The amount of the enterprise's own fixed capital is calculated using the following formula:

where SKoc is the amount of its own fixed capital formed by the enterprise;
VA - the total amount of non-current assets of the enterprise;
DZKv - the amount of long-term borrowed capital used to finance the non-current assets of the enterprise.

2. Formation at the expense of own capital of a certain volume of current assets. The amount of equity capital advanced into various types of its current assets (inventories of raw materials, supplies and semi-finished products; volume of work in progress; inventories of finished products; current accounts receivable; cash assets, etc.) is characterized by the term own working capital.

The amount of the enterprise’s own working capital is calculated using the following formula:

where SKob is the amount of own working capital generated by the enterprise;
OA - the total amount of current assets of the enterprise;
DZKo - the amount of long-term borrowed capital used to finance the current assets of the enterprise;
KZK - the amount of short-term borrowed capital attracted by the enterprise.

In order to separately study the impact on operating profit of an increase in the volume of product sales in physical terms and changes in the price level for it, the following formula is used to determine the effect of operating leverage:

where Eol is the effect of operating leverage;
ΔGOP - growth rate of gross operating profit, in%;
Δ0Рн - growth rate of product sales volume in physical terms (number of product units), in%;
ΔTse is the rate of change in the level of the average price per unit of production, in%.

This formula allows you to comprehensively take into account the impact on changes in the amount of operating profit of both the operating leverage ratio and changes in pricing policy.

There are other more complex modifications of the formula for calculating the effect of operating leverage. However, despite the differences in the algorithms for determining the effect of operating leverage, the content of the mechanism for managing operating profit by influencing the ratio of fixed and variable costs of the enterprise remains unchanged.

For clarity, consider the effect of operating leverage using the following example:

Example. Two enterprises “A” and “B” have the same initial base of product sales volume and increase this volume over subsequent periods at the same pace. At the same time, at enterprise “B*” the amount of fixed operating costs is twice as high as at enterprise “A” (60 and 30 conventional monetary units, respectively). At the same time, at enterprise “A” the level of variable operating costs in the calculation was higher. per unit of production than at enterprise “B” (20% and 10%, respectively). Based on these different ratios of fixed and variable operating costs at enterprises, we will determine the growth rate of the amount of gross operating profit at the same growth rate of product sales (level of tax payments). at the expense of gross operating income we will accept in the amount of 20% of its total amount). The results of calculating the effect of operating leverage are presented in Table 10.1.

As can be seen from the calculation results, both enterprises, due to the presence of fixed operating costs, receive the effect of operating leverage. However, the level of this effect varies significantly due to differences in operating leverage ratios.

Thus, enterprise “A”, having increased the volume of product sales in relation to the first period by 100% in the second and by 200% in the third period, received a corresponding increase in gross operating profit of 200% and 400%. At the same time, enterprise “B”, with the same growth rate in product sales volume, due to a higher operating leverage ratio, received an increase in gross operating profit of 600% and 1400%, respectively. And in relation to the second period, the mechanism of manifestation of the effect of operating leverage remained unchanged - having increased the volume of product sales by 50%, enterprise "A" received an increase in the amount of gross operating profit in the amount of 67%, and enterprise "B" (due to a higher operating leverage ratio ) - in the amount of 88%.

The comparison results show that due to the higher initial operating leverage ratio, the degree of sensitivity of operating profit to the increase in product sales at enterprise "B" is significantly higher than at enterprise "A"

The general operating principle of the operating leverage mechanism was discussed above. At the same time, in specific situations of an enterprise's operating activities, the manifestation of the operating leverage mechanism has a number of features that must be taken into account in the process of using it to manage profits. Let us formulate the main of these features.

1. The positive impact of operating leverage begins to appear only after the enterprise has passed the break-even point of its operating activities. In order for the positive effect of operating leverage to begin to manifest itself, the enterprise must first receive a sufficient amount of marginal profit to cover its fixed operating expenses (i.e., ensure equality: MP = Hypost). This is due to the fact that the enterprise is obliged to reimburse its fixed operating costs regardless of the specific volume of product sales, therefore, the higher the amount of fixed costs and the operating leverage ratio, the later, other things being equal, it will reach the break-even point of its activities. In this regard, until the enterprise has achieved break-even in its operating activities, a high operating leverage ratio will be an additional “burden” on the way to achieving the break-even point. This can be seen from the data presented in Fig. 10.10.

As can be seen from the presented graph, with a high share of fixed costs (operating leverage ratio), the break-even point lies much to the right when the volume of product sales increases.

2. After overcoming the break-even point, the higher the operating leverage ratio, the greater the power of influence on profit growth the enterprise will have, increasing the volume of product sales. This thesis has already been confirmed by a previously given example (see Table 10.1), so we will illustrate it only graphically (Fig. 10.11).

From the above graph it can be seen that at the same growth rate of product sales at an enterprise with a higher operating leverage ratio (enterprise “B”), the amount of operating profit increases at a higher rate after overcoming the break-even point than at an enterprise with a lower operating leverage ratio (enterprise "A").

3. The greatest positive impact of operating leverage is achieved in the field as close as possible to the break-even point (after it has been overcome). As the volume of product sales further increases and moves away from the break-even point (i.e., as the safety margin or safety margin increases), the effect of operating leverage begins to decrease. In other words, each subsequent percentage increase in product sales volume will lead to an increasingly slower growth rate in the amount of operating profit (but at the same time, the growth rate in the amount of profit will always remain greater than the growth rate in product sales volume). This can be seen from the graph presented in Fig. 10.12.

From the above graph it is clear that with the same volume of increase in product sales, gross operating profit decreases as the enterprise moves away from the break-even point or increases the safety limit: ΔВП 2< ΔВОП 1 .

4. The mechanism of operating leverage also has the opposite direction - with any decrease in the volume of product sales, the size of the gross operating profit will decrease to an even greater extent. Moreover, the proportions of such a reduction depend on the value of the operating leverage ratio: the higher this value, the faster the amount of gross operating profit will decrease in relation to the rate of decline in product sales. Likewise, as you approach the break-even point in the opposite direction, the negative effect of the rate of decline in profits relative to the rate of decline in product sales will increase. The proportionality of the decrease or increase in the effect of operating leverage with a constant value of its coefficient allows us to conclude that the operational leverage ratio is a tool that equalizes the ratio of the level of profitability and the level of risk in the process of carrying out operating activities.

5. The effect of operating leverage is stable only in the short term. This is determined by the fact that operating costs, classified as fixed costs, remain unchanged only for a short period of time. As soon as, in the process of increasing the volume of product sales, another jump in the amount of fixed operating costs occurs, the enterprise needs to overcome the new break-even point or adapt its operating activities to it. In other words, after such a jump, which causes a change in the operating leverage ratio, its effect manifests itself in a new way in new business conditions.

Understanding the mechanism of manifestation of operational leverage allows you to purposefully manage the ratio of fixed and variable costs in order to increase the efficiency of operating activities. This management comes down to changing the value of the operating leverage ratio under various trends in the product market conditions and stages of the enterprise life cycle.

In case of unfavorable conditions on the product market, which determines a possible decrease in the volume of product sales, as well as in the early stages of the enterprise’s life cycle, when it has not yet overcome the break-even point, it is necessary to take measures to reduce the value of the operating leverage ratio. And vice versa, with favorable conditions on the commodity market and the presence of a certain safety margin (margin of safety), the requirements for the implementation of the fixed cost savings regime can be significantly weakened - during such periods, the enterprise can significantly expand the volume of real investments by reconstructing and modernizing production fixed assets.

Operating leverage can be managed by influencing both fixed and variable operating costs.

When managing fixed costs, it should be borne in mind that their high level is largely determined by the industry characteristics of operating activities, which determine different levels of capital intensity of manufactured products, differentiation of the level of mechanization and labor automation. In addition, it should be noted that fixed costs are less amenable to rapid change, so enterprises with a high operating leverage ratio lose flexibility in managing their costs.

However, despite these objective limitations, each enterprise has sufficient opportunities to reduce, if necessary, the amount and share of fixed operating costs. Such reserves include a significant reduction in overhead costs (management costs) in the event of unfavorable commodity market conditions; sale of part of unused equipment and intangible assets in order to reduce the flow of depreciation charges; widespread use of short-term forms of leasing of machinery and equipment instead of purchasing them as property; reduction in the volume of a number of consumed utilities and some others.

When managing variable costs, the main guideline should be to ensure constant savings, because There is a direct relationship between the amount of these costs and the volume of production and sales of products. Providing these savings before the enterprise overcomes the break-even point leads to an increase in the amount of marginal profit, which allows it to quickly overcome this point. Once the break-even point is passed, the amount of variable cost savings will provide a direct increase in gross operating profit. The main reserves for saving variable costs include reducing the number of workers in main and auxiliary production by ensuring an increase in their labor productivity; reducing the size of inventories of raw materials and finished product materials during periods of unfavorable commodity market conditions; ensuring favorable terms for the enterprise for the supply of raw materials and materials, and others.

Targeted management of fixed and variable costs, prompt changes in their ratio under changing business conditions make it possible to increase the potential for generating an enterprise's operating profit.

Dividend policy

5. The policy of constantly increasing the size of dividends (carried out under the motto “never reduce the annual dividend”) provides for a stable increase in the level of dividend payments per share. The increase in dividends when implementing such a policy occurs, as a rule, in a firmly established percentage of increase to their size in the previous period (the Gordon Model, which determines the market value of shares of such companies, is built on this principle). The advantage of such a policy is to ensure a high market value of the company's shares and the formation of a positive image among potential investors during additional issues. The disadvantage of this policy is the lack of flexibility in its implementation and the constant increase in financial tension - if the growth rate of the dividend payout ratio increases (i.e. if the dividend payout fund grows faster than the amount of profit), then the investment activity of the enterprise is reduced, and the financial stability ratios decrease (other things being equal). Therefore, only truly prosperous joint-stock companies can afford to implement such a dividend policy - if this policy is not supported by the constant growth of the company's profits, then it is a sure path to its bankruptcy.

Various types of dividend policy of a joint stock company are illustrated in the graph shown in Fig. 10.13.

Taking into account the considered principles, the dividend policy of a joint-stock company is formed according to the following main stages (Fig. 10.14).

Figure 10.14. The sequence of formation of the dividend policy of a joint-stock company.

The initial stage of forming a dividend policy is the study and assessment of the factors that determine this policy. In the practice of financial management, these factors are usually divided into four groups:

1. Factors characterizing the investment capabilities of an enterprise. The main factors in this group include:

a) stage of the company’s life cycle (in the early stages of the life cycle, a joint-stock company is forced to invest more funds in its development, limiting the payment of dividends);

b) the need for a joint stock company to expand its investment programs (during periods of increased investment activity aimed at expanded reproduction of fixed assets and intangible assets, the need for capitalization of profits increases);

c) the degree of readiness of individual investment projects with a high level of efficiency (individual prepared projects require accelerated implementation in order to ensure their effective operation under favorable market conditions, which necessitates the concentration of one’s own financial resources during these periods).

2. Factors characterizing the possibilities of generating financial resources from alternative sources. The main factors in this group are:

a) adequacy of equity capital reserves formed in the previous period;
b) the cost of attracting additional share capital;
c) the cost of attracting additional borrowed capital;
d) availability of loans in the financial market;
e) the level of creditworthiness of the joint-stock company, determined by its current financial condition.

3. Factors associated with objective limitations. The main factors in this group include:

An assessment of these factors allows us to determine the choice of one or another type of dividend policy for the near future.

The mechanism for distributing profits of a joint stock company in accordance with the chosen type of dividend policy provides for the following sequence of actions:

At the first stage, mandatory contributions to the reserve and other mandatory special-purpose funds provided for by the company's charter are subtracted from the amount of net profit. The “cleared” amount of net profit represents the so-called “dividend corridor”, within which the corresponding type of dividend policy is implemented.

At the second stage, the remaining part of the net profit is distributed into its capitalized and consumed parts. If a joint stock company adheres to a residual type of dividend policy, then during this stage of calculations the priority task is to form a production development fund and vice versa.

At the third stage, the consumption fund formed at the expense of profits is distributed to the dividend payment fund and the consumption fund of the personnel of the joint-stock company (providing for additional material incentives for employees and meeting their social needs). The basis for such distribution is the chosen type of dividend policy and the obligations of the joint stock company under the collective agreement.

The level of dividend payments per common share is determined using the formula:

where UDVpa is the level of dividend payments per share;
VP - fund for paying dividends to owners of preferred shares (according to their intended level);
Kpa - the number of common shares issued by a joint stock company.

An important stage in the formation of dividend policy is the choice of forms of dividend payment. The main of these forms are:

1. Payment of dividends in cash (checks). This is the simplest and most common form of dividend payments.

2. Payment of dividends in shares. This form provides for the provision of newly issued shares to shareholders in the amount of dividend payments. It is of interest to shareholders whose mentality is focused on capital growth in the coming period. Shareholders who prefer current income can sell additional shares on the market for this purpose.

3. Automatic reinvestment. This form of payment gives shareholders the right to individual choice - to receive dividends in cash, or to reinvest them in additional shares (in this case, the shareholder enters into an appropriate agreement with the company or its brokerage house).

4. Repurchase of shares by the company. It is considered as one of the forms of dividend reinvestment, according to which the company buys part of the freely traded shares on the stock market using the amount of the dividend fund. This allows you to automatically increase the profit per remaining share and increase the dividend payout ratio in the upcoming period. This form of use of dividends requires the consent of shareholders.

To assess the effectiveness of a joint stock company's dividend policy, the following indicators are used:

a) dividend payout ratio. It is calculated using the formulas:

where Kdv is the dividend payout ratio;
FDV - dividend payment fund, formed in accordance with the selected type of dividend policy;
PE - the amount of net profit of the joint-stock company;
Yes - the amount of dividends paid per share;
NPA is the amount of net profit per share.

b) the price-to-earnings ratio of a stock. It is determined by the formula:

where Kts/d is the ratio of price and income for the stock;
РЦа - market price of one share;
Yes - the amount of dividends paid per share.

When assessing the effectiveness of the dividend policy, indicators of the dynamics of the market value of shares can also be used.

Share issue management

Raising equity capital from external sources through additional issue of shares is a complex and expensive process. Therefore, this source of generating one’s own financial resources should be resorted to only in extremely limited cases.

The process of managing the issue of shares is structured according to the following main stages (Fig. 10.15):

1. Research into the possibilities of effective placement of the proposed issue of shares. The decision on the proposed primary (if the enterprise is transformed into a joint-stock company) or additional (if the enterprise has already been created in the form of a joint-stock company and needs an additional influx of equity capital) issue of shares can be made only on the basis of a comprehensive preliminary analysis of the stock market conditions and an assessment of the potential investment attractiveness of its shares

Analysis of stock market conditions (exchange and over-the-counter) includes characteristics of the state of supply and demand for shares, dynamics of the price level of their quotations, sales volumes of shares of new issues and a number of other indicators. The result of such an analysis is to determine the level of sensitivity of the stock market's response to the appearance of a new issue and to assess its potential for absorbing the issued volumes of shares.

The assessment of the potential investment attractiveness of its shares is carried out from the perspective of taking into account the prospects for the development of the industry (in comparison with other industries), the competitiveness of the products produced, as well as the level of indicators of its financial condition (in comparison with the industry average indicators). The assessment process determines the possible degree of investment preference of the shares of one's own company in comparison with the circulating shares of other companies.

2. Determination of emission goals. Due to the high cost of raising equity capital from external sources, the objectives of the issue must be quite significant from the standpoint of the strategic development of the enterprise and the possibility of significantly increasing its market value in the coming period. The main goals that an enterprise follows when resorting to this source of equity capital formation are:

a) real investment associated with industry (sub-industry) and regional diversification of production activities (creation of a network of new branches, subsidiaries, new production facilities with a large volume of output, etc.);

b) the need to significantly improve the structure of the capital used (increasing the share of equity capital in order to increase the level of financial stability; ensuring a higher level of own creditworthiness and thereby reducing the cost of attracting borrowed capital; increasing the amount of the effect of financial leverage, etc.);

c) the planned takeover of other enterprises in order to obtain a synergistic effect (participation in the privatization of third-party state-owned enterprises can also be considered as an option for their takeover, if this ensures the acquisition of a controlling stake or a predominant share in the authorized capital);

d) other goals requiring the rapid accumulation of a significant amount of equity capital.

3. Determination of the volume of emission. When determining the volume of emissions, it is necessary to proceed from the previously calculated need to attract one’s own financial resources from external sources.

4. Determination of the par value, types and number of shares to be issued. The nominal value of the shares is determined taking into account the main categories of their upcoming buyers (the highest nominal values ​​of the shares are aimed at their acquisition by institutional investors, and the smallest - at the purchase by the public). In the process of determining the types of shares (common and preferred), the feasibility of issuing preferred shares is established; if such an issue is considered appropriate, then the ratio of common and preferred shares is established (it should be borne in mind that, in accordance with current legislation, the share of preferred shares cannot exceed 10% of the total issue volume). The number of shares to be issued is determined based on the volume of the issue and the par value of one share (during one issue, only one variant of the par value of shares can be established).

5. Estimation of the value of the attracted share capital.

In accordance with the principles of such an assessment, it is carried out according to two parameters: a) the expected level of dividends (it is determined based on the chosen type of dividend policy); b) costs of issuing shares and placing the issue (reduced to the average annual amount). The estimated cost of capital raised is compared with the actual weighted average cost of capital and the average interest rate on the capital market. Only after this is the final decision to issue shares made.

6. Determination of effective forms of underwriting. If there is no provision for the sale of shares directly by the investor by subscription, then in order to quickly and effectively conduct an open placement of the issued volume of shares, it is necessary to determine the composition of the underwriters, agree with them on the degree of their participation in the placement of the issue, the initial quotation price of shares and the amount of commission (spread ), ensure regulation of the volume of sales of shares in accordance with the needs for the flow of financial resources, ensuring the maintenance of liquidity of already placed shares at the initial stage of their circulation.

Taking into account the increased volume of equity capital, the enterprise has the opportunity, using a constant financial leverage ratio, to accordingly increase the amount of borrowed funds attracted, and consequently increase the amount of profit on invested equity capital.

In the financial and economic activities of each enterprise, both own and borrowed capital must be used.

The use of own capital allows the enterprise to avoid disruptions in work, implement various investment projects in a timely manner, etc.

Debt capital, within certain limits, is a cheaper source of financing than equity capital. This is due to the fact that interest on loans and borrowings, as a rule, is significantly less than dividends on shares that form the equity capital of the enterprise. However, to a greater extent this concerns the authorized capital. The same cannot be said for other elements of equity capital.

Equity includes:

• authorized capital;
• reserve and additional capital;
• targeted financial funds;
• retained earnings.

In practice, an enterprise's own funds can be formed from internal and external sources of financial resources.

Internal sources own funds constitute the bulk of equity capital. They include depreciation charges, which are important in enterprises with a high proportion of depreciable non-current assets and a depreciation policy that involves accelerated and additional depreciation.

External sources The formation of own funds includes additional share or share capital, which is attracted through additional cash contributions to the authorized capital or additional issue of shares.

Equity management should be carried out on the basis of a certain financial policy of the enterprise. It is usually carried out in three stages.

1. Analysis of the current potential of own financial resources: volume and dynamics in the previous period; compliance of the growth rate of equity capital with the growth rate of assets and sales volume; proportions of the ratio of external and internal sources of formation of own financial resources, their cost; the state of the autonomy and self-financing coefficient and their dynamics.

   The result of this stage should be the development of reserves for increasing equity capital.

2. Determining the need for equity capital. Based on known formulas and initial information, calculations of the need for equity capital are made:

   SKplan = KUDck – Pr + A,
   where SK plan is the additional need for equity capital for the planned period;
   Ku– total capital;
   d ck– the share of equity capital in its total amount;
   Pr – the amount of reinvested profit in the planning period;
   A – depreciation fund at the end of the planning period.

All indicator values ​​used are essentially planned.

Estimation of the cost of raising equity capital from various sources (internal and external). The financial policy of an enterprise must contain priorities in financing business activities. At this stage, based on the adopted financial policy, a management decision is made regarding the choice of alternative sources for the formation of its own financial resources.

The concept of “equity capital”, its composition and sources of formation

Definition 1

Equity capital is the total amount of funds owned by an organization by right of ownership and exploited by the organization to form assets.

Net assets are the value of assets formed by investing own capital in them.

Equity capital operates in various forms (Figure 1).

Figure 1. Forms of functioning of the organization's own capital. Author24 - online exchange of student works

Authorized capital is the totality of monetary contributions of shareholders to property when creating an organization to ensure its activities in the amounts established by the constituent documents (Charter).

Reserve capital is an insurance fund formed to cover losses and protect the interests of third parties in the event of insufficient profit for the organization.

Trust funds (special funds) are formed from the net profit of a business entity and serve for certain purposes in accordance with the Charter or a decision of shareholders (owners).

Retained earnings are the net profit remaining with the organization after paying dividends to shareholders and not used for other purposes.

Additional capital is an increase in the value of property (property) of an organization during the revaluation of fixed assets (fixed assets) and construction in progress, etc.

The elements that form the structure of equity capital are: the invested part and accumulated capital.

The invested portion includes the nominal portion of common and preferred shares and values ​​received free of charge. Accordingly, the invested capital is (diagram 2):

Figure 2. Elements of invested capital. Author24 - online exchange of student works

Accumulated capital - income items generated as a result of the distribution of net profit: reserve capital, accumulation fund, retained earnings, other funds.

Note 1

Own capital has both advantages and disadvantages. The advantages of equity capital are the ease of attraction and the high ability to concentrate profits in almost all areas of activity. Own capital ensures financial stability in terms of the development of the organization and reduces the risk of bankruptcy.

Negative aspects in the functioning of equity capital are the excessively limited volume of attraction and the narrow range of opportunities for global expansion of operating and investment activities during periods of favorable market conditions at certain stages of its life cycle. Compared to alternative debt sources of capital formation, the cost of equity capital is quite high.

Goals of formation and functions of equity capital

One of the main goals of the formation of equity capital is the formation of the required volume of non-current capital, since its own fixed capital is equal to the amount of the organization’s own capital advanced into various types of its non-current assets.

The formula for calculating fixed equity capital is as follows:

$SKos = VA – DZKv$, where:

• $skos$ – the amount of its own fixed capital formed by the organization;
• $ВА$ – the amount of non-current assets of the organization;
• $DZKv$ is the amount of borrowed capital in the long term and aimed at financing $VA$ (non-current assets).

The next goal of forming equity capital is the concentration of a certain volume of current assets. In this case it is expressed by the formula:

$SKob = OA – DZKo – KZK$, where:

• $skob$ – the amount of own working capital generated by the organization;
• $OA$ – the sum of all current assets of the enterprise;
• $DZKo$ – the amount of long-term borrowed capital for the purpose of financing current assets;
• $KZK$ is the amount of short-term borrowed capital raised by the organization.

The functions of equity capital are divided (Scheme 3);

Figure 3. Functions of equity. Author24 - online exchange of student works

The protective function fulfills the mission of protecting depositors (investors) and creditors and provides for the possibility of compensation in the event of losses or bankruptcy of the organization. It also allows you to maintain solvency at the expense of the formed reserve funds and continue the activities of the organization, despite the risk of losses.

The operational function considers equity capital as a source of long-term development of the organization’s material base.

The regulatory function determines the amount of equity capital as a development activity.

Optimal structure of equity capital

In order to determine the optimal structure of your own, the following criteria are used:

1. The amount of equity capital is determined by legislative acts and the requirements specified therein;
2. A necessary condition for an optimal structure is a sufficient amount of equity capital;
3. Own capital must be exploited with a high degree of efficiency;
4. The price of equity capital determines the high price of the organization, its financial stability and allows for the purchasing power of capital and its regulatory function;
5. One of the criteria for the optimal structure of equity capital is the infusion of retained earnings into its composition. Also, the protective function and regulatory functions are implemented in full only with a minimum amount of reserve capital.

The development of equity capital is one of the areas of the organization’s overall financial strategy, which is to provide its production and commercial activities with financial resources. The policy of generating your own financial resources should always be focused on providing self-financing for the organization.

The equity capital of an organization (enterprise) characterizes the total value of the organization's funds owned by it.

The following functions of equity capital can be distinguished:

– operational – related to maintaining the continuity of the organization’s (enterprise’s) activities;

– protective (absorbing) – aimed at protecting the capital of creditors and compensating (absorbing) the organization’s losses;

– distributive – associated with participation in the distribution of profits received;

– regulating – determines the possibilities and scope of attracting borrowed sources of financing, as well as the participation of individual entities in the management of the organization.

As part of equity capital, two main components can be distinguished: invested and accumulated capital.

Invested capital - This is the capital invested by the owners. Includes par value of common and preferred shares, as well as additional paid-in capital. Invested capital is presented in the balance sheet of Russian organizations in the form of authorized capital and additional capital in terms of share premium.

Accumulated capital is capital created in excess of what was originally advanced by the owners. It is reflected in the form of items formed from net profit (reserve capital, retained earnings).

Net assets (NA) - this is the difference between the amount of the organization’s assets accepted for calculation (Ar) and the amount of liabilities accepted for calculation (Pr).

In general, the value of net assets is calculated using the formula NA = Ar – Pr

The amount of net assets may not coincide with the total of Section III “Capital and Reserves” of the balance sheet. In order to avoid artificially inflating the share of equity capital and reduce the financial risks of the organization, the latter (the result of the section) needs to be adjusted.

The following components are distinguished (taken into account) as part of equity capital: authorized (share) capital, additional capital, reserve capital, retained earnings and other reserves.

In the process of managing equity capital, the sources of its formation are divided into internal and external.

IN composition of internal sources allocate retained earnings (she owns the main place), reserve funds Anddepreciation deductions. Depreciation charges, which represent the monetary expression of the cost of depreciation of fixed assets and intangible assets, are a source of financing for simple, and in some cases, expanded reproduction.

Among the external sources of formation of our own financial resources we can highlight:

Attracting additional share capital (by re-issuing and selling shares);

Free financial assistance from legal entities and the state;

Conversion of borrowed funds into equity (exchange of corporate bonds for shares);

Funds of targeted financing received for investment purposes;

Own capital is characterized by ease of attraction, since decisions to increase it are made by owners and managers without the participation of other business entities. The amount of equity capital largely determines the financial condition of the organization, in particular the level of its financial independence, the amount of net assets, and profitability of activities.

The level of financial independence (sustainability) of an organization is determined primarily its capital structure. The main indicators of the organization's capital structure include:

autonomy coefficient – characterizes the degree of financial independence (dependence) of the organization on borrowed sources of financing. It is defined as the ratio of the amount of equity capital to the total amount of assets of the organization (balance sheet currency). The calculated value should not be less than 0.5;

debt to equity ratio – shows which funds the company has more - its own or borrowed. Defined as the ratio of the amount of borrowed capital to equity. The maximum value of the coefficient should not exceed 1;

financial dependence ratio (financial leverage ratio) is the inverse of the autonomy coefficient. It is defined as the ratio of the value of the organization's total assets to the value of its equity capital. Shows the influence of capital structure as one of the factors on return on equity;

financial stability ratio characterizes the share of permanent capital in the form of equity and long-term borrowed capital in the total assets (capital) of the enterprise. In foreign practice of financial analysis, the normal value of this coefficient is taken to be 0.9. A decrease in the coefficient to 0.75 is considered a critical level.

The disadvantages of using only equity are:

Limited volume of attraction to expand the scale of business activity;

Higher cost compared to alternative debt sources of capital;

The unrealized possibility of increasing profitability through the use of borrowed funds using the effect of financial leverage.

Introduction

Chapter 1. Theoretical foundations of equity capital

1 The concept of equity capital and its essence

2 Structure of the enterprise’s equity capital

3 Price of equity capital and methods for determining it

Conclusion

List of used literature

Introduction

Currently, managing an enterprise as an economic system requires solving numerous problems caused by both external and internal factors. At the same time, one of the main internal factors of uncertainty for making management decisions is incomplete information, both about the current state and prospects for the development of one’s own enterprise. Solving these problems requires the formation of new approaches to management and tools for their implementation, which would help modify the organizational and information structures of the enterprise in such a way as to clearly capture the trends of change and instantly adapt to them. As such a concept, you can use enterprise equity management. This paper examines the management of an enterprise's own capital, since it is the formation of a capital structure that fully satisfies all the needs and capabilities of the enterprise that is one of the main economic problems of managers today.

In recent decades, the management of an enterprise's own capital has received an increasingly broad theoretical basis and effective forms of practical implementation. The range of issues resolved by this type of functional enterprise management is so extensive that the management decisions made in this area are inextricably linked with all the main activities of the enterprise and all stages of its life cycle, which determined the relevance of this study.

Own capital allows you to form assets that are free from the claims of persons who are not the owners of the organization, and in this regard, it is the basis for the financial stability and stable successful functioning of any commercial enterprise. The dynamics of the amount of equity capital and its individual components, as well as the efficiency of its use, are the subject of close attention of the company’s external counterparties, among which are business counterparties (suppliers, contractors, buyers, customers), creditors and potential investors. Thus, the need to manage equity capital is dictated not only by internal prerequisites (the desire to improve the financial performance of the company in order to increase the well-being of its owners), but also by the dependence of the company on the external economic environment, which evaluates its activities from the outside and forms a system of economic relationships with it.

The relevance of the topic of the essay lies in the fact that the development of a market economy and the desire of enterprises to increase prosperity in conditions of complete economic independence contributes to an increasing concentration of attention on managing sources of financing for commercial activities, including such an important component as equity capital.

The purpose of the abstract research is to find out what the process of managing equity capital is and how to effectively carry out such management. Also, the task of my essay is to define the concept and essence of equity capital, as well as determining its price.

The theoretical and methodological basis of the work is the scientific works of domestic authors on the formation and use of the organization’s own capital, current regulatory and legislative acts of the Russian Federation, periodical press materials, Internet sources related to research problems

Chapter 1. Theoretical foundations of equity capital

1 The concept of equity capital and its essence

At the present stage of economic development, any enterprise operates in a harsh competitive environment. The efficiency of an enterprise in such conditions, especially in the long term, which involves not just survival in the market, but ensuring high rates of development and increasing competitiveness, is determined by the level of financial potential and quality of management at the enterprise, which is ensured to a certain extent by the effective organization of the equity capital management system in companies.

In market conditions, effective management involves a significant range of volumes of planning and control work. Strengthening competitive relations in global and domestic markets, rapid development and change in technology, growing business diversification, increasing complexity of business projects and other factors determine new requirements for the control system at the enterprise. At the same time, it is necessary to clearly understand that for the effective operation of an enterprise, it is not enough to simply organize the control process, but it is necessary to develop and implement an effective capital management system. Therefore, in most Russian enterprises there is a need to implement enterprise equity management systems aimed at achieving the company’s strategic goals.

Own capital is understood as a set of economic relations that make it possible to include financial resources belonging either to the owners or to the economic entity itself into economic circulation.

Equity capital is the total value of an organization's funds owned by it and used to form a certain part of its assets.

Own capital is the basis for the financial stability and stable functioning of any commercial enterprise. In recent years, the approach to accounting for equity capital has changed, and the role of this indicator in the analysis of the financial and economic activities of an organization has increased.

Equity capital represents the value of the owners' investment, which has changed under the influence of the facts of economic activity, in the form of the value of assets not encumbered by obligations used by the company to generate income.

Equity capital characterizes the total value of the enterprise's funds owned by it and used by it to form a certain part of the assets. This part of the asset, formed from the equity capital invested in them, represents the net assets of the enterprise.

The value of assets is always equal to the value of the capital invested in them. The main purpose of an enterprise's assets is to generate income for it. An enterprise can combine its assets in any way not prohibited by law in order to maximize this result. In financial management, the possibility of an enterprise accidentally acquiring any assets is excluded. Any purchase must have a preliminary financial justification, the main criterion of which is maximizing income. If it turns out that the acquired asset is not capable of providing the company with the expected income, then it must be sold, and the freed-up money invested in another, more profitable asset. Transactions with assets that do not lead to a change in the value of the assets (assets are sold at the same price at which they were purchased) leave the amount of the enterprise's equity capital unchanged.

It is calculated as the difference between the total assets of the enterprise and its obligations (liabilities) and represents the amount of excess of the reasonable market value of the property over the outstanding debt.

Own capital can be in the form of:

1) cash (cash, loans issued to borrowers, etc.);

) investments in securities of any issuers;

) investments in real estate and other inventory items.

Own capital is characterized by the following positive features:

ü ease of attraction, since decisions related to increasing equity capital (especially through internal sources of its formation) are made by the owners and managers of the enterprise without the need to obtain the consent of other economic entities.

ü higher ability to generate profit in all areas of activity, because when using it, payment of loan interest in all its forms is not required.

ü ensuring the financial sustainability of the enterprise’s development, its solvency in the long term, and, accordingly, reducing the risk of bankruptcy.

However, it has the following disadvantages:

ü limited volume of attraction, and, consequently, possibilities for a significant expansion of the operating and investment activities of the enterprise during periods of favorable market conditions and at certain stages of its life cycle.

ü high cost in comparison with alternative borrowed sources of capital formation.

ü an unused opportunity to increase the return on equity ratio by attracting borrowed funds, since without such attraction it is impossible to ensure that the financial profitability ratio of the enterprise’s activities exceeds the economic one.

Thus, an enterprise that uses only its own capital has the highest financial stability (its autonomy coefficient is equal to one), but limits the pace of its development (since it cannot ensure the formation of the necessary additional volume of assets during periods of favorable market conditions) and does not use financial growth opportunities return on invested capital.

The main source of replenishment of equity capital is the profit of the enterprise, through which accumulation, consumption and reserve funds are created. There may be a balance of retained earnings, which, before its distribution, is used in the turnover of the enterprise, as well as the issue of additional shares.

Own capital management is based on the use of modern analysis techniques and includes the following important stages:

) formation of own financial resources from internal and external sources;

) optimization of capital structure;

) assessment of the effectiveness of equity capital management.

Managing your own capital is associated not only with ensuring the effective use of the already accumulated part of it, but also with the formation of your own financial resources that ensure the future development of the enterprise.

The goal of capital management is to ensure sustainable and effective development of the organization's business.

Capital management tasks:

Determining the total capital requirement to finance the organization’s activities and ensure the necessary pace of its economic development

Determining the most effective sources of raising capital.

Optimizing the organization's capital structure is adequate to the goals and objectives of its development.

2 Structure of the enterprise’s equity capital

Own capital, of course, has a complex structure. Its composition depends on the organizational and legal form of the business entity.

It includes sources of financial resources that are different in their economic content, principles of formation and use: authorized, additional, reserve capital. In addition, the equity capital, which a business entity can operate without reservations when making transactions, includes retained earnings; special purpose funds and other reserves.

Fig.1. Structure of the enterprise's equity capital

Authorized capital. Acts as the main and, as a rule, the only source of financing at the time of creation of a joint-stock commercial organization; it characterizes the share of owners in the assets of the enterprise. In the balance sheet, the authorized capital is reflected in the amount determined by the constituent documents.

Characterizes the initial amount of the enterprise's equity capital invested in the formation of its assets to begin business activities. Its size is determined by the constituent documents and charter of the enterprise.

The authorized capital of an enterprise that is purchased by its collective is calculated as the sum of: property at its residual value (minus depreciation); cash - money in the current account and in accounts receivable minus accounts payable. If an enterprise is transformed into a joint stock company, then shares are issued for the amount of the authorized capital calculated in this way. The size of the authorized capital is an indicator of the organization's performance.

Functions of the authorized capital:

ü forms the material basis for starting the organization’s activities.

ü guarantees the interests of creditors.

ü determines the share of participation of each owner in the distribution of the organization’s profits.

The legal basis of the authorized capital determines its size and composition; terms and procedure for making contributions to the authorized capital by participants; assessment of deposits upon their deposit and withdrawal; the procedure for changing the shares of participants; liability of participants for violation of obligations to make contributions.

According to the Civil Code of the Russian Federation, the authorized capital can be in the form of:

ü share capital as the totality of contributions of participants in a general partnership or limited partnership;

ü mutual or indivisible fund - in a production cooperative;

ü authorized capital - in joint-stock companies, limited liability companies;

ü authorized capital - in unitary state and municipal enterprises.

Authorized capital is one of the most important indicators that allows us to get an idea of ​​the size and financial condition of economic entities. This is one of the most stable elements of an organization’s own capital, since changes in its value are allowed in a strictly defined manner established by law.

Reserve capital. It is the insurance capital of an enterprise, intended to cover general balance sheet losses in the absence of other possibilities for their compensation, as well as to pay income to investors and creditors in the event that there is not enough profit for these purposes. Reserve capital funds act as a guarantee of the uninterrupted operation of the enterprise and respect for the interests of third parties . The presence of such a financial source gives the latter confidence that the enterprise will pay off its obligations.

The amount of annual contributions is provided for by the company's charter, but cannot be less than 5% of net profit until the amount established by the company's charter is reached.

The creation of an accumulation fund, a consumption fund, as well as other monetary funds is mandatory if provided for by the constituent documents of commercial organizations, or a meeting of shareholders, upon the recommendation of the board of directors, makes a decision to direct profits to these trust funds.

Additional capital is the share premium created in open joint-stock companies and represents the amount of excess of the selling price of shares over the nominal value during an open subscription. The share premium generated during the formation of the authorized capital of joint-stock companies is considered only as additional capital and is not allowed to be used for consumption needs.

In other words, additional capital is a source of funds for an enterprise, formed as a result of the revaluation of property or the sale of shares above their nominal value.

It is formed due to the increase in the value of non-current assets, identified by the results of their revaluation, and the amount of the difference between the sale and par value of shares, received in the process of forming the authorized capital of the joint-stock company, as a result of the sale of shares at a price exceeding the par value.

Additional capital accumulates funds received through the above channels. The main channel here is the results of the revaluation of fixed assets.

Special purpose funds are formed from the profit of the enterprise after settlements with the budget for taxes. The issue of the types of special funds, the percentage of contributions to them and the direction of expenditure is decided by the enterprise independently, but this must be recorded in the constituent documents.

Special purpose funds are formed according to the standards established by the owners, as well as through gratuitous contributions from the founders and other enterprises. They are usually divided into an accumulation fund, a social fund and a consumption fund.

The funds from the accumulation funds are used for the production development of the organization and other similar purposes.

The consumption fund funds are allocated for social development and material incentives for personnel, as well as other activities and work that do not lead to the formation of new property of the organization.

The Social Sphere Fund represents reserved (directed) amounts as financial support for the development of the social sphere.

The fund's funds are used to finance expenses related to the maintenance of housing and communal services, healthcare, culture, sports, children's institutions, houses and recreation centers, recorded on the organization's balance sheet.

Retained earnings characterize the part of the enterprise's profit received in the previous period and not used for consumption by the owners (shareholders, shareholders) and staff.

It is used to pay dividends to the founders and to make contributions to the reserve fund (if any). In accordance with its accounting policies, an organization may decide to use the profits remaining at the disposal of the enterprise to finance its planned activities.

Retained earnings are calculated as the difference between the financial result for the reporting period identified on the basis of accounting of all operations of the organization and the assessment of balance sheet items and the amount due for payment of taxes and other similar mandatory payments paid in accordance with the legislation of the Russian Federation, at the expense of profit after tax, including sanctions for violations (including settlements with state extra-budgetary funds).

This part of the profit is intended for capitalization, that is, for reinvestment in production development. In terms of its economic content, it is one of the forms of reserve of the enterprise’s own financial resources, ensuring its production development in the coming period.

Other forms of equity. These include settlements for property (when leasing it), settlements with participants (for payment of income to them in the form of interest or dividends) and some others.

Two main components can be distinguished as part of equity capital: invested capital, i.e. capital invested by owners in the enterprise; and accumulated capital, i.e. capital created in a business in excess of what was originally advanced by the owners.

Invested capital includes the par value of common and preferred shares, as well as additional paid-in capital (in excess of the par value of shares). This group usually includes valuables received free of charge. The first component of the invested capital is represented in the balance sheet by the authorized capital, the second - by additional capital (in terms of share premium received), the third - by additional capital (in terms of property received free of charge) or a social fund.

The accumulated capital is reflected in the form of items arising as a result of the distribution of net profit (reserve capital, retained earnings, other similar items). Despite the fact that the source of formation of individual components of accumulated capital is the same - retained earnings, the goals and procedure for the formation, directions and possibilities of using each of its articles are significantly different.

3 Price of equity capital and methods for determining it

Equity has a value that is considered in terms of alternative investment options or lost profits. In this case, it is necessary to take into account the peculiarities of the formation of individual components of equity capital and, accordingly, their element-by-element assessment, which contributes to the selection of the most inexpensive sources of their attraction.

Despite the multiplicity of approaches to assessing the value of equity capital in the scientific literature, the following can be identified as basic:

1) dividend method;

2) income method (income approach);

) a method for assessing the profitability of financial assets based on the use of the CAMP (Capital Assets Pricing Model) model.

According to the dividend approach, the value of equity is determined by the current value of dividends that shareholders either receive or wish to receive from the enterprise, as well as expected changes in the market value of the shares. The logic of this approach is that the payment of dividends is considered as a payment for equity capital.

where k is the dividend rate per share (price of equity capital);

D is the projected dividend per share;

P is the current market price of the stock.

This formula can be modified if we assume that dividends are growing at a certain rate of growth. In this case, determining the desired value of equity capital presupposes the presence of a new parameter g, which represents the expected growth rate of dividends. In this case, the price of equity capital can be determined by the following formula:

This formula is widely used under the name Gordon's formula.

The income method is based on the calculation of ratios between the market price of shares (P) and earnings per share (EPS). That is, when implementing this approach, the following formula is used:

This approach assumes that all future profits will be distributed to shareholders, which is a very rough approximation. In addition, the problems of using this formula are associated with the ability to have information about the market price of a company's shares and predict income (net profit). Therefore, in Russian practice, the price of equity capital of Tsk within the framework of this approach can be calculated in a simplified way, namely:

The cost of equity capital E within the framework of the income method according to the first theorem of Modigliani-Miller, taking into account taxation, is determined by the following formula:

R U - economic profitability of the enterprise's assets without the use of borrowed funds;

R D - cost of debt servicing, %;

D - amount of debt (borrowed capital), rub.;

E - the amount of share capital, rub.;

D/E - the ratio of debt capital to shareholder (equity) capital;

T C - income tax.

The method, based on the use of the company's financial asset return (CAMP) model, is based on the principle that the required rate of return should reflect the level of risk that owners are forced to bear in order to obtain the specified return.

It includes the calculation of the following indicators:

R f is the rate of return on risk-free investments, which, as a rule, includes the yield on government securities;

R m is the average market level of return on ordinary shares, i.e. the average rate of return for all shares listed on the stock market;

c - systematic risk indicator. It is characterized by fluctuations in indicators on the securities market and shows how much the change in the price of a company's shares is due to market trends.

The CAMP model, which allows one to estimate the required return on shares of company R, corresponding to the level of risk determined by the b-coefficient, can be presented as the following formula:

In this case, the component (R m - R f) has a very real interpretation, representing the market (average) premium for the risk of investing capital in risky securities.

Estimating the value of equity capital has a number of features, the most important of which are:

ü the amounts of payments to shareholders are included in the tax base, which increases the cost of equity capital in comparison with borrowed funds. Payment of interest on borrowed capital in the form of bank interest, on the contrary, reduces the tax base. As a result, the price of newly raised equity capital often exceeds the cost of borrowed capital;

ü attracting equity capital is associated with a higher financial risk for investors, which increases its cost by the amount of the risk premium;

ü mobilization of equity capital, unlike borrowed capital, is not associated with reverse cash flow, which speaks in favor of the profitability of this source, despite its higher cost;

ü the need to periodically adjust the amount of equity capital recorded in the balance sheet, caused by an underestimation of the amount of equity capital used in comparison with the use of newly raised equity or borrowed capital, which are valued at current market prices;

ü the assessment of attracted equity capital is probabilistic in nature, since current market prices for shares are subject to significant fluctuations in the stock market. If the attraction of borrowed funds is based on interest rates fixed, for example, in loan agreements with banks, then the issue of ordinary shares does not contain such contractual obligations to investors. The exception is the issue of preferential shares with a firmly fixed percentage of dividend payments. Thus, in its essence, the price of equity capital is an implicit price, i.e. a price in which costs are not accurately determined.

equity value price

Conclusion

Own capital is the financial basis of an enterprise, and knowledge of how to manage it correctly is the key to the future development of the enterprise, its financial stability, and, therefore, receiving the expected profit from the company's activities.

Increasing the efficiency of equity capital management is stimulated, on the one hand, by the desire to improve the financial results of the company and increase the welfare of its owners, on the other hand, by the company’s dependence on the external economic environment, which evaluates its activities from the outside and forms a system of economic relationships with it.

If we directly answer the question “What is the role of equity capital in the formation of enterprise capital?” - we can come to the conclusion that: each enterprise’s own financial resources, even invested and in a free state, are that vital part, without which neither the work nor the further existence of the enterprise is possible. It is not for nothing that among the classification of total capital, the division into equity and borrowed capital comes first.

Available own funds allow the enterprise to use them both at its own discretion and in individual cases in legally established areas. It all depends on the source of such financing through elements of equity.

In the course work, the essence and concept of capital were identified and justified, since when analyzing the financial condition of an enterprise, it is clearly determined that its successful activities depend on the rational structure of capital and the efficiency of its use.

The first chapter of the work highlights the theoretical aspects of equity capital: its essence, features and objectives of capital management. The structure of equity capital is also presented. The equity capital of the enterprise is represented by the main components: authorized capital, additional capital, reserve capital and retained earnings. This chapter discusses ways to determine the price of equity, which can be found using:

) dividend method;

) income method (income approach);

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