Financial management as a science
Financial department as a science, it is a system of principles, methods for the development and implementation of managerial decisions related to the formation, distribution and use of financial resources of an enterprise and the organization of the turnover of its monetary funds.
Fin. min-t is directly related to the management of fin. the state of the enterprise.
Fin. state of the enterprise- this is his eq. a state characterized by a system of indicators reflecting the availability, placement and use of fin. the resources of the enterprise necessary for its economic activities.
In this way, fin. min-t- is the purposeful activity of the subject of management (top management of the enterprise and its financial services), aimed at achieving the desired financial. the state of the managed object (enterprise).
Stages of development financial management in Russia
1. Formation of an independent area of fin. men-ta(1985 - 1994).
Main postulates: the strictest control over all processes at the enterprise; cost optimization; correct conduct of fin. operations.
2. Functional approach(1990 - 1996).
Main postulates: allocation of functions fin. planning, organization and control.
3. Systems approach (1993 - present).
Main postulates: development of universal procedures for decision making; allocation of elements of the system of fin. ment, the definition of their relationship.
3. The purpose and objectives of financial management
The purpose of fin. men-ta- maximizing the well-being of owners with the help of rational finance. policies based on:
Long-term profit maximization;
Maximization of the market st-sti of the company (the main goal of the activity of the enterprise and the financial manager).
Fin. Tasks man:
1) Ensuring the formation of the volume of financial. the resources required to support the planned activities;
2) Providing the most effective use fin. resources;
3) Optimization of cash flow;
4) Cost optimization;
5) Ensuring the maximization of the company's profits;
6) Ensuring the minimization of the level of financial. risk;
7) Providing constant financial. equilibrium of the enterprise (financial stability and solvency of the enterprise);
8) Ensuring sustainable growth rates of eq. potential;
9) Assessment of potential fin. opportunities of the enterprise for the coming periods;
10) Ensuring target profitability;
11) Avoiding bankruptcy ( crisis management);
12) Providing the current fin. sustainability of the organization.
4. Basic principles of fin. man:
1) The principle of fin. independence of the enterprise;
2) The principle of self-financing;
3) The principle of material interest;
4) Principle material responsibility;
5) The principle of security risks fin. reserves.
Functions of fin. men-ta
Functions of fin. men-ta are divided into two groups:
I. Functions of fin. ment as a control system:
1. Function of development of fin. enterprise strategy - priority development tasks are determined, etc.
2. Organizational function;
3. Analysis function;
4. Scheduling function;
5. Stimulating function;
6. Control function.
II. Functions of fin. ment as a special area of enterprise management:
1. Asset management (OA, BOA);
2. Capital management (SK, ZK);
3. Investment management (real investments, financial investments);
4. Office of the den. flows (operating, investment, financial activity);
5. Management of fin. risks;
6. Anti-crisis fin. control.
Financial management information support.
1. Scorecard information support fin. ment, formed from external sources:
Indicators of macroeconomic development;
Industry development indicators.
2. Indicators characterizing the conjuncture of the financial market:
Indicators characterizing the conjuncture of individual segments of the stock market;
Indicators characterizing the conjuncture of individual segments of the credit market and other indicators for various fin. markets.
3. Indicators characterizing the activities of counterparties and competitors:
Leasing companies;
Investment companies and foundations;
Product suppliers;
Product buyers;
Competitors.
4. Regulatory indicators:
Regulatory indicators for various aspects of fin. activities of the enterprise;
Regulatory indicators on the functioning of individual segments of fin. market.
5. Indicators of fin. enterprise reporting:
Indicators characterizing the composition of assets and the structure of capital used;
Indicators characterizing the main. results of economic activities of the enterprise;
Indicators characterizing the movement of den. Wed-in the enterprise.
6. Indicators characterizing fin. results in the main areas of financial activity:
Indicators characterizing fin. results in the main areas of fin. activities;
Indicators characterizing fin. results on the main spheres of activity in the regional context;
Indicators characterizing fin. results on the main areas of activity of individual "centers of responsibility".
7. Regulatory and planning indicators related to the financial development of the enterprise:
The system of internal regulations governing fin. enterprise development;
The system of planned indicators of financial. enterprise development.
The system of organizational support for financial management.
Organizational support system for financial management Is a set of internal structural services and divisions of an enterprise that ensure the development and adoption of management decisions on certain aspects of its fin. activities and responsible for the results of these decisions.
General principles the formation organizational system enterprise management provide for the creation responsibility centers.
Responsibility Center(or the center of financial responsibility) is a structural unit of an enterprise that fully controls certain aspects of financial responsibility. activity, and its leader independently takes management decisions within the framework of these aspects and bears full responsibility for the implementation of the planned (normative) indicators entrusted to him.
Responsibility centers classification:
Responsibility centers:
a) Cost centers:
Cost control centers;
Partially regulated cost centers.
b) Profit centers.
c) Revenue centers.
d) Investment centers.
Most often, the following are used in practice. principles of allocation of centers of responsibility at the enterprise:
Functional;
Territorial;
Compliance organizational structure;
Similarities in the cost structure.
By functional principle the following centers of responsibility are distinguished:
Servants (for example: cleaning, food, etc.);
Material;
Manufacturing;
Managerial;
Sales.
8. Basic concepts of financial management:
1. The concept of ideal capital markets;
2. The concept of cash flow;
3. The concept of a compromise between risk and return;
4. The concept of the cost of capital;
5. The concept of market efficiency;
6. The concept of asymmetric information;
7. The concept of agency relations;
8. The concept of opportunity costs.
Cash flow concept
Cash flow concept means that any financial transaction can be associated with some cash flow (cash flow), that is, a set of payments (outflows) and receipts (inflows) distributed over time, understood in a broad sense. Cash receipts, income, expense, profit, payment, etc. can be used as an element of a cash flow.
In the vast majority of cases, we are talking about expected cash flows. It is for such flows that formalized methods and criteria have been developed that make it possible to make informed decisions of a financial nature, supported by analytical calculations.
Basic Provisions Federal law No. 127-FZ dated 26.10.2002 "On insolvency (bankruptcy)"
Insolvency (bankruptcy) - a debtor's inability to fully satisfy creditors' monetary obligations and (or) fulfill the obligation to pay mandatory payments recognized by an arbitration court
The bankruptcy procedure is, first of all, the procedure for the implementation, application of something in relation to the defective debtor, impact on him. It can be argued that practically all the options for influencing the debtor permitted by law fit into the concept of "measures (measures) applied to the debtor". All the variety of relationships in the field of bankruptcy can be reduced to three groups:
a) determining whether there are grounds for "placing" the entity within the scope of insolvency law, or, in other words, whether it has signs of bankruptcy;
b) in the presence of the latter, the application to him of certain measures provided for by legal acts (protection of his property, provision of financial aid, forgiveness of part of the debt, sale and division of its assets, etc.);
c) solution of organizational issues (training of bankruptcy commissioners, coordination of activities government agencies authorized to represent public law entities in competitive proceedings, etc.).
The impact on the debtor at different stages of the proceedings in the case of his bankruptcy is associated with the application of certain strictly established (permitted) measures by law.
Signs of bankruptcy
A sign of bankruptcy of a legal entity is the inability to satisfy the claims of creditors for monetary obligations and (or) to fulfill the obligation to pay mandatory payments, if the corresponding obligations and (or) the obligation has not been fulfilled by him within three months from the date when they should be performed.
Bankruptcy cases are considered in an arbitration court, and can be initiated by arbitration courts, provided that the claims against the debtor (legal entity) in the aggregate amount to at least 100,000 rubles.
In the event of signs of bankruptcy, the head of the debtor's organization is obliged to send the founders (participants) of the debtor information about the presence of signs of bankruptcy.
Bankruptcy of developers
Entity regardless of its organizational and legal form, including a housing construction cooperative, or individual entrepreneur for which there are requirements for the transfer of residential premises or monetary claims;
1. The arbitration court establishes the existence of requirements for the transfer of residential premises or monetary claims
2. From the date of the introduction of supervision in respect of the developer, the debtor may conclude, exclusively with the consent of the temporary manager, contracts providing for the transfer of residential premises, as well as conclude other transactions with real estate, including land plots.
3. The expenses of the insolvency practitioner for notifying creditors about the presentation of claims for the transfer of residential premises and (or) monetary claims shall be borne by him at the expense of the debtor.
4. The opening of bankruptcy proceedings in relation to the developer is the basis for the unilateral refusal of the construction participant to fulfill the contract providing for the transfer of residential premises.
Citizen bankruptcy
Citizen is a person who belongs on a legal basis to a particular state. G. has a certain legal capacity, is endowed with rights, freedoms and burdened with duties.
1. An application for declaring a citizen bankrupt may be submitted to an arbitration court by a citizen - a debtor, a creditor, as well as an authorized body.
2. The bankruptcy estate does not include the property of a citizen, which, in accordance with the civil procedural legislation, cannot be levied.
3.From the moment the arbitration court makes a decision to declare a citizen bankrupt and to open bankruptcy proceedings, the following consequences occur:
The deadlines for the fulfillment of the obligations of the citizen are deemed to have arrived;
The accrual of penalties (fines, penalties),% and other financial sanctions for all obligations of a citizen is terminated;
The collection from a citizen is terminated for all executive documents, with the exception of executive documents for claims for compensation for harm caused to life or health, as well as for claims for the recovery of alimony.
4. The decision of the arbitration court on declaring the citizen bankrupt and on the commencement of bankruptcy proceedings and the writ of execution on the foreclosure on the citizen's property shall be sent to the bailiff - the executor for the sale of the debtor's property.
Composition of current assets
Production stocks of the enterprise;
Stocks of finished and shipped products;
Accounts receivable;
Cash Wed-va at the cash desk and den. Wed-va on the accounts of the enterprise.
From the standpoint of liquidity, a distinction is made between:
1. Highly liquid assets - den. Wed-va and short-term Finn. Attachments
2. Quickly realizable assets - DZ less than 12 months.
3. Slowly realizable assets - long-term assets, reserves, salary.
By the nature of the sources of formation:
1. Gross current assets (VOA) - characterize the total volume of all assets of the enterprise, formed both at the expense of the IC and at the expense of the LC.
2. Net current assets (NPA)
CHOA = VOA - KKZ
KKZ - short-term (current) loans and borrowings
3. Own current assets (SOA) - those assets that are formed at the expense of their own. assets pr-ia.
SOA = BOA - KKZ - DKZ
By the nature of participation in the operational process:
Current assets serving the production cycle of the enterprise (materials, stocks, payroll, finished goods)
Current assets serving the financial (monetary) cycle of the enterprise ( cash, DZ).
The composition of working capital:
1. Revolving funds (are normalized):
Productive reserves,
Future spending.
2. Funds of circulation (non-standardized):
Finished products in stock - mb. and standardized;
Products shipped, unpaid;
Cash on PC.
The financial cycle of the enterprise
The second part of the operating cycle is the financial cycle of the enterprise. This is the period of full turnover of funds.
PFC = PPC + Podz - Pockz
PFC - the duration of the financial cycle (cycle of money turnover) of the enterprise (days)
PPTs - The duration of the production cycle of the enterprise (days)
POdz - cf. DZ turnover period (days)
POKZ - cf. short circuit period (days)
Stock rationing policy:
Development and implementation integrated automation according to the calculations of the optimal value of the reserve standards;
Scientifically grounded rationing of the optimal amount of reserves for each type of material resources;
Clarification of the norms and standards of working capital when changing technology and organization of production, changing prices, tariffs and other indicators.
In order to optimize the amount of stocks when rationing, it is necessary:
Do not include in the rationing of inventories that are in warehouses without movement for more than a year, as well as those inventories that exceed the annual period of their use.
Do not include surplus of ineffectively used property in the rationing of inventories and WIP.
A set of measures to optimize inventory management:
Rationing stocks for each type of material resources by structural and functional divisions and services of the enterprise;
Creation of a databank of underutilized stocks in the context of functional divisions;
Develop measures to involve unused reserves in production and sale functional services enterprises
Bringing to the structural and functional divisions and services of a rigid task for the sale of illiquid assets
Conducting quarterly inventories of stocks with a shelf life of more than 1 year in order to identify excessive excess, ineffective used property;
Based on the results of the inventory and technological audit, carry out work to involve in the production of refineries with an injury period of over a year, subject to the possibility of replacement;
Periodic (at least once a quarter) analysis of inventory turnover, compliance with inventory standards;
Determination of the need for financial resources for the procurement of goods and materials to ensure control over the targeted and rational use of working capital and warehouse stock standards;
Ensuring further improvement of planning of commodity and cash flows
Attraction of creditors
Holding a tender for the purchase of inventories directly from suppliers:
The goal is to achieve the optimal ratio: price, quality, on-time deliveries.
During the tender for the procurement of inventories, special attention should be paid to the following aspects:
Compliance by suppliers of the required level of quality of supplied values;
Checking the reliability of suppliers;
The minimum price of the supplied materials;
Compliance of the supplied materials with the technological requirements of the product regulatory documentation;
Optimal payment terms for the company.
Traditional approach
An enterprise that attracts borrowed capital (up to a certain level) is valued by the market higher than an enterprise without borrowed funds of long-term financing.
Ks is the cost of the SK source
Kd - cost of the source of ZK
Kd< Ks =>the capital structure is optimal => the market value of the firm is maximum.
A compromise approach
The optimal capital structure is determined by the ratio of benefits from the tax shield (the possibility of including fees for the land contract in the cost price) and losses from a possible bankruptcy.
According to this theory, with the growth of financial leverage, the cost of debt and equity capital grows.
The price of the enterprise exceeds the market value of the "armless" firm, i.e. not using financial leverage by the amount of tax savings (PVn) minus bankruptcy costs (PVb):
Vl = Vu + PVn - PVb
where Vu is the market value of the financially independent organization U (the value of the organization without debt obligations).
Vl - the market value of the financially dependent organization L (the value of the organization with debt obligations).
According to the compromise approach:
An enterprise should set its target capital structure so that the marginal cost of capital and the marginal effect of leverage are equal.
100% debt capital OR exclusively own financing - suboptimal strategies financial management.
When justifying the target capital structure, the following guidelines should be followed:
The higher the risk of the results obtained when making decisions, the less should be the value of financial leverage.
Enterprises whose assets are dominated by tangible assets may have higher financial leverage compared to enterprises where a significant proportion of assets are represented in the form of patents, brand, various usage rights.
For corporations with corporate income tax benefits, target capital structure is irrelevant.
The trade-off approach assumes that enterprises in the same industry have a similar capital structure, since:
Assets of the same type;
Commercial risk (nature of demand, pricing of manufactured products, materials consumed, operating lever);
Close values of profitability and tax conditions.
Ross model
Ross Model (1977):
It is assumed that the manager's financial decisions can influence the perception of risk by investors.
The real level of risk of cash flows may not change, but managers, as monopolists of information about future cash flows, can choose signals about the prospects for development.
The Ross model substantiates the choice of signals from the point of view of managers (their welfare).
It is assumed that managers are rewarded for performance, as a certain share of the market value of the entire company.
There are two real development options for the company:
Bankruptcy: V<0
The manager's remuneration (M) is:
M = (1 + k) * f0V0 + f1 * (V-C)
where D is the nominal value of the ZK;
K is the market interest rate for the period;
C - payments when the company is declared bankrupt;
f 0 and f1 - share due to the manager at the beginning and end of the period;
V0 and V1 - valuation of the company at the beginning and end of the period.
Normal functioning: V> 0
M = (1 + k) * f0V0 + f1V
Conclusions:
In the model, the signal good prospects the company has a high financial leverage;
A large ZK value will lead a company in a difficult financial situation, to bankruptcy.
The manager's remuneration at the end of the period will depend on the signal being given at the moment. This signal can be true (reflecting the true state of affairs in the company and prospects) or false.
A true signal will be given if the marginal benefit of the false signal, weighted by the manager's share of remuneration, is less than the manager's bankruptcy cost.
If the benefits to the manager outweigh the costs of bankruptcy, then managers will choose to give a false signal.
Basic DP theories
The theory of irrelevance of dividends;
The theory of materiality of DP;
Tax differentiation theory;
Dividend Signaling Theory;
Clientele theory.
1. The theory of irrelevance of dividends:
=> does not exist!
There are no taxes;
2. The theory of materiality of DP:
M. Gordon and J. Lintner;
3. The theory of tax differentiation:
4. The theory of signaling dividends:
5. The theory of the clientele (or the theory of compliance of the DP with the composition of shareholders):
111. The theory of irrelevance of dividends:
F. Modigliani and M. Miller (1961):
The value of a firm is determined solely by the return on its assets and its investment policy;
The proportion of the distribution of income between dividends and reinvested earnings does not affect the total wealth of shareholders.
=> optimal DP as a factor in increasing the value of the enterprise does not exist!
F. Modigliani and M. Miller base their assumptions on the following premises:
There are only perfect markets capital (free and equally accessible information for all investors, no transaction costs, rational behavior of shareholders);
The new share issue is fully placed on the market;
There are no taxes;
Equivalence for investors of dividends and capital gains.
F. Modigliani and M. Miller have developed three options for the payment of dividends:
1) If the investment project provides a level of profitability that exceeds the required, shareholders will prefer the option of reinvesting profits;
2) If the return on investment is expected to be at the required level, then neither option is preferable for the shareholder;
3) If profit is expected from inv. the project does not provide the required level of profitability, shareholders will prefer to pay dividends.
The sequence of determining the amount of the company's dividends for opinion of MM:
An investment budget is drawn up and the required investment amount is calculated with necessary level profitability;
The structure of the funding sources for the project is being formed, subject to the maximum possible use net profit for investment purposes;
If not all profits are used for investment purposes, the remainder is paid to the owners of the company in the form of dividends.
112. The theory of materiality DP:
M. Gordon and J. Lintner;
“Bird in the hand theory”;
DP significantly affects the value of the aggregate wealth of shareholders.
By increasing the share of profits allocated to dividend payments, a company can improve shareholder wealth.
113. The theory of tax differentiation:
R. Litzenberger and K. Ramswami, late 70s and early 80s. XX century
For shareholders, it is not the dividend yield that is more important, but the income from the capitalization of value (at that time in the United States, the tax on dividends was higher than the tax on capitalization).
114. Dividend signaling theory:
The assessment of the market value of shares is based on the amount of dividends paid on them;
An increase in the level of dividend payments causes an increase in the market value of shares, which, when sold, brings additional income to shareholders;
Paying high dividends signals that the company is on the rise and expects earnings to rise in the coming period.
115. The theory of the clientele (or the theory of compliance of the DP with the composition of shareholders):
The company must implement a DP that meets the expectations of the majority of shareholders;
If the majority of shareholders give preference to current income, then DP should proceed from the preferential direction of profit for current consumption and vice versa;
The part of shareholders who do not agree with such a DP reinvests their capital in the shares of other companies.
116. Stages of formation of the dividend policy of JSC:
1) Assessment of the main factors that determine the formation and implementation of DP;
2) Determination of the type of DP and the method of payment of dividends;
3) Development of a profit distribution mechanism in accordance with the selected type of DP;
4) Evaluation of the effectiveness of the ongoing DP.
1) Assessment of the main factors that determine the formation and implementation of DP.
The main factors are:
Legal regulation dividend payments;
Providing a sufficient amount of investment resources;
Maintaining an adequate level of the company's liquidity;
Comparison of the cost of equity and borrowed capital;
Compliance with the interests of shareholders;
Informational value of dividend payments.
2) Determination of the DP type and dividend payment method:
Forms of dividend payments:
Methodology for paying dividends on a residual basis.
Payment of dividends is carried out last, after financing all possible effective investment projects of the company. The amount of dividend payments is determined after a sufficient amount of financial resources has been formed at the expense of the profit of the reporting year, which ensures the full implementation of the investment opportunities of the enterprise.
If the level of internal rate of return on investment projects to be financed exceeds the weighted average cost of the company's capital, then the profit is used to finance these projects, since they provide high rates of growth in the value of equity capital.
Benefits of the residual dividend payment method are in ensuring high rates of development of the enterprise, increasing its market value, maintaining financial stability.
This technique dividend payments are usually used during periods of increased investment activity of companies at the initial stages of their development.
Disadvantages of the residual dividend payment method:
Payment of dividends is not guaranteed, regular;
The amount of dividends is not fixed, varies depending on the financial. results of the past year and the volume of own resources allocated for investment purposes;
Dividends are paid only if the company has profits left unclaimed for capital investments.
As a rule, the market value of shares of companies that pay dividends on a residual basis is low.
Methodology for fixed dividend payments (or methodology for a stable amount of dividend payments).
The company regularly pays dividends per share at a constant rate over a long period of time, regardless of changes in the share price. At high inflation rates, the amount of dividend payments is adjusted for the inflation index. If the company develops successfully and the amount of annual profit exceeds the amount of funds required to pay dividends at a stable level, then the indicator of fixed dividend payments per share can be increased.
When conducting a dividend policy using this method, enterprises also use the dividend yield indicator (Kdv), i.e. the ratio of dividend per ordinary share (Add. share) to profit (P ob. share). due per ordinary share. This indicator serves as a guideline for the company in determining the size of the fixed dividend for the future.
The advantage of this technique is a sense of reliability, which gives shareholders a sense of confidence in the constant size of current income, regardless of various circumstances, and avoids fluctuations in the price of shares on the stock market.
The disadvantage of this technique is a weak connection with the financial results of the firm's activities, therefore, during periods of unfavorable conditions and a decrease in the amount of profit of the current year, the enterprise may not have enough own funds for investment, financial and even core activities. To avoid negative consequences, the fixed amount of dividends is set, as a rule, at a relatively low level in order to reduce the risk of a decrease in the financial stability of the enterprise due to insufficient rates of growth in equity capital.
Method of constant percentage distribution of profits (or method of a stable level of dividends).
It implies a stable percentage of net profit for a long time, directed to the payment of dividends on ordinary shares.
At the same time, one of the main analytical indicators characterizing DP is the dividend yield ratio (Kdv), i.e. the ratio of dividend per ordinary share (Add. share) to profit (P vol. share) attributable to one ordinary share:
Kdv = add. acc. / P about. acc.
Dividend policy of this type assumes a stable value of the dividend yield per ordinary share over a long period of time. It should be noted that the profit attributable to an ordinary share is determined after the payment of income to the owners of bonds and dividends on preferred shares (the yield of these securities is negotiated in advance, regardless of the size of the profit and is not subject to adjustment).
In accordance with this method, dividends on ordinary shares are not paid in cases where the company ended the current year with a loss, or all the profit received should be directed to the owners of bonds and preferred shares. In addition, the amount of dividends determined in this way can fluctuate significantly from year to year, depending on the profit of the current year, which cannot but affect the market value of shares.
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Why is it necessary to study financial management?
Today, one of the main conditions for the stable functioning of any enterprise is a competently and correctly chosen strategy. entrepreneurial activity... And financial management plays a key role in creating this strategy.
The essence of financial management
Financial management is a financial science that studies methods of efficient use of equity and debt capital of a company, ways to get the most profit with the least risk, rapid capital growth. Financial management answers the question of how you can easily and quickly turn a company from an uninteresting one to one that is attractive to investors.
This is a certain system of principles, forms and methods that is used to correctly regulate the financial activities of an enterprise. It is financial management that is responsible for making investment decisions and finding financial sources for them. That is, by and large, it answers the questions of where to get money and what to do with it next. The relevance of the use of financial management is also due to the fact that modern economic realities and the requirements of the world market imply constant development. Today successful business he cannot stand still, he must grow, expand, find new ways of self-realization.
Goals and objectives of financial management
The main goal of financial management is to maximize the value of the enterprise by increasing capital.
Detailed goals:
- effective functioning and strengthening of positions in the competitive market;
- preventing company ruin and financial insolvency;
- achieving market leadership and effective functioning in a competitive environment;
- achieving the maximum rate of growth of the organization's price;
- stable growth rate of the firm's reserve;
- maximum increase in the received profit;
- minimizing the costs of the enterprise;
- guaranteeing profitability and economic efficiency.
Fundamental concepts of financial management
| Concept | Meaning |
| Cash flow |
|
| The trade-off between risk and reward | Any income in business is directly related to risk. That is, the higher the expected profit, the greater the level of risk associated with the non-receipt of this profit. Most often in financial management goals are set: maximizing profitability and minimizing costs. But achieving rational proportions between risk and reward is an ideal solution. |
| Capital cost | All sources financial security organizations have their own definite value. The cost of capital is the minimum amount that is required to recover the cost of maintaining a given resource and which ensures the profitability of the company. This concept plays an important role in investment research and selection of backup options. financial resources... The manager's task is to choose the most effective and profitable project. |
| Efficiency of the securities market | The level of efficiency of the securities market depends on the degree of its information content and access to information for market participants. This concept is also called the market efficiency hypothesis. Market information efficiency occurs in the following cases:
|
| Asymmetric information | Some categories of persons may possess confidential information, access to which is closed for other market participants. The carriers of such information are often managers, managers, and financial directors of firms. |
| Agency relations | Bridging the gap between ownership, management and control. The interests of a company manager do not always coincide with the interests of his employees. Business owners do not always need to have a thorough understanding of business management practices. This is due to the existence of alternative decision-making options, some of which are aimed at obtaining instant profits, while others are aimed at future income. |
| Opportunity Cost | Any financial solution has at least one alternative. And the acceptance of one option inevitably entails a rejection of the alternative. |
Thorough knowledge of the concepts of financial management and their relationship entails the adoption of effective, balanced, profitable and rational decisions in the process of managing the financial flows of the enterprise.
Financial management functions
Any process or activity presupposes the presence of certain functions. Financial management functions are divided into 2 formats:
Financial management - what is this profession?
The relevance and relevance of financial management in modern business leads to a huge demand for qualified specialists, which today significantly exceeds the supply existing on the labor market. This suggests that a person with knowledge in the field of financial management can count not only on guaranteed employment and consistently high earnings, but also on rapid career development.
So, what knowledge and skills should a specialist apply for the position of a financial manager?
Receive necessary knowledge, as well as systematize existing knowledge without interrupting the main activity on the course Financial management and financial analysis... The first module of the course is provided free of charge.
Training from the Center "Aktiv" is a convenient distance format, a highly qualified teaching staff and the opportunity to take the exam for an international diploma online.
Financial management(Financial Management) - a system for managing the movement and financial relations arising in the course of the activity of an enterprise, firm, bank. The goal of financial management is to maximize through rationalization.
Financial management tasks:
- efficient use of financial resources;
- cash flow management;
- optimization of cash flow;
- cost optimization;
- minimization of risks;
- provision of assets and capital;
- provision of the current enterprise, and.
Financial management -
- the process of managing money turnover, the formation and use of financial resources of an enterprise, organization;
- the science of financial management, building financial relations for the achievement of enterprises and organizations of their goals.
Financial management is a kind professional activity aimed at achieving the goals of the enterprise (firm) through the effective use of the entire system of financial relationships, funds and reserves that form the activities of the enterprise in a market economy.
Financial management is a part, it is a synthetic sphere of activity, covering various areas of managerial work. Scientific and practical developments in the field of finance, credit, statistics, economic and financial analysis serve as a base, a toolkit for solving problems facing financial management.
- and enterprises, organizations;
- enterprises and;
They are used as a toolkit for financial analysis.
Financial management has its own system of specific management objects. The main such objects include the assets and capital of the enterprise, its cash flows and financial resources, real and financial investments, risks, etc. Taking into account the objects of financial management at the enterprise, the following are distinguished main directions of financial management:
- formation of the required volume of assets and optimization of their composition;
- formation of the required amount of capital and optimization of its structure;
- management of the company's cash flow in various areas of its activities - operating, investment, financial;
- management of current assets in general and in the context of their individual elements;
- management;
- management and;
- management of the formation of financial resources at the expense of their own internal and external sources;
- attraction management;
- management;
- threat management and prevention.
Specification of certain areas of financial management is largely determined by the sectoral characteristics of the activities of enterprises, as well as their organizational and legal forms. Thus, the sectoral features of the activities of enterprises cause significant differences in the duration of their operating cycles, capital intensity production activities, the structure of the assets being formed, the composition of financial risks, etc. The organizational and legal forms of activity of enterprises cause significant differences in the volume and structure of capital used, sources of formation of financial resources, the procedure for distributing net profit, forms of financial control, etc.
The method is a simple (buk-koy) rate of return.
This method is based on calculating the ratio of the average net booze over the life of the project. profit and average investment (costs of fixed assets and working capital) in the project. A project is selected with greatest environments... boo. rate of profit. Basics. the advantage of this method is its simplicity for understanding, availability of information, simplicity of calculation.
Method of calculating the payback period of the project.
The number of years required to fully recover the initial costs is calculated, i.e. the moment is determined when the cash flow of income equals the sum of cash flows of costs. The project with the shortest payback period is selected. The method ignores the possibilities of income reinvestment and the time value of money.
The discount method of payback of the project is also applied - the period after which the discounted cash flows of income will equalize with
Net present (present) value (NPV) method.
The net present value of a project is defined as the difference between the sum of the present values of all money. income streams and the sum of the present values of all cash flows of costs, i.e. as the net cash flow from the project reduced to the present value. In this case, the discount coefficient is taken to be equal to the average cost of capital. The project is approved if the net present value of the project is greater than zero. When considering a single project or choosing between independent projects, it is applied as a method equivalent to the method of internal rate of return (see below); when choosing between mutually exclusive projects, it is used as a method that meets the main task of financial management - to increase the income of the owners of the enterprise.
Internal Rate of Return (IRR) method
All revenues and costs of the project are reduced to present value at a discount rate obtained not on the basis of an externally specified average cost of capital, but on the basis of the internal rate of return of the project itself, which is defined as the rate of return at which the present value of revenues is equal to the present cost of costs. those. the net present value of the project is zero. The net present value of the project obtained in this way is compared to the net present value of the costs. Projects with an internal rate of return exceeding average cost capital (taken as the minimum acceptable level of return). This method involves complex calculations and does not always highlight the most profitable project.
Each of the investment analysis methods. projects provides an opportunity to consider individual characteristics and features of the project. Most effective way assessment and selection of investment. projects need to recognize the complex application of all basic methods in the analysis of each of the projects.
Methodological foundations for making financial decisions. Techniques, methods and models used in financial management
Regulatory, informational and staffing financial management. External tax and legal environment
Fundamental concepts of financial management
1. Subject and main categories of financial management as a science. The essence and types of financial instruments, derivative financial instruments
Financial management is, on the one hand, an independent scientific direction, and on the other, a purely practical activity. In the system of economic sciences, it is a specific part of the discipline "management" and has many features of this science. At the same time, this discipline has management and financial aspects inherent in a number of applied sciences (enterprise finance, securities market, accounting).
Financial management is interconnected with many sciences. As an independent direction, it was formed within the framework of modern finance theory by supplementing its basic sections with analytical sections of accounting and the conceptual apparatus of management theory.
Financial management as a science has its own subject of study, categorical apparatus and research methods.
The subject of financial management are the financial relations of business entities, financial resources and their flows.
Financial management method includes the following elements:
scientific tools;
system of basic concepts;
management principles financial activities business entities.
Financial management categories - the most general key concepts of this science. They include concepts such as factor, model, rate, interest, discount, financial instrument, risk, leverage, cash flow and others.
Basic concepts are theoretical constructions that serve as a methodological basis for describing the logic of making financial decisions. These include concepts such as the concept of the time value of money; cash flow concept; the concept of a compromise between risk and return; the concept of the cost of capital; market efficiency concept; opportunity cost concept; the concept of agency relations; the concept of information asymmetry.
Scientific tools - a set of general scientific and specific scientific methods of managing the financial activities of business entities. The scientific toolkit includes techniques, methods and models of financial management, developed by various scientists and specialists in the field of financial management.
The principles of financial management are guidelines, basic rules and guidelines for the management of the financial activities of economic entities. Integration with the general management system of the company is distinguished among the basic principles of financial management of companies; the complex nature of decisions made in the field of financial management; high dynamism of management; variability of approaches to the development of individual financial solutions; focus on the strategic goals of company management.
Let's consider the key elements of the financial management method in more detail.
Factor- the reason, the driving force of any phenomenon, which determines its nature or one of the main features. In financial management, this concept is used in the framework of financial analysis when constructing models of factor systems. For example, Du Pont's factor model establishes the relationship between a company's return on assets and factors such as asset turnover and return on sales.
Model- the system used to gain an understanding of a process. In financial management, as such systems, mathematical formulas (and a set of conditions for their application) are often used, expressing the relationship between various phenomena (model of optimal delivery lot size (EOQ); model of a certain size of average cash wealth.
Bid- a relative indicator by which the profitability of a financial transaction is determined. Rates can be presented in the form of a percentage or a discount.
Cash flow- a set of valuable payments or cash receipts distributed over time. Cash flow is one of the basic categories of financial management.
Risk- the danger of future unfavorable outcomes of decisions made today. Management of risks arising in the course of the functioning of an economic entity is separated into a separate subsection of financial management - risk management.
Leverage (leverage)- literally means the action of a small force (lever) with which you can move objects. In financial management, the term “leverage” is used to assess the relationship between profits and the valuation of the costs of assets or funds incurred to generate those profits.
Financial instruments
There are different approaches to the interpretation of the concept of "financial instrument". Initially, financial instruments were understood as: cash on hand and on the current account; credit instruments (bonds, loans, deposits); methods of participation in the authorized capital of the enterprise (shares and units).
With the emergence of new types of financial assets and transactions with them (forward and futures contracts), it became necessary to differentiate the instruments themselves from those financial assets and liabilities that they manipulate.
Currently under financial instrument means a financial transaction in the form of a contract under which there is a simultaneous increase in the financial assets of one enterprise and an increase in financial liabilities of a long-term or short-term nature from another enterprise.
Financial assets include: cash, the right to receive cash or other financial assets from another company, the right to exchange financial assets with another company on potentially favorable terms.
Financial liabilities include: contractual obligations, payments of cash or financial assets to another entity, exchange of financial assets with another entity on potentially unfavorable terms.
Almost all financial instruments are currently in the form of securities. A security is a document certifying, in compliance with the established form and mandatory details, property rights, the exercise and transfer of which is possible only upon its presentation.
There are two options for carrying out a financial transaction:
the contract reflects the acquisition of title to a financial asset (or the occurrence of a financial liability), which is realized at the time of the transaction. Such contracts are in the form of primary financial instruments.
the contract reflects the acquisition of title to a financial asset (or the occurrence of a financial liability), which will be realized in the future. These contracts are called forward transactions and are in the form of secondary or derivative financial instruments.
The classification of financial instruments depending on the urgency of financial transactions is shown in Figure 2.
Fig. 2. Classification of financial instruments
Financial instruments
primary
Secondary (derivatives)
Note that derivative financial instruments can also be subdivided into two types, depending on the degree of obligatory performance of the financial transactions reflected in them:
financial instruments representing transactions binding on both parties(solid deals).
These include forward and futures contracts. Forward contract is an agreement to buy and sell an asset with future delivery and settlement. According to the contract, the seller is obliged to deliver a certain asset at a specific place and time, and the buyer is obliged to pay for it the price determined in advance at the conclusion of the contract. In this case, the parties to a forward contract can be any participants in a financial transaction, therefore, the terms of various forward contracts can vary significantly. Forward contracts are usually traded over the counter.
Futures contract is a type of forward contract, one of the participants in which is the stock exchange. The terms of these contracts are usually standardized. Futures contracts are traded primarily on stock exchanges.
financial instruments representing transactions, one of the parties to which has the right to refuse to fulfill the terms of the contract in case of unfavorable changes in the conjuncture of the financial market (conditional transactions).
Options are the main type of contingent trades. An option is a contract concluded between two parties, one of which proposes a transaction and stipulates the timing of its implementation in the future, and the other, upon signing the contract, acquires the right to fulfill the terms of the contract when the time comes for the transaction, or to refuse to execute it.
Derivative financial instruments are used primarily for the following purposes:
insurance of price risks in the course of future purchase and sale transactions;
speculative purposes (making a profit due to price fluctuations for any asset on the exchange);
protection of the interests of owners (insurance against possible unfavorable changes in the market value of their securities).
