Organization finance

One of the tasks of corporate finance is to ensure uninterrupted supply of money to the organization. The main source of financing the economic activities of the organization is its own capital ( authorized capital and profit ) ^[2] . With a temporary excess of the cost of doing business over the amount of working capital , the organization attracts borrowed capital ^[3] . To meet long-term needs, bonds or stocks are more often issued, or long-term loans are taken. Such strategic decisions about taking a loan or issuing shares ultimately determine the organization’s capital structure itself ^[4] . It should be noted that the traditional accounting indicator profit does not take into account the opportunity costs of raising capital used to create economic profit, as well as the growth necessary to create additional value, control the amount of working capital, capital investments, but takes into account such non-monetary indicator as depreciation of fixed assets and intangible assets, therefore, individual financial specialists choose the expected disk as the main indicator of the company’s activity cash flow. This alternative management method is called business value management ^[5] .

The next task of corporate finance is to find the optimal balance between business profitability and financial risks.

Another important aspect of corporate finance is investment decisions, that is, decisions on investing funds in order to generate additional income. Investment management is the most important aspect of finance at any level, and the corporate level is no exception. Before deciding on an investment, you need to analyze the following factors:

• correlation between: target - period of time - inflation - risk aversion - taxes - net income
• the choice between an active and passive hedging strategy
• assessment of the effectiveness of the investment portfolio

Functions:

• Accounting - with the help of a financial mechanism, all produced values ​​of goods, work, services are recorded.
• Distribution - as a result of the sale of goods, work, services, the newly created value is distributed and redistributed between the producer, intermediary, and the state budget.
• Stimulating - through financial leverage, an enterprise can stimulate the development of priority areas of activity.
• Control - the company carries out internal and external control over the safety of property, efficient use of resources, rational spending of funds.

For organizations and enterprises, there are such principles of finance ^[6] :

1. The principle of economic independence
2. The principle of self-financing
3. Principle of material interest
4. The principle of providing financial reserves
5. The principle of financial planning and commercial calculation
6. Principle of liability
7. Principle of economic efficiency
8. Principle of financial control

Financial work - the practical activities of people in managing the organization’s finances. The ultimate goal of this activity is to achieve the best results at the lowest cost. Results are understood as both economic and social performance indicators.

Tasks of financial work:

• providing financial resources of all types of costs necessary for current and future activities
• ensuring financial stability and economic independence
• finding reserves for increasing income and final financial results
• the use of financial leverage for the rational use of material, labor and financial resources
• compliance with financial discipline in cooperation with state financial bodies and business partners
• Strengthening, maintaining and enhancing property

The scope of financial (monetary) relations of an enterprise includes:

1. Relations between the company and its investors ( shareholders , participants , owners ) regarding the formation and effective use of equity , as well as the payment of dividends and interest .
2. The relationship between the company, suppliers , customers about the calculations , as well as ways to ensure the fulfillment of financial obligations.
3. Relations between the enterprise and financial institutions ( banks , insurance companies , other financial organizations).
4. The relationship between the investor enterprise and other enterprises (organizations) regarding its investments and payment of dividends and interest on them.
5. Relations between the enterprise and the state regarding the payment of taxes and other obligatory payments.
6. Relations between parent and subsidiary enterprises regarding internal corporate redistribution of funds.
7. Relations between the company and copyright holders regarding the payment of remuneration under a commercial concession agreement.
8. The relationship between the company and employees regarding pay, tax withholding.
9. Other financial relations of the enterprise.