, etc.
The main function of corporate finance management is to ensure the formation and use of the specified funds, their planning in such a way as to stimulate the increase in production efficiency, the growth of the corporation's assets (fixed and working capital, reserve, insurance funds) and its profits.
The importance of finance in corporate activities increased dramatically in the years after World War II. In the late 1950s, the state of corporate finance was significantly influenced by the use of mathematical methods and models. In the 60s, the main focus was on the management of a portfolio of securities (stocks, bonds, etc.). In the 1970s and 1980s, the following three factors had the greatest impact on corporate finance:
inflation and high level interest rates;
deregulation by financial institutions, mainly banks. Refusal of corporations from services of specialized banks and turning to the services of universal banks;
significant application computer technology in the process of making financial decisions.
Modern conditions of capitalist reproduction, aggravation competitive struggle dramatically increased the importance of corporate finance management. If in the first post-war years the total volume of sales of the corporation's products was determined by the marketing manager, the production manager was determined by the production manager, and the financial matters - only the monetary resources necessary for the purchase of raw materials, materials, electricity, machinery, equipment, etc., then at present the solution of all cardinal issues of the corporation's development is carried out under the strict control of financial management. Although acute inflation in the capitalist countries was overcome in the early 1980s, the functions of a finance manager increased, especially in connection with the deep stock market crisis of 1987.
The slowdown in economic growth in the main capitalist countries has created new acute problems for corporations. Under these conditions, the success of corporations is largely determined by the knowledge of all its employees, and not only employees of financial management of the basics of financial and economic analysis. Professionals in marketing, accounting, product manufacturing, and all parts of the corporation must know finance in order to be successful in their own jobs.
Consider the place of finance in business organization. Huge national and multinational corporations have large financial departments. Thus, the financial management of the American corporation "DuPont" includes nine departments and 29 sectors. The Chief Financial Officer is the vice president of the corporation and reports directly to the president. The chief treasurer and chief financial controller of the corporation are subordinate to him.
The place of finance in the general management of a corporation is evidenced by the following diagram:
The traditional functions of the chief treasurer are as follows: planning the financial resources of the corporation based on current and new operations, financing these operations, distributing proceeds from the sale of products to the appropriate funds, managing cash, marketable securities of the corporation, planning the capital structure of the firm, i.e. the ratio of fixed and working capital, equity and borrowed funds. In addition, the treasurer is in charge of the payment of management personnel, as well as the formation and use of pension and reserve funds.
The traditional functions of the chief controller include: drafting and interpreting the annual report of the corporation, including the profit and loss account, balance sheet, cash flow account, capital account, and ongoing monitoring and control of these accounts. The Comptroller General is responsible for accounting and auditing, all tax matters and information provided to government agencies.
The vice president of the corporation for finance with other members of the corporation's Board of Directors and its president determine the most important issues for the development of the corporation: large capital investments, directions for the development of production (including manufactured products, market strategy), prices, wages, loan policy, policy in area of \u200b\u200bdividends on shares.
The management of the corporation must foresee not only the degree of risk for new large capital investments and the terms of their payback, but also the form of receipt of funds (in the form of cash, commercial credit, barter transactions). Particular attention is paid to the influence of new investments on the financial results of the corporation, on the movement of the share price and the amount of profit.
The dynamics of stock prices is the main synthetic indicator that reflects the financial condition of a corporation: a steady increase in stock prices indicates a favorable financial perspective corporations, a decrease in their rate indicates a deterioration in the financial situation of the corporation and can lead to bankruptcy.
Capitalist corporations are usually created in the form joint stock companyin the capital of which the bourgeoisie invests its share by purchasing shares; an insignificant part of the shares is acquired by the general population. The general meeting of shareholders elects the board of the joint stock company. A significant part of the corporation's profits is annually distributed to shareholders in the form of dividends. Shares are the subject of purchase and sale, they are traded on the securities market, that is, on the stock exchange.
A shareholder can sell a share to anyone at any time, but cannot return it to the corporation. Thus, the corporation in the form of shares has an indefinite loan.
The amount of money indicated on the shares - par value, and the price at which a share is bought and sold on the securities market is stock rate... Stock prices are subject to sharp fluctuations. They can be higher or lower than the nominal price. Strong demand for shares of the corporation can take place in the expectation of future increases in its profits. The stock price depends on the demand for shares and their supply. In many respects, the share price is determined by the amount of dividend received on it. Here the dependence is direct. The higher the dividend on a share, the higher its rate. However, it should be borne in mind that not in all cases an increase in dividend is in the best interests of shareholders. The timing and risk factors must be taken into account. Suppose a corporation has an investment project in which payments for each share will increase annually by 20 cents, or by $ 1, over five years per share, while another project provides an increase in payment for a share only in the fifth year for 1 dollar. 25 cents. The question arises - which of these projects is preferable? The winnings will be on the side of the project that will have the greatest impact on the rise in the share price, which in turn depends on the time aspect of the value of money for the investor. All other factors are related to risk. Suppose one project provides an opportunity to increase the return on each share by $ 1, while the other - by $ 1. 20 cents. The first project contains few elements of risk and there is complete confidence in receiving the specified amount of $ 1 for this project. The second project is fraught with great risk for shareholders. On it you can get 1 dollar. 20 cents for each share, but the possibility of no income at all is possible. Under these conditions, the first project may be preferable to the second.
The element of risk also depends on the sources of funding for the corporation. Although the shareholders are interested in raising the dividend, the development of the corporation depends on how much of the profit will be directed to expanding production. Corporate finance management carefully determines how much of the profits should go to dividend payments, and how much should go to reserve funds, insurance funds and reinvestment.
The dividend policy aims to maximize the value of stocks.
The stock price depends primarily on the phase of the cycle, as well as on the corporation's activities to improve production efficiency.
The corporation's production efficiency is influenced by: an increase in labor productivity, a decrease in production costs, high quality products and their volume produced at the lowest prices;
demand for the corporation's products from consumers. It is to meet demand and, therefore, maximum profit corporations are implementing new technology, produce new types of products, pay great attention to scientific and technological progress;
high level of after-sales service as a prerequisite for the growth of sales and profits.
In the stock market, the share price depends on: the expected level of dividend per share; the degree of risk of receiving or not receiving a dividend; the period during which the increased dividends are paid;
sources of financing for expanded reproduction of the corporation;
the value of interest in the loan capital market. Here the relationship is reversed. The higher the lending rate, the lower the stock price and vice versa.
Each decision of the corporation's management is analyzed from the point of view of the impact on these factors and through them on the dynamics of the share price.
In addition to stocks, corporations issue bonds. These are securities that are subject to redemption after a certain period; a certain predetermined percentage is paid on them annually. Bonds do not entitle their holders to participate in general meetings shareholders. Bonds, like shares, are traded on the securities market. The value indicated on the bond is its par value, and the price of a bond that is added up on the stock exchange is bond rate... The bond rate is constantly changing. It can be higher or lower than the nominal price. The bond rate depends on the size of the nominal interest written on the bonds (here the dependence is direct) and the level of the lending interest (where the dependence is inverse).
Stocks and bonds of capitalist corporations are fictitious capital even in cases where the money received from their sale is used for capital investment in production.
The real capital of a corporation is embodied in factories, machinery, equipment, raw materials, etc. Large shareholders receive huge profits not only in the form of dividends on stocks and stock exchange profits from speculating by them, but also in the form of founding profits 1.
1 (Founding income is the difference between the sum of the prices of shares sold by the founders and the amount of capital actually invested in the joint stock company.)
Stocks and bonds are the subject of purchase and sale on the stock exchange, which is the securities market. Stock speculation in securities is associated with frequent fluctuations in their rates. It is carried out mainly through urgent exchange transactions, that is, such transactions in which the seller of the securities undertakes to deliver them to the buyer after a certain period of time, and the buyer undertakes
upon expiration of this period, it is also required to pay the price specified at the time of the transaction.
Stock exchange speculation leads to the redistribution of money capital between individual capitalists. It also serves as a means of robbery by large capitalists of the mass of small holders of securities, who, during market crashes, have to sell these securities for next to nothing.
Financial planning is an important method of corporate governance and effective control. The financial management of the corporation develops numerous financial plans, which are forecasts for one year and for a five-year period of the volume of production and sales of products, the development of scientific and technological progress, the introduction of new management solutions for the development of the corporation and financial resources for their provision. Such financial plans are determined for each division of the corporation, that is, for individual firms within the corporation and for individual industry departments within one firm.
The organizational structure of a modern corporation includes both individual firms and the relevant industry units responsible for organizational and financial issues. Thus, the organizational structure of General Motors Corporation includes the following companies: Buick Motors, Cadillac Motors, Chevrolet Motors, Oldsmobil, Pontiac Motors, Track and Coach (truck division). At the same time, General Motors includes a headquarters for operational management of the company's activities, consisting of a marketing department, design work, scientific research and development, production design, as well as a financial apparatus, which includes financial management with the relevant financial and insurance departments. Each of these divisions has short-term and long-term financial plans drawn up for one year and five years, respectively. The main indicators in the process of financial planning are the volume of product sales, profits, capital investments.
A well-written financial plan is an essential element of successful corporate development.
As noted above, corporations are based on short-term financial plans. They are widely used to develop profit and loss accounts. Long-term financial plans reflect the general production policies of corporations. They find solutions related to the dismantling of old buildings, machinery and equipment, the purchase of new enterprises and equipment for the development of the company or with the introduction of the corporation into a new field of activity, or into a new territory.
Long-term financial plans reflect the amount of funds through which these long-term targets must be financed, as well as the types and amounts of long-term borrowings, the amount and types of new issues of shares, bonds and the methods by which long-term debt can be covered. The financial plans reflect the transfer of free cash from one branch of the corporation to another, as well as between industry divisions.
Thus, corporations plan their operating and capital expenditures well in advance; long-term plans take into account not only fluctuations in the general economic environment, but also the situation in the financial value markets in order to borrow money at the most convenient moment in terms of the level of loan interest and ensure the issue of new shares and bonds to obtain the largest possible financial resources. In the 70s and 80s, as a result of a sharp increase in the internationalization of economic life, these factors were added to the conjuncture for the placement of securities on various stock exchanges of the capitalist world, since, for example, on the Tokyo and New York stock exchanges, stock prices develop in different ways; the same applies to the currency in which stocks, bonds and loans are issued.