Corporate Finance is... the Concept and the specifics of the Finance of the enterprise

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2018-04-17 21:00:34

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Getting the maximum number of funds is the main goal of any enterprise. In order to understand what you have and how to use it, you need to pursue a sound financial policy. And for that you need to know the theoretical basis of this approach.

What is Finance?

Finance of enterprisesThe So-called system of money relations, which expresses the formation and use of trust funds during their circulation. Finance firms occupy an important position in the economic system of the state, because their level formed the bulk of the funds that will be used further. They are divided into private and credit (debt). The first are unconditional the location of the enterprise and can be used for any purpose. Second, you will need time to recover, paying more interest and. So what are the features of a Finance company? This is a tough question, so the answer will be divided into several sub-items.

What are Finance companies?

principles of corporate FinanceIt is an integral part of national economic system. These include:

  1. Pricing.
  2. Budget financing.
  3. The Tax system.
  4. The Level of money circulation.
  5. Credits.
  6. International business.
  7. Licensing.
  8. Revenues.

The Greatest negative impact on the finances of business are provided by the following factors:

  1. Unexamined issue and monetary policy that does not take into account the volume of commodity supply and the real interests of the company.
  2. Price Liberalization without the necessary prior to this settlement.
  3. Incorrect fiscal policy.
  4. Reduction of investment activities.
  5. Trends in the stock market and credit-banking policy.
  6. Payments Crisis.
  7. Erroneous policy regarding export/import.

Principles of corporate Finance

For their organization must adhere to the following tenets:

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  1. To Maintain a stake in the results.
  2. Create financial reserves.
  3. Responsibility.
  4. Division of Finance and credit.
  5. Fulfilment of obligations to the budget.
  6. Financial control activities and use of funds.
  7. Independence.
  8. Self-financing.

Principles of corporate Finance based on the balance of interests of the private entrepreneur and the state. If you deviate from them provided the leverage that will allow you to return the system to its original state.

Relationship of cash turnover

commercial Finance companiesBusiness Finance – an economic element that is continuously in motion. Each direction spending should have its funding source. Usually allocate such a relationship:

  1. With customers.
  2. Employees of the company or enterprise.
  3. Banking institutions.
  4. Government.
  5. With management structures that have leverage.
  6. The participation in other enterprises (such as the distribution of profit, received from joint activity).
  7. Handling of trust funds that have on-farm appointment.

Financial mechanism

It consists of five elements, which are interdependent:

  1. Financial methods. These include ways to influence business processes in the use of funds by creating trust funds. The formation of the Finance of the enterprises is the main purpose of using these methods. Their peculiarity is that they define the basis on which everything else is built.
  2. Financial leverage. These actions are aimed at achieving the desired goal.
  3. Legal support. Includes regulations, orders, legislative acts and other similar documents.
  4. Regulatory support. These include instructions, tariff rates, explanations, guidelines and similar data.
  5. Information support. These include economic, commercial, financial, and other data that are valuable in each case. Thus, the objects may be information on the solvency, financial stability, monetary rates, and so on.

As you can see, finances – this is such a specific area where you have to act with caution on a number of factors. And they can have as an information base, and legislative. If you select the wrong method of interaction of the entrepreneur is waiting for, perhaps, ruin.

Functions

features of corporate FinanceThey allow us to understand the content itself of this sphere of enterprise activity. Only there are three options:

  1. Distribution (stimulating). Shall mean that the company makes a decision, where will the monies received. With its help form the Foundation to perform all of the obligations that the organization has the staff, budget, contractors and lenders. If done with a reasonable approach, the stimulation of quality of work, it can be said about commercial Finance companies, and governmentorganizations.
  2. Control. It is to monitor the financial status of the organization and test the effectiveness of its work. The most important is to control the profitability of the enterprise. This function is implemented in two ways:
    1. Monitoring the metrics that go into the operational, accounting and statistical statements.
    2. Under the influence of financial effects (taxes, subsidies, benefits).
    3. Serving (reproducing). This function deals with the fact that there was a constant renewal of the consumed resources (as an example: purchase of new materials, hire new workers to replace the retired and so on).

Structure

analysis of corporate FinanceFinancial resources according to their origin can be divided into three components:

  1. Are Formed due to own means. These include profits derived from operations, sale of property, trust receipts, various fees, and so on.
  2. Were mobilized in the financial market. These include funds received in the sale of securities, interest and dividends, loans, or income received under operations with foreign currencies.
  3. Comes after redistribution. This insurance indemnity, financial resources (which were received from other economic structures), resources (which was formed on a mutual basis) and budget subsidies.

Administration

The Formation and use of financial resources is not possible if there is no system that organizes and coordinates. Management implies the achievement of strategic and/or tactical goals regarding the functioning of the enterprise. Features of corporate Finance include:

  1. Formation of financial resources and their optimization.
  2. The deployment of capital.
  3. Analysis of corporate Finance and the direction of the cash flows that circulate on it.
  4. Manage the process of functioning of capital.
  5. Organization and management of relationships with other businesses, insurance companies, budgets, banks and offices of financial institutions.

Conclusion

the formation of the Finance companyAs you can see, finances – is a complex component of any business organization. They need to be able to handle and efficiently used. Every Manager should be aware that Finance companies – this is the main key of its functioning, and they should always work from the point of view of optimality and efficiency.


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Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."

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