Plan
Purpose and objectives of financial management.
Principles of organization of financial management
Functions of financial management
Basic concepts of financial management
Financial management as a management system
Information support of financial management
Literature
Karelin V. S. Finance of corporations: textbook. / V. S. Karelin. - M .: Publishing house. corporation "Dashkov and K", 2005. - 619 p.
Zabelina O. V. Financial management: textbook. allowance for universities / O. V. Zabelina, G. L. Tolkachenko. - M. : Exam, 2005. - 223 p.
Financial management. Theory and practice: textbook. for students of higher textbook institutions / Financial acad. under the Government of the Russian Federation, Acad. management and market, Institute of financial management; ed. E. S. Stoyanova. - Ed. 5th, revised. and additional - M. : Prospect, 2005. - 655 p.
1. Purpose and objectives of financial management
Financial management - the process of developing and implementing management decisions related to the formation, distribution and use financial resources organizations.
Purpose of financial management – ensuring sustainable development and capitalization (growth of market value) of the organization.
This goal is inextricably linked with the main goal of managing the organization as a whole and is implemented with it in uniform procedures.
The main tasks that financial management is designed to solve:
Search for sources and ways of financing the organization's business to ensure required level and structure of its assets. This task is implemented by determining the total need for financial resources of the organization for the upcoming planning period, maximizing the volume of involvement of own financial resources, determining the optimal structure of borrowed funds and managing their attraction.
Ensuring the effective use of financial resources in the activities of the organization. This task is implemented by optimizing the distribution of the formed volume of financial resources in time and in the areas of the organization's activities.
Cash flow optimization. This problem is solved by managing the organization's cash flows in the process of its cash circulation, ensuring the synchronization of receipts and expenditures. Money for certain time periods, maintaining the required level of liquidity of its current assets.
Minimization of the level of financial risk. This task is achieved by diversifying the types of operating and financial activities, formation of an optimal investment portfolio, monitoring of financial market conditions, application of various insurance schemes for financial assets.
Security financial stability organization in its development. This task is achieved by forming the optimal structure of the capital and assets of the organization and maintaining the required level of its solvency.
2.Principles of the organization of financial management
The main principles of financial management include:
Focus on the strategic goals of the organization's development. Management decisions in the field of financial activity in the current period should not contradict the strategic goals of the organization.
Adaptability. Financial management is designed to take into account changes in the factors of the external and internal environment, financial market conditions, resource potential, forms of organization of production and financial activities, financial condition and other parameters of the functioning of the organization.
Complexity. Financial management as an integrated management system links all management decisions in the field of formation, distribution and use of financial resources of the organization.
Integration. Any management decision directly or indirectly affects the formation of cash flows and financial performance, so financial management is directly related to the overall management system of the organization.
The object of regulation is the existing financial resources of the enterprise, debt obligations, liquid assets. The task of financial management is to reduce losses and maximize business profitability.
Financial management focuses on the strategic goals of the company, quickly adapts to changes in the situation. The cash flow management structure is closely integrated with the departments of the company in order to control the amount of profit (loss) for each management decision.
Tasks
In terms of management, financial management is seen as part of the overall management of the business and a separate department in the company that performs a narrow list of functions.
- Financial management as a management system includes the creation of a financial strategy, the construction of an accounting policy, the introduction of accounting software products, constant monitoring of the company's performance. For example, the tasks of financial managers include building a budget, a system of material motivation for staff.
- Financial management, as a separate department, manages financial assets and risks, monitors cash flows, selects investment projects for participation, monitors information flows in the company. For example, the assessment of acquired fixed assets is carried out after studying the accompanying documentation.
The financial manager determines the investment policy of the company (a list of projects in which assets are invested), manages tangible assets (executes transactions for the sale of fixed assets), calculates and pays dividends to shareholders. The constant task of financial management is the classification and accounting of the company's income and expenses, the preparation of analytical reports for management.
The effectiveness of financial management depends on the quality of external sources of information that are used to collect and analyze indicators. For example, public data from banks and insurance companies, information from competitors, regulatory requirements from supervisory authorities, and the financial statements of an enterprise should be checked for completeness and accuracy.
Principles
Regardless of the specifics of the company, current and strategic goals of its development, financial management is a systematic activity aimed at solving specific problems by distributing cash flows. The activity of a financial manager is aimed at solving strategic problems, achieving financial well-being in the long term.
- A compromise of risk and return. Financial management considers opportunity costs, overall market performance, projected returns and associated risks before making a decision. management decisions. For example, investing in startups brings high returns and is accompanied by the risk of losing investments.
- Asymmetry and time value of information. Confidential information about market characteristics obtained from counterparties or supervisory authorities can be beneficial in the short term. For example, "tax holidays" for R&D companies may be valid for two years.
Financial management assumes an unlimited period of operation of the company, strives to meet the interests of business owners and employees, and fairly evaluate the available sources of financing.
FINANCIAL MANAGEMENTINTRODUCTION
"Financial management" is one of the main disciplines for students of economic specialties. The discipline "Financial Management" is aimed at forming the student's complete system of knowledge about financial relations in the economic process, the financial mechanism, the technology of managing the financial activities of an economic entity.
The development of market relations in the country not only strengthened the role of finance in the functioning of the enterprise, but also determined the direction of fundamental changes in the field of financial management.
Management - from the English word "management" - to manage. Therefore, - financial management, i.e. the process of managing cash flow, the movement of financial resources. However, is it right to consider the English term "financial management" not literally as "financial management", but as stated above "financial management"? A positive answer is undoubted, and this is explained by the logic and consistency of the development of scientific knowledge and practical experience, i.e. go from finance to financial management, or - from simpler to more complex. Therefore, the first lecture will be devoted to theoretical foundations financial management - the definition of finance, the principles of organization of finance in enterprises, finance in a market economy.
The transition to a market economy contributed to the birth new specialty in the field of management - financial manager.
A financial manager must be a highly educated, creative thinker.
The formation of professional managers in the Republic of Kazakhstan will be determined by emerging new economic solutions, the development of the market sphere, the development of forms of ownership and business, a new level of banks, securities markets and targeted training of specialists.
Starting the study of theoretical and practical financial management, the student must have an idea about the place of this academic discipline in economics and practice.
"Financial management" is a synthetic discipline that incorporates the achievements of a number of disciplines. Scientific and practical developments in the field of finance, credit, insurance, statistics, financial analysis and a number of other sciences serve as the basis for financial management.
When studying the course, it is necessary to acquire the skill of independent work not only with textbooks and teaching aids, but also with recommended methodological publications. Students themselves need to constantly monitor the publication of new laws, government regulations, as well as textbooks and teaching aids.
For each topic of lectures in these methodological developments a mandatory minimum of educational literature is recommended, which is not very large and feasible for any student, they must also be studied.
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TOPIC 1. THE CONCEPT OF FINANCIAL MANAGEMENT.
1. Finance in a market economy. Principles of organization of finance at the enterprise.
2. Financial management as a system and mechanism of financial management.
3. The scope of financial management and its functions in market conditions.
4. The relationship of financial management with other disciplines. Tasks of a financial manager.
Literature: L-7 (p.18-24), L-8 (p.15-26), L-16 (p.10-19), L-18 (p.7-8,43-44), L-25 (p.21-24).
1.1. Finance in a market economy. Principles of organization of finance in enterprises.
Deep economic changes are taking place in Kazakhstan, the former mechanism of the former mechanism of economic management by market methods of managing is being replaced.
Finances play a huge role in the structure of market relations, as well as in the mechanism of their regulation by the state.
Finance (from the Latin finish - end) - the end of the payment, settlement between subjects economic relations.
Later this term was transformed into the term "finance". The authorship of the term belongs to the French scientist Jean Boden, who in 1577 wrote the work “6 books on the republic”.
Finance is economic category expressing that part of economic relations that is associated with the creation of funds of funds and their use for the purpose of reproduction, stimulation and satisfaction of the social needs of society.
In the total set of financial relations, two large interconnected areas are distinguished:
Finances of business entities.
Public finances.
Each link performs its tasks, has its own organizational structure of the financial apparatus, but together they form the financial system of the state.
task public finance is the concentration of financial resources at the disposal of the state and their direction to finance national needs. They are based on a system of budgets, off-budget funds ( Pension Fund, fund social insurance, State Employment Fund, Compulsory Medical Insurance Fund).
Leading in the financial system are the finances of business entities. This is due to the fact that they are monetary relations associated with the formation and distribution of financial resources, i.e., the finances of economic entities provide the circulation of capital and relationships with the state budget, tax authorities, banking and other institutions of the financial and credit system.
At the same time, with the transition to market economic conditions, enterprises are independent in economic and financial relations and bear full responsibility for compliance with loan agreements and settlement discipline.
In a market economy, the financial independence of the enterprise has received a new direction of development. That is, the company got the opportunity to form its financial resources not only from traditional sources (profit and depreciation), but also to attract contributions from the founders, funds received from the sale of securities and other contributions. In this situation, the importance of effective management of financial resources sharply increases. On how effectively and expediently they are transformed into fixed and working capital, as well as incentives work force depends on the financial well-being of the enterprise as a whole, its owners and employees.
Today, enterprise finance is an indicator of its competitiveness in the market, i.e. the prestige of an enterprise is ultimately determined not by the number of employees, the volume of output, but by its financial stability, i.e. the position it occupies in the market.
Therefore, the finances of enterprises in market conditions must have a certain organization based on principles.
Organization principles:
Rigid centralization of financial resources in the enterprise.
financial planning.
Formation of financial reserves.
Unconditional fulfillment of financial obligations to partners.
In the process of achieving self-sufficiency, the enterprise solves two problems:
a) Loss control. If an enterprise suffers chronic losses, then a set of measures is required for the financial recovery (sanation) of the enterprise, which is developed by the enterprise itself, if these measures do not produce results, then the enterprise is subject to liquidation or sale.
b) Increasing profitability. The enterprise should not only cover its expenses with income, but also be profitable, i.e. get a profit.
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1.2. Financial management as a system and mechanism of financial management.
In a market economy, the competitiveness of any economic entity can only be ensured by the effective management of the movement of its financial resources (capital). To rationally manage, you need to know the methodology, methods, management techniques.
The subject of the study of financial management is the study of the mechanism for managing monetary funds, monetary relations, i.e. what constitutes the concept of finance.
As for the definition of financial management, it is related to the concept of a financial management mechanism, or financial mechanism. And financial is a system of actions of financial levers, expressed in organizing, planning, stimulating the use of financial resources.
Financial relations between numerous areas of management are shown precisely during the movement of financial resources, which, in turn, are the object of management.
Development of management goals, anticipation of the positive action of the financial mechanism, financial decision-making and are within the scope of the immediate responsibility of the financial manager.
Financial management is aimed at increasing financial resources, investments and increasing the amount of capital.
V general view financial management can be represented in the form of a diagram shown in Fig. 1.1.
This scheme gives a general idea of financial management as a mechanism for managing the movement of financial resources, the ultimate goal of such management is to increase competitive positions enterprises in the relevant field of activity through the mechanism of formation and effective use of profits.
Financial management is an integral part common system enterprise management, which in turn consists of subsystems: the control object ( managed subsystem) and the subject of control (control subsystem).
The object of management in financial management is a set of conditions for the implementation of cash flow, the circulation of value, the movement of financial resources and financial relations between business entities.
The subject of management is specific professionals, a special group of people who through various forms managerial impact carry out purposeful functioning of the object.
The impact of the subjects of economic relations on the object of management in the development of a certain strategy and tactics reveals the content of financial management.
It is possible to formulate a whole system of financial management goals, this and
Avoiding bankruptcy and major financial failures;
Survival of the firm in a competitive environment;
Cost minimization;
Ensuring cost-effective activities;
Profit maximization, etc.
The priority of a particular goal is explained in different ways within the framework of the existing theory of business organization (which can be found by studying the additional recommended literature).
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1.3. The scope of financial management and its functions in market conditions.
The modern approach to the term "Financial Management" involves understanding and analyzing the structure of capital in making financial decisions.
According to this, the functions of financial management cover two areas of the company's activity: the acquisition of funds, as well as their distribution. Regardless of the results, it also includes receiving external funds. The main task of the financial manager is the efficient and rational allocation of available funds. In this case, it is necessary to take into account:
1) How big is the enterprise and how fast will it grow?
2) in what form will it own the assets?
3) what will be the composition of its obligations?
These three questions are important financial problems of the enterprise. In other words, financial management deals with three important issues related to the activities of the enterprise, i.e. investment, financing and dividend decisions are the three main functions of financial management.
I Investment solutions are related to the choice of assets in which the funds of the enterprise will be invested. Assets that can be acquired are expressed in two groups.
1. Long-term assets that will generate income after a certain period of time in the future.
2. Short-term or current assets that, in the normal course of business (activities), turn into cash, usually within one year.
Accordingly, decisions on the choice of assets in an enterprise can be of 2 types.
I-type - includes the first category of assets and in the financial literature - capital budgeting (the process of selecting components investment projects based on determining the current value, future cash flows and making decisions on their financing. The budgeting process compares actual and planned cash flows and capital expenditures.)
II-type. Financial decisions concerning current assets or short-term assets are defined as working capital management.
The first aspect - capital budgeting refers to the selection of a new asset from available alternative or newly allocated capital, when the existing asset is not able to justify the invested funds.
The elements of capital budgeting include the analysis of risk and unreliability of projects. Since the income from investment decisions will be in the future and its accumulation is unreliable. Thus, investment proposals can be priced lower (higher than the physical volume of sales and the price level. Therefore, the element of risk in the sense of unreliability of future income / benefits is difficult to apply. Therefore, income is assessed as a ratio to the risk associated with it.
Finally, the assessment of benefits in a long-term project implies certain norms and standards from which the benefits will be considered (for example, barrier norms, requirement norms, minimum income norms, etc.).
These standards are broadly expressed in terms of the cost of capital.
The concept and measurement of the cost of capital other more important aspect capital budgeting solutions.
Conclusion. Key elements of capital budgeting decisions:
1) general assets and their components
2) types of entrepreneurial risk in the enterprise
3) the concept and measurement of the cost of capital
Working capital management concerns the management of current assets. This is a significant and integral part of financial management, so that short-term survival in the market is necessary as a precondition for long-term success.
One aspect of working capital management is balancing profitability and risk/commitment. There are contradictions between profitability and liabilities. If the firm does not have enough working capital, i.e. it does not invest enough in current assets, it may become illiquid and therefore cannot meet current liabilities and thus is at risk of bankruptcy.
If current assets are too large, this can also adversely affect profitability. Therefore, the main direction of the financial manager in this area is to ensure the relationship between profitability and liabilities.
II Financing. The second important decision included in financial management is the financing decision. Investment decisions concern mixed assets, i.e. mixed financing or capital structure or leverage (borrowing policy).
There are also two aspects to the financing decision:
I Theory of capital structure, which shows the theoretical relationship between the use of debt and returns to shareholders. The use of debt provides for an increase in shareholder income, which in turn may be associated with financial risk. The right balance between debt and equity provides a ratio between risk and return to shareholders, a necessary condition. A capital structure with a moderate ratio of debt and equity (own) capital is called the optimal capital structure.
Thus, two questions arise
1) Is the capital structure optimal?
2) in what ratio will the funds cause the maximization of shareholder income?
The second aspect is the establishment of an appropriate capital structure in actual cases.
Thus, the financing decision concerns the relationship of two aspects:
a) the theory of capital structure
b) decision of the capital structure.
III The third important decision in financial management is the decision related to dividend policy. . That is, the policy of the enterprise in the field of profit use, which determines what share of the profit is paid to shareholders in the form of dividends, and what share remains in the form of retained earnings and reinvestment.
Which course should be chosen - dividends or reinvestment?
The decision will depend on shareholder preference and the firm's investment policy and other factors.
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1.4. The relationship of financial management with other disciplines. Tasks of a financial manager.
Financial management is an inseparable part of general management and is closely related to related disciplines such as economics, accounting, as well as various areas of production and marketing.
In particular, enterprises and firms operate in a close macroeconomic environment and therefore the financial manager must know and be well versed in both macroeconomics and microeconomics. Especially:
1) should assume how the monetary policy of the state affects the prices and cash of the enterprise;
2) be experienced in fiscal policy and know how it affects the economy;
3) to know the various financial institutions and their modus operandi, evaluate potential investments;
4) assume consequences various ways and levels of financial revitalization and the impact of changes in economic policy on their financial decisions;
5) know the relationship between supply and demand and the strategy for maximizing profits;
6) calculate the results associated with changes in various production factors, the "optimal" level of product sales and the result of the pricing strategy; preferred profit margins, risk and value determination, etc.
Financial statements are closely related to the activities of the enterprise - it is primarily a system of indicators that characterize the conditions and financial results of the enterprise for a certain period of time.
The following two definitions speak of the relationship between financial management and accounting:
1. They are closely related in terms of the degree of accountability, which is important information for enterprise financial solutions.
2. The key differences are the reporting assignment functions.
Thus, accounting and financial management are functionally interconnected. But there are also key differences: differences in the circulation of funds and decision-making.
The purpose of accounting is the collection and presentation of financial data. The financial manager uses this data to make financial decisions. But that doesn't mean that accountants never make decisions or that money managers don't collect data. However, the main functional purpose is to collect and provide data, while the more important responsibility of the financial manager is financial planning, forecasting and control over the implementation of decisions made.
In addition to economics and accounting, a financial manager makes daily decisions based on areas such as marketing, production, and quantitative methods. For example, a financial manager considers the impact of developing new industries and the relevance of projects proposed in the field of marketing with their projects requiring capital expenditures and influencing the design of cash inflows. Changes are taken into account manufacturing process, confirms the need capital investments. And here the financial manager must clearly evaluate everything and only then finance the project.
Analysis tools appear in the field quantitative methods, useful and analyzed complex complex problems of the financial manager.
Rice. 1.2. Influence of other disciplines on financial management
Principles of organization of financial management
financial mechanism
financial leverage
financial methods
Legal support
Regulatory support
Investment decisions
Capital budgeting
Dividend Policy
Reinvestment of profits
Summary.
Financial management - financial management, i.e. the process of managing cash flow, the formation and use of financial resources of enterprises.
Financial management is an integral part of the overall enterprise management system, which in turn consists of two subsystems: the object of management (managed subsystem) and the subject of management (management subsystem).
The goals of financial management are realized through the functions of the object and subject of management.
Financial management performs three essential functions: investment decisions, financing and dividend decisions.
Terms and concepts:
Management
Financial management
Centralized cash funds
Decentralized Funds of Cash
Financial Manager
Control system
Managed system
Tests for self-control of knowledge.
1. Financial management is
a) a form of managing the process of financing business activities. c) a complex process of managing cash flow, cash funds, financial resources of enterprises. c) a science that is only emerging simultaneously with the formation of a market economy and the development of entrepreneurship. d) a form of management that determines the scale and priorities business2. Functions of financial management
a) reproduction c) distribution c) control d) investment decisions3. Capital budgeting is
a) the process of selecting investment projects by the enterprise; b) the financing of the production process; c) the process of accumulation of funds; d) the determination of the present value of cash flows4. The main source of information for financial management
a) production plan c) statistical data c) accounting records d) portfolio of securities
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TOPIC 2. FINANCIAL MODEL OF CAPITAL.
1. Financial resources and capital.
2. financial model capital.
3. The main assets of enterprises.
4. Intangible assets.
Literature: L-7 (p. 29-33), L-8 (p. 34-47), L-9 (p. 279 - 284), L-18 (p. 110-114), L-31 ( p. 89), L-35.
2.1. Financial resources and capital.
Financial resources are a set of funds of funds at the disposal of enterprises, organizations and other organizational structures different forms of ownership, i.e. Under the financial resources of enterprises are understood those funds that remain with the enterprise or other economic entity after they have reimbursed all costs and expenses associated with the implementation of the current economic activity.
Financial resources formed from various sources enable the enterprise to invest in new production in a timely manner, to ensure, if necessary, the expansion and technical re-equipment of existing enterprises, to finance Scientific research, developments and their implementation, etc.
The use of financial resources is carried out in many areas, the main of which are:
Payments to organizations of the financial and banking system in connection with the fulfillment of financial obligations (payment of taxes to the budget, payment of interest to banks for the use of loans, repayment of previously taken loans, insurance payments);
Investing (own funds) financial resources in securities of other firms purchased on the market;
The direction of financial resources for the formation of monetary funds of an incentive and social nature;
Use of financial resources for charitable purposes, sponsorship.
To ensure uninterrupted financing of the production process, financial reserves are of great importance. In the conditions of transition to the market, their role increases significantly. Financial reserves are able to ensure the continuous circulation of funds in the reproduction process, even in the event of huge losses or the occurrence of unforeseen events. Financial reserves can be created by enterprises themselves at the expense of their own financial resources (self-insurance), their management structures (on the basis of standard deductions), specialized insurance organizations (insurance method) and the state (reserve funds).
With the transition to a market economy, the role of financial services in finding financial sources for the development of an enterprise increases. The search for effective directions for investing financial resources, operations with securities, and timely attraction of borrowed funds become the main ones in managing the finances of an enterprise, forming the so-called "financial management".
Financial management is such an organization of financial management by financial services that allows you to attract additional financial resources on the most favorable terms, invest them with the greatest effect, and carry out profitable operations in the financial market by buying and reselling securities.
The choice of a source for covering the costs of an enterprise with a lack of its own financial resources depends on the purpose of investing funds.
To cover the short-term need for working capital, it is advisable to use loans from credit institutions.
When making large investments in the expansion, technical re-equipment or reconstruction of production, you can attract a long-term loan or use the issue of securities.
It is equally important for an enterprise to rationally use free financial resources, to find the most effective directions for investing funds that bring the enterprise additional profit. Here it is important to be able to foresee the dynamics of economic processes and to professionally master the technique of financial transactions.
Financial resources used for the development of production, in economic activity represent capital in its monetary form.
Capital is value that brings surplus value. Only the investment of capital in economic activity, its investment create profit.
Managing finances means managing capital. In essence, the capital reflects the system of monetary relations, embodying the cyclic movement of financial resources - from their mobilization into centralized and decentralized funds of funds, then distribution and redistribution, and, finally, the receipt of the newly created value (or gross income) of this enterprise, including profit .
Thus, the movement of capital and its management reflect the movement of financial resources and the management of this process.
2.2. Financial model of capital.
The capital structure includes cash invested in fixed assets, intangible assets and working capital.
The financial model of capital can be represented as follows:
The line outlines the working capital area.
Share capital is the amount of money invested in a company by shareholders who take on the business risk. The maximum amount of share capital permitted to be issued is determined by the company's articles of association.
Share capital is the owner's contribution. A distinction must be made here between paid-in share capital and declared but not yet paid-in capital. Only the former is usually shown on the balance sheet of a small business, as it represents the amount actually deposited into a bank account by shareholders, as evidence of which they receive share certificates as evidence of equity participation.
The most "solid" capital is provided by the shareholders, and the accumulation of profits is done precisely for the shareholders.
Borrowed capital - loans provided to a company (enterprise) to finance its operations on the terms of repayment within a specified period. They can take the form of long-term loans, short-term loans (for a period of up to 1 year) or a bank overdraft.
Invested capital - the total amount of money invested in the company, consisting of shareholders' funds and borrowed capital. In essence, the company's debt to investors and creditors.
From this moment, there are two possibilities for using money - they can be invested either in fixed assets (or in working capital) or directed to external investments. The financial model of capital is shown in fig. 2.1.
The part converted to working capital will be spent on materials and on converting them into goods ready for sale, as well as converting all this into cash. (The working capital of an economic entity will be discussed in the next topic).
The flow of money to suppliers will be interrupted by the creditor "barrier" just as the receivable "barrier" will slow down the return of money coming into the business.
The working capital zone is highlighted in fig. 2.1. But since this model is a "snapshot", there is no constant movement in it.
Purchased materials are dead unless someone puts them to work turning them into a final, marketable commodity. This transformation process involves spending money on wages, rent, taxes, insurance, communications, and so on.
For the same reason, some of the fixed assets will be fully utilized in the form of depreciation. In some enterprises, raw materials and partially finished products ("work in progress") appear in the production process until they are qualified as final goods. In addition, there are many centralized (administrative) costs that require money.
The sale can be carried out either through direct payments or on credit. In the latter case, debtors slow down the process of cash inflow.
If the enterprise has invested funds in external projects, then the interest on investments will come from behind the "boundary" of working capital in the form of income.
Finally, some of the money will be lost due to the constant payment of taxes, interest on loans and dividends on shares.
Evaluating the model in terms of the effectiveness of enterprise management, it must be recognized that the financial manager is responsible for the use of all resources. The financial manager is not interested in how the owners create capital, managers exist in order to draw up an optimal structure of equity and debt capital, as well as ensure proper management of resources.
2.3. The main assets of enterprises.
Cash advanced for the acquisition of fixed assets is called fixed assets. Fixed assets (funds) are the material and technical basis of production at any enterprise. In a market economy, the initial formation of fixed assets, their functioning and expanded reproduction is carried out with the direct participation of finance. At the time of acquisition of fixed assets and their acceptance on the balance sheet of the enterprise, the value of fixed assets quantitatively coincides with the value of fixed assets. In the future, as the fixed assets participate in the production process, their value bifurcates: one part of it, equal to depreciation, is attributed to finished products, the other - expresses the residual value of existing fixed assets.
is the management of the company's finances, aimed at achieving the strategic and tactical goals of the functioning of this company in the market.
The main issues of financial management are related to the formation of the enterprise's capital and ensuring its most efficient use.
Currently, the concept of "financial management" implies a variety of aspects of financial management of the enterprise. A number of areas of financial management have received in-depth development and stand out as relatively independent scientific and educational disciplines:
- higher financial computing;
- investment analysis;
- risk management;
- crisis management;
- company valuation.
A Brief History of Financial Management
Financial management as a scientific direction originated at the beginning of the last century in the United States and at the first stages of its formation considered mainly issues related to financial aspects creation of new firms and companies, and subsequently - financial investment management and bankruptcy problems.
It is believed that the beginning this direction was laid by G. Markowitz, who developed in the late 1950s. portfolio theory, on the basis of which W. Sharp, J. Lintner and J. Mossin created a model for assessing the return on financial assets (CAPM) a few years later, linking the risk and return of a portfolio of financial instruments. Further development of this area led to the development of the concept of an efficient market, the creation of the theory of arbitrage pricing, the theory of pricing of options, and a number of other models for evaluating market instruments. Around the same time, intensive research began on the structure of capital and the price of funding sources. The main contribution to this section was made by F. Modigliani and M. Miller. Year of publication of their work “The cost of capital. Corporate Finance. Theory of Investments” in 1958 is considered a milestone, when FM emerged as an independent discipline from applied microeconomics. The portfolio theory and the theory of capital structure can be called the core of financial management, since they allow answering two main questions: where to get money from and where to invest it.
The role of financial management in the management of the organization
Financial management is carried out through financial mechanism, which can be defined as a system of action of financial methods, expressed in the organization, planning and stimulation of the use of .
There are four main elements of the financial mechanism:- State normative-legal regulation of the financial activity of the enterprise.
- Market mechanism for regulating the financial activity of an enterprise.
- The internal mechanism for regulating the financial activities of the enterprise (charter, financial strategy, internal standards and requirements).
- The system of specific techniques and methods used in the enterprise in the process of analysis, planning and control of financial activities.
represent a system of economic relations associated with the formation, distribution and use of funds in the process of their circulation. The market environment, the expansion of independence of acceptance have led to a sharp increase in the importance of financial management in the management of any economic structure.
The concept of "management" can be considered from three angles:
- as a system economic management company;
- as a governing body;
- as a form of business activity.
The development of market relations in our country, which made it possible for enterprises to independently make management decisions and manage the final result of their activities, along with a fundamental change, the emergence, introduction of new forms of ownership, and the improvement of the accounting system, led to the realization of the importance of financial management as a scientific discipline and the possibility of using it theoretical and practical results in management Russian enterprises and organizations.
Objectives of financial management
The main objectives of financial management:- increase in the market value of the company's shares;
- increase in profit;
- fixing the company in a particular market or expanding an existing market segment;
- avoiding bankruptcy and major financial failures;
- improving the well-being of workers and/or management personnel;
- contribution to the development of science and technology.
1. Achieving high financial stability of the company in the process of its development. This task is implemented through the formation of an effective policy for financing the economic and investment activities of the company, managing the formation of financial resources through various sources, optimization of the company's financial capital structure.
2. Optimization of the company's cash flows. This task is achieved through effective management of solvency and absolute liquidity. At the same time, the free balance of cash assets should be minimized in order to reduce the risk of impairment of excess cash.
3. Ensuring the maximization of the company's profits. This task is implemented by controlling the formation financial results, optimization of the size and composition of the financial resources of non-current and current assets of the company, balance of cash flows.
4. Minimization of financial risks. This goal is achieved by developing effective system risk identification, quality and quantification financial risks, determining ways to minimize them, developing an insurance policy.
Some goals and criteria for managing company finances|
Increasing the welfare of company owners |
Consolidation in the market, financial balance |
Maximizing the current |
The economic growth |
|
|
Criteria |
Increase in market value Increasing return on equity |
Positive dynamics and stability of liquidity indicators, financial independence and sustainability |
Growth of indicators of profitability of turnover and Growth of indicators of business activity |
Positive dynamics and stability of capital growth rates, turnover and Growth of economic profitability. Stability of financial indicators |
Functions of financial management
Financial management includes the following aspects of activity:- organization and management of relations of the enterprise in the financial sector with other enterprises, banks, insurance companies, budgets of all levels;
- formation of financial resources and their optimization;
- placement of capital and management of the process of its functioning;
- analysis and management of the company's cash flows.
Financial management includes management strategy and tactics.
Management strategy- the general direction and method of using funds to achieve the goal. This method corresponds to a certain set of rules and decision-making constraints. Management tactics- these are specific methods and techniques for achieving the goal within the framework of certain conditions economic activities of the enterprise in question.
Functions of financial management:
Planning function:
- development of the company's financial strategy; formation of a system of goals and main indicators of its activities for the long-term and short term; carrying out long-term and short-term financial planning; preparation of the company's budget;
- formation pricing policy; sales forecast; analysis of economic factors and market conditions;
The function of forming the capital structure and calculating its price:
- determination of the total need for financial resources to ensure the activities of the organization; formation and analysis of alternative sources of financing; formation of an optimal financial structure of capital that provides the value of the company;
- calculation of the price of capital;
- formation of an effective flow of reinvested profits and depreciation.
- investment analysis;
Investment Policy Development Function:
- formation of the most important areas for investing the company's capital; assessment of the investment attractiveness of individual financial instruments, selection of the most effective of them;
- formation of an investment portfolio and its management.
Working capital management function:
- identification of a real need for certain types assets and determining their value, based on the expected growth rate of the company;
- formation of an asset structure that meets the company's liquidity requirements;
- increasing the efficiency of working capital use;
- control and regulation cash transactions; cash flow analysis;
Financial risk analysis function:
- identification of financial risks inherent in the investment and financial and economic activities of the company;
- analysis and forecasting of financial and business risks;
Evaluation and consultation function:
- formation of a system of measures to prevent and minimize financial risks;
- coordination and control over the execution of management decisions within the framework of financial management;
- organization of a system for monitoring financial activities, implementation individual projects and management of financial results;
- adjustment financial plans, budgets of individual units;
- holding consultations with heads of departments of the company and developing recommendations on financial matters.
Information support of financial management
Specific indicators of this system are formed from external and internal sources, which can be divided into the following groups:
- Indicators characterizing the general economic development of the country (used when making strategic decisions in the field of financial activity).
- Indicators characterizing the financial market situation (used in the formation of a portfolio of financial investments, the implementation of short-term investments).
- Indicators characterizing the activities of competitors and counterparties (used in making operational management decisions).
- Regulatory indicators.
- Indicators characterizing the results of the financial activity of the enterprise (balance sheet, income statement).
- Normative and planned indicators.
The content of financial management and its place in the management system
organization. Purpose and objectives of financial management. Basic concepts
financial management. Financial instruments. External - legal and
tax environment. Information support of financial management.
Methodological bases for making financial decisions. cash flows and
methods for their evaluation. Methods for valuation of financial assets. Risk and return
financial assets. Risk and profitability of portfolio investments. Control
investments. Assessment of efficiency and risk of investment projects.
Formation of the capital investment budget. Investment policy.
Management of sources of long-term financing. Traditional and new
financing methods. Price and capital structure. weighted average and
marginal price of capital. Theories of capital structure. Managing your own
capital. The rate of sustainable growth. Production and financial leverage.
dividend policy. Business value. Working capital management.
Working capital policy. Inventory Management. Control
accounts receivable (credit policy). Cash management
means and their equivalents. Traditional and new methods
short term financing. Management of funding sources
working capital. Financial planning and forecasting.
Strategic, long-term and short-term financial planning.
Financial strategy. Methods for forecasting the main financial
indicators. Special issues of financial management. Financial
management in conditions of inflation. Bankruptcy and financial restructuring.
Crisis management. International aspects of financial management.
3
1. Subject, tasks, basic
concepts of financial
management
4
Definition of financial management
The most financial management
can be defined in the simplest way as
art of financial management
streams.
5
Essence of financial management
Essence of financial
management as a form
entrepreneurship, expressed
in exchange.
Money
Financial management services
money with growth
6
Capital Mission
Capital must generate income
otherwise, the business entity may
lose their market position
.
7
Control object
object management is a set of conditions for the implementation of cash flow and cash flow, the circulation of value, the movement of financial resources and financial relations that arise in the internal and external environment of the enterprise.
Therefore, the following elements are included in the control object:
1) Money turnover;
2) Financial resources;
3) Circulation of capital;
4) Financial relations.
8
Subject of management
Subject management - a set of financial instruments, methods, technical means, as well as specialists organized in a certain financial structure, which carry out the purposeful functioning of the management object.
The elements of the subject of control are:
1) Personnel (trained personnel);
2) Financial instruments and methods;
3) Technical means management;
4) Information support.
9
Typical control loop
Subject
management
(control part of the system)
control action feedback
An object
management
(managed part of the system)
10
entrance
Exit
Control subsystem (subject)
Finance department and its divisions
Financial Manager
Managed subsystem (object)
Money turnover
Circulation of value
(capital)
Financial
financial relations
11
Relationship between subject and object
management
External Information
Subject of management
Information received by the subject of control about the state of the control object
Information coming from the control system to the control object
Control object
12
Purpose of financial management
aim financial management is to develop certain solutions to achieve optimal end results and find the optimal balance between short-term and long-term goals for the development of the enterprise and decisions made in the current and future financial management.
13
The main goal of the financial
management
main goal financial management is to ensure the growth of the welfare of the owners of the enterprise in the current and prospective period.
14
The main tasks of the financial
management:
one). Ensuring the formation of a sufficient amount of financial resources in accordance with the needs of the enterprise and its development strategy.
2). Ensuring the effective use of financial resources in the context of the main activities of the enterprise.
3). Optimization of cash flow and settlement policy of the enterprise.
4). Profit maximization with an acceptable level of financial risk and a favorable taxation policy.
5). Ensuring a constant financial balance of the enterprise in the process of its development, i.e. ensuring financial stability and solvency.
15
Principles of financial management
16
Structure of financial management
17
Functions
financial
management
1. Functions of the control object,
2. Functions of the subject of management.
18
Control object functions
Control object functions:
1. reproductive
, ensures the reproduction of advanced capital on an expanded basis;
2. Production
– ensuring the continuous functioning of the enterprise and the circulation of capital;
3. Control
(control of capital management, enterprise).
19
Functions of the subject of management
1. Forecasting financial situations and conditions;
2. Planning of financial activities;
3. regulation;
4. Coordination of the activities of all financial departments with the main, auxiliary and service departments of the enterprise;
5. Analysis and assessment of the state of the enterprise;
6, Incentive function;
7. Function of control over money circulation, formation and use of financial resources.
20
Management functions in
management cycle
PLANNING
CONTROL
ORGANIZATION
MANAGEMENT
MOTIVATION,
REGULATION
21
Development of financial strategy
Organization
Implementation of financial planning
Implementation of the analysis of financial activity
Control
Formation of effective information systems
Motivation
Delegation
FUNCTIONS
FINANCIAL MANAGEMENT
AS A CONTROL SYSTEM
current assets
Fixed assets
Asset structure
Asset Management
Equity
Borrowed capital
Capital structure
Capital Management
Real investment
financial investments
Investment management
Operating activities
Investment activities
Financial activities
Cash flow management
Composition of risks
Risk Prevention
Risk insurance
Financial risk management
Solvency
Financial stability
financial balance
Sanation
Anti-crisis financial management
SPECIAL FUNCTIONS
FINANCIAL MANAGEMENT
FUNCTIONS OF FINANCIAL MANAGEMENT
22
General scheme of financial management
financial challenge
(determining the purpose of capital use)
Choice
financial methods,
levers and techniques for managing the movement of financial resources and capital
Decision-making.
Drawing up a program of events,
financial plan
Organization of decision implementation
Control over the implementation of the decision
Analysis and evaluation of solution results
23
Basic concepts of financial
management
1). Cash flow concept.
2). The concept of time value
monetary resources.
3). The concept of trade-off between risk and
profitability.
4). The concept of the price of capital.
5). Market Efficiency Concept
capital.
6). The concept of asymmetry
information
7). The concept of agency relations.
eight). The concept of opportunity costs.
24
Cash flow concept
This concept assumes:
1. identification of the cash flow, its duration and type (short-term, long-term, with or without interest);
2. assessment of the factors that determine the value of the elements of the cash flow;
3. selection of a discount factor that allows comparing flow elements generated at different points in time;
4. an assessment of the risk associated with this flow, and ways to account for it.
25
The concept of the time value of money
resources
Time value is an objectively existing characteristic of monetary resources.
It is determined by three main reasons:
a) inflation
b) The risk of not receiving or not receiving the expected amount,
c) turnover.
26
The concept of trade-off between risk and
profitability
The meaning of the concept:
Getting any income in business is almost always associated with risk, and the relationship between them is directly proportional.
At the same time, situations are possible when the maximization of income should be accompanied by the minimization of risk.
27
The concept of the price of capital
Maintenance of one or another source of financing costs for the firm unequally, therefore, capital price shows
the minimum income required to
cover the costs of maintaining each
source and allowing not to be at a loss.
The quantitative assessment of the price of capital is of key importance in the analysis of investment projects and the choice of alternative options for financing an enterprise.
28
Market Efficiency Concept
capital
Operations in the financial market (with securities) and their volume depends on how much the current prices correspond to the intrinsic value of the securities.
The market price depends on many factors, including information.
Information is seen as a fundamental factor, and how quickly information is reflected in prices, the level of market efficiency changes.
29
The concept of information asymmetry
This concept is directly related to the previous concept.
Its meaning is as follows: individual
categories of persons may have information, not
available to other market participants
.
The use of this information can have both positive and negative effects.
30
The concept of agency relations
It was introduced into financial management in connection with the complication of organizational - legal forms business.
essence: in complex organizational and legal forms there is a gap between the function of ownership and the function of management, that is, the owners of companies are removed from the management that managers are engaged in.
In order to level the contradictions between managers and owners, to limit the possibility of undesirable actions of managers, the owners are forced to bear agency costs (the manager's participation in profits or agreement with the use of profits).
31
Opportunity cost concept
Any investment is always
has an alternative.
32
The main stages in the development of financial
management
At present, Western experts distinguish five approaches in the formation and development of financial management.
33
First approach
It is associated with activities schools of empirical
pragmatists"(1850-1860). Its representatives are professional analysts (Eugene Brigham, USA), who, working in the field of analyzing the creditworthiness of companies, tried to justify a set of relative indicators suitable for such an analysis. For the first time they tried to show the variety of analytical coefficients that can be calculated from the data financial statements and are useful for making managerial decisions.
34
Second approach
This approach is driven by the activities of the school
« statistical financial analysis»
(1860-1880). The main idea is that analytical ratios calculated from financial statements are only useful if there are criteria against which these ratios can be compared.
35
Third Approach
This approach is associated with the activities of the school
« multivariate analysts"(1870-1890).
Representatives of this school proceed from the idea of building conceptual foundations based on the existence of an undoubted connection between private coefficients characterizing the financial condition and efficiency. current activities.
36
Fourth Approach
The fourth approach is associated with the emergence of " schools
forecasting analysts
company bankruptcy"(1930). Representatives of this school emphasize the financial stability of the company in the analysis, preferring a prospective analysis to a retrospective one.
37
Fifth Approach
The fifth approach is the newest direction (1990) - the school " participants of the stock
market».
The value of reporting lies in the possibility of using it to predict the level of efficiency of investing in securities.
This direction is developed mainly by scientists and has not yet received recognition in practice.
38
1. Financial analysis and planning, and
financial forecasting:
assessment and analysis of assets and sources of their formation;
assessment of the size and composition of the resources needed to maintain the economic potential of the company and expand its activities;
assessment of sources of additional financing;
formation of a system of control over the compilation and efficient use financial resources.
39
Areas of financial management
2. Providing the enterprise with financial
resources:
assessment of the amount of required financial resources;
choice of forms of their receipt;
assessment of the degree of availability and time of receipt of these resources;
assessment of the cost of owning this type of resource (%, discount, etc.);
assessment of the risk associated with this source of funding.
40
Areas of financial management
3. Distribution and use of financial
resources:
analysis and evaluation of long-term and short-term investment decisions;
optimal time for transforming financial resources into other types of resources
(material, labor, monetary);
expediency and efficiency of investments in
OF, NMA and the formation of their rational structure;
optimal use of working capital;
ensuring the effectiveness of financial investments.
42
Financial service managing
subject
The financial service, as a rule, consists of two divisions, one of which is administered by the treasurer, and the other by the controller (chief accountant) of the company.
43
Treasury functions
The functions of the Treasury include the formation of the capital investment budget, the development of annual financial plans, the development of a dividend policy, the planning of the capital structure and the organization of relationships with its main suppliers - financial institutions and private investors. The Treasury also manages the current liquidity of the company and ensures the completeness and timeliness of the collection of cash income and the smooth implementation of payments.
44
Functions of the control service
The control service primarily performs accounting and auditing functions - accounting for production resources, production accounting and costing, tax accounting, internal audit, drawing up an external financial reporting.
45
Interaction with others
management subsystems
In the process of performing its functions, the financial management subsystem closely interacts with all other management subsystems, therefore, along with the vertical subordination of financiers, their horizontal integration with other enterprise services is of great importance: marketing, supply, production, personnel, etc.
46
Information Support
financial management
Information support of financial management is carried out due to the continuous targeted selection of informative indicators necessary for the analysis, planning and preparation of effective operational management decisions on all aspects of the financial activity of the enterprise.
47
Scorecard
informational
ensure
financial
management,
formed from
external sources
48
Scorecard
informational
ensure
financial
management,
formed from
internal sources
49
2. Financial
activity,
financial mechanism
enterprises, financial
analysis
50
Financial relations of the business
subject
The financial relations of an economic entity form the basis of finance.
Finance expresses the form of the movement of value in the production and trade process and reflects the completeness of the acts of commodity-money relations, the social recognition of the produced use values, that is, the produced goods have found their consumers.
51
Functions of the finance manager
subject
The finances of an economic entity perform three functions:
1) the formation of cash funds
(income);
2) use of cash funds
(costs);
3) control over the formation and use of monetary funds.
52
financial mechanism
financial mechanism
- actions of financial leverage, expressed in the organization, planning and stimulation of the use of financial resources.
53
Structure of the financial mechanism
The structure of the financial mechanism includes five interrelated elements:
financial methods, financial
leverage, legal, regulatory and
Information Support
.
54
financial method
financial method
can be defined as the mode of action of financial relations on economic process, which operate in two directions: in the line of managing the movement of financial resources and in the line of market commercial relations related to the comparison of costs and results, with material incentives and responsibility for the efficient use of funds.
55
financial leverage
financial leverage
is a reception of the action of the financial method.
Financial leverage includes profit, income, depreciation, special-purpose economic funds, financial sanctions, rent, interest rates on loans, deposits, bonds, share contributions, contributions to authorized capital, portfolio investments, dividends, discount, ruble exchange rate quotation etc.
56
Legal support
Legal support
functioning of the financial mechanism includes legislative acts, resolutions, orders, circular letters and other legal documents governing bodies.
57
Regulatory support
Regulatory support
functioning of the financial mechanism form instructions, standards, norms, tariff rates, guidelines and explanations, etc.
58
Information Support
Information Support
functioning of the financial mechanism consists of various kinds and types of economic, commercial, financial and other information.
Financial information includes information about the financial stability and solvency of their partners and competitors, about prices, rates, dividends, interest on the commodity, stock and currency markets, etc.; report on the state of affairs on the exchange, over-the-counter markets, on the financial and commercial activities of any economic entities worthy of attention; various other information.
59
The financial analysis
Financial analysis is an assessment and forecasting of the financial condition of an enterprise based on its financial statements.
60
The main goal of financial analysis
Home purpose any type of financial analysis is the assessment and identification of internal problems of the company for the preparation, justification and adoption of various management decisions, including in the field of development, overcoming the crisis, transition to bankruptcy procedures, buying and selling a business or a block of shares, attracting investments (borrowed funds ).
61
Objectives of financial analysis
TO goals financial analysis also include:
1. Objective assessment financial condition, financial results, efficiency and business activity of the object of analysis.
2. Identification of the factors and causes of the achieved state and the results obtained.
3. Preparation and justification of managerial decisions in the field of finance.
4. Identification and mobilization of reserves for improving the financial condition and financial results, increasing the efficiency of all economic activities.
62
Where to start the financial analysis
Financial analysis begins with a comprehensive examination of the intentions of the enterprise, such as:
production expansion,
equipment placement,
change in current status,
and other activities requiring the movement of money.
63
Scoping
Financial analysis involves determining the scope, quantitative composition and timing of the movement of financial resources from suppliers to recipients through financial markets and financial institutions.
64
Types of financial analysis
Financial analysis can be of two types:
1. Internal analysis;
2. External analysis.
65
External analysis
External analysis- this is a financial analysis based only on public accounting data, carried out outside the enterprise by interested parties
(owners, government agencies, contractors).
66
Features of external analysis
Features of external analysis are
:
one). The plurality of subjects of analysis, users of information about the activities of the enterprise.
2). Variety of goals and interests of analysis;
3). Availability of standard methods, accounting and reporting standards;
4). Orientation of the analysis only to the public, external reporting of the enterprise;
5). Limitation of analysis tasks, due to the fact that external analysis focused only on public, external reporting of the enterprise;
6). Maximum openness of the results of the analysis for users of information about the activities of the enterprise.
67
The main content of the external
financial analysis
The main content of external financial analysis is:
one). Analysis of absolute indicators of profit;
2). Analysis of relative profit indicators;
3). Analysis of the financial condition, market stability, financial results, liquidity of the balance sheet, solvency of the enterprise;
4). Assessment of property status;
5). Study of the state and dynamics of receivables and payables;
6). Analysis of the effectiveness of the execution of borrowed capital, economic diagnostics of the financial condition of the enterprise.
68
Who performs external analysis
External financial analysis is carried out by employees of tax authorities, audit firms, commercial banks, insurance companies, in order to study the correctness of reflecting the results of the enterprise, its creditworthiness.
69
On-farm financial analysis
When conducting it, data available to a limited circle of persons managing the activities of the enterprise are used as sources of information.
This is a financial statement technical training production, regulatory and planning information and other system accounting data.
70
Features of on-farm
financial analysis:
one). Orientation of the results of the analysis to the goals and interests of the management of the enterprise;
2). Use of all sources of information for analysis;
3) Lack of regulation of analysis from outside government agencies;
4) The complexity of the analysis, the study of all aspects of the enterprise;
5). Integration of accounting, planning analysis and decision making;
6). Maximum secrecy of the analysis results in order to preserve commercial secrets.
71
Tasks of internal analysis
More deeply explore the causes of the current financial condition, the efficiency of the use of fixed and working capital, the relationship between indicators of volume, cost and profit.
72
Who conducts internal analysis
Internal financial analysis is carried out by the financial managers of the enterprise and its owners in order to use the entire set of available informative indicators.
The results of such analysis may be a trade secret.
73
Comparison table of internal and
external analysis
External analysis
Internal analysis
Target
Financial
states (problem of choice)
financial improvement
states
Initial data
Open (standard)
financial statements
Any information
needed to solve
task
Methodology
Standard
Any corresponding
solution of the
tasks
Accent
Comparison with others
enterprises
Identification of causal
investigative links
An object
research
Enterprise as a whole
The enterprise, its structural
divisions, directions
activities, types
products
74
Forms of financial analysis
one). Form No. 1 of financial analysis.
2). Form No. 2 of financial analysis.
3). Form No. 3 of financial analysis.
75
Form No. 1 of financial analysis
According to the volume of analytical research, there are full and
