Equity which means what. Enterprise capital structure

Economics is a science that characterizes financial relationships in society. One of the basic concepts in economic theory is capital. Different economic directions and schools interpret this term in their own way. In this article, we will give a general definition of what capital is, what forms it takes and how it is used in practice.

The essence of the definition

Capital has a different gradation and interpretation, which includes the classification as a type of certain funds involved in the production of goods. First of all, capital can be fixed or circulating. Depending on the functions in which the capital participates, it is divided into:

• industrial;
• financial.

If we take capital as an economic resource, then it can be real and financial. To understand all of these classifications, let's define this term.

Capital is the aggregate of all the funds that an entrepreneur has to form a product with the aim of selling it and making a profit. These funds can be buildings and structures, technical devices, machine tools, intellectual and physical labor, money and securities.

Real capital

The real capital investment includes industrial and commercial capital, which is involved in the creation of goods and services. These are material resources and intellectual labor without monetary expression. All buildings, machines, equipment that are applicable in production are real capital.

Real capital consists of fixed assets and circulating assets. They are also expressed in a penniless form. At the same time, fixed assets are those material assets of the company that have been participating in the chain of creating a product or service for at least more than one year.

For example, a workshop in which a product is manufactured is a fixed asset. Also machines, equipment, office buildings, change houses, canteen - everything that ensures the production process and lasts a long time.

On the other hand, real capitalization consists of working capital. They are applied in a specific chain of product creation, after which they are considered exhausted. These include: materials, components, raw materials.

For example, the planks that the company uses to create furniture will be working capital. They were used for a unit of goods, after which they are considered exhausted. To create a new batch, you need to order a new consumable.

In accounting, it is customary to consider as capital all the assets that an enterprise has. Cash is an unconditional asset with varying degrees of liquidity. Liquidity is the speed at which you can sell your funds.

Financial capital includes:

1. Authorized capital formed by the founders.
2. Raised capital in the form of payments from investors.
3. Shares placed in public or private circulation.
4. Bonds and other securities.

Financial capital can bring profit in the form of interest when placing funds on bank deposits, as well as subject to an increase in the value of securities. Financial capital does not participate in the formation of real capital, otherwise it is called money capital.

The goal of capitalization is to make a profit. Profit is the difference between a company's revenues and costs. Thus, the injection of money into the capital of the company is carried out only in order to get more money.

If we do not talk about speculative operations in stock or other markets, then it is real capital that can bring profit. The capitalist invests money capital in fixed and circulating assets, attracts hired workers, creating a final product, the cost of which will include the price of the invested funds and the percentage of sales.

Finished products enter the free market, and everyone in the chain that participated in the formation of the product, including employees, suppliers and others, becomes buyers. Since the cost per unit of production was included in the cost, taking into account the cost of labor, then only the capitalist receives the final profit.

After all, the worker who prepared the product ultimately becomes the consumer of this product, giving away all the money he earned. In these conditions, the redistribution of funds is carried out only in favor of the capitalist.

Over time, this leads to an inevitable crisis, a moment when there is a product on the market, but there is no one to buy it, since the funds are in the hands of the owners of the companies. The state should act as a regulator, ensuring the distribution of money between market participants through the tax system.

But the system functions in such a way that state laws are lobbied in the interests of capitalists, since they somehow become participants in legislative acts, lobbying for the interests of their own production.

Therefore, the only way to keep the market at parity is inflation. Inflation is the depreciation of money through the additional emission of money. Thus, by issuing additional money, supervisors reduce their cost, which ultimately reduces the purchasing power of consumers, but to a greater extent reduces the value of the capitalist's funds.

But even in these conditions, as a result, an inevitable crisis occurs in the form of the impossibility of the functioning of such a system. Marx proposed to abolish the idea of ​​private business by transferring production to a collective.

In such conditions, the profit received would be distributed evenly among all market participants, the control of which would be ensured by the state. This economic concept was later called socialism, and Marx's Capital is still featured in many economic textbooks.

In the current economic situation, there is a mixture of capitalist private business and national economic projects. The state acts as an investor, buying a controlling stake in the founding corporations in certain sectors of the economy.

Various forms of ownership are also observed. Thus, private companies coexist with collective forms and state organizations. The state, through the development of the national economy and social policy, stimulates the growth of certain sectors, reducing the level of unemployment and the loss of purchasing power.

The growing role of the state, socialized projects aimed at supporting vulnerable segments of the population and redistributing profits are an integral part of modern post-capitalist society.

All sciences of economic development consider the organization's own capital as a constituent element of the reproduction process. The authors of all theories recognize its crucial role in market relations. In this regard, not only general, but also specific issues of its use are becoming relevant. Let us consider in more detail what constitutes an enterprise's equity capital.

General information

The formation and improvement of the market system has led to the emergence of various kinds of economic objects of analysis and accounting. One of them was the company's own capital. Any company that operates separately from the rest, conducts production or other commercial activities, must have certain funds. Equity capital acts as the main source of financing for the operation of the company.

Characteristic

Today most of the enterprises are owned by one or more entities. Maintaining documentation that confirms the rights, various operations, acts as a subject of accounting. Equity is a complex of funds that belong to the owner. They participate in the production process and generate income for the owner. The set of funds includes sources of resources that are different in terms of economic content, principles of use and formation. With a high proportion of equity capital in the balance sheet liabilities, we can talk about the stability of the financial condition of the entity. For a company to grow, it needs stable equity capital. These funds act as a guarantee of the firm's survival in the market.

Classification

Equity represents the assets of a company less its liabilities. In accounting, it is divided into subclasses:

Structure

Equity capital consists of investment and accumulated funds. The former are contributions from the owners of the company. They include the par price of preferred and common shares, as well as additional paid-in capital. Investment funds are presented in the JSC balance sheet in two parts: additional and authorized capital. The accumulated fund is created in excess of what was originally advanced by the owners.

Equity: formula

The sources of funds in the company are, among other things, attracted finances. They include loans, borrowings and other debts - the obligations of the firm to other entities. Passive capital is represented by sources of property, including borrowed and own funds. Assets: the value of the property in terms of placement and composition - everything that the company possesses, acting as a legal entity. Using these elements, you can create the following equation:

Ck + Fo = A, where

A - assets,

Sk - equity capital,

Fo - financial obligations.

In some cases, SC acts as a residual. In this case, it reflects all the funds that remain with the organization after the repayment of obligations. Equation can be used to determine equity. The formula will be as follows:

Ck = A - Fo.

Asset value

The CK size is not constant. The amount varies depending on the field of activity and development goals. The adjustment is carried out in accordance with the conditions for maximizing profit. The total value of the assets that the company controls is called the balance sheet. Together with this, other concepts are used:

Effectiveness of using SC

In a market environment, an analysis of the company's financial position is essential. This is due to the fact that firms gain independence and are fully responsible for the results of production and entrepreneurial activity to the owners and employees. In this regard, the return on equity capital is an economic category that reflects the state of funds in the course of their use. It shows the firm's ability to self-development at a particular moment.

Depending on the functional affiliation, one distinguishes between own working capital and fixed assets. The latter are a collection of fixed assets, intangible assets and funds that do not have a specific purpose, but are used in production. Profitability, capital intensity, capital productivity - indicators on the basis of which a generalizing characteristic of the effectiveness of the circulation of funds is formed.

Profitability

The return on equity is calculated by the ratio of net profit to the average annual value of the invested assets. As the latter, the cost of individual components (borrowed, operating and other funds) can be used. The main synthetic indicator is the equity capital ratio. It shows the amount of profit that the company receives from each ruble invested in assets.

A generalizing characteristic of the intensity of the use of fixed assets is given by the values ​​of capital intensity and capital productivity. The last indicator determines the cost of one product per unit of the price of fixed capital. Capital intensity reflects the need for funds per unit of value of the result.

Own working capital and the indicator of the efficiency of its use deserve special attention. This is due to the fact that the rational implementation of these funds has an impact on increasing production volume, reducing the cost of goods, increasing the company's profitability. Evaluation of the efficiency of using working capital allows you to identify additional reserves and contributes to an increase in the main economic indicators.

Velocity of funds

The following elements are associated with it:

• the minimum required amount of the involved (advanced) capital and the funds related to its payment (dividends, interest, etc.);
• the need for additional income and payment for them;
• the amount of costs that are associated with the possession of commodity material assets and their storage;
• the amount of taxes and so on.

The shorter the duration of the turnover, the more cycles the funds will make. The duration of the stay of assets in circulation is determined by the complex influence of internal and external factors of different directions. The economic situation in the state is also of great importance, as well as the economic conditions of the entities that are formed in a particular situation. For example, due to inflationary processes, the lack of established relationships with buyers and suppliers in most companies, there is a forced accumulation of stocks. They, in turn, significantly slow down the turnover of funds.

The equity capital of an enterprise is its basic platform on which all further business development is based. The higher this indicator, the more stable the company, the more attractive it looks to investors. Consider two options for formulas and examples of how you can determine the amount of the company's equity capital from the balance sheet.

Determination of equity

Equity capital of an enterprise is the aggregate of its net assets, initially invested by the founders, plus retained earnings.

In fact, the company's equity capital consists of the authorized capital, additional and reserve capital, retained earnings and various special funds. This also includes amounts after revaluation of non-working assets and own shares bought back from shareholders. At the same time, the latter indicator is taken into account in the balance sheet liability as negative and, when summed up, reduces the amount of the company's equity capital. This is logical - if the authorized capital, which is part of the equity capital, is formed when the shares are paid by shareholders, then their buyback should lead to its decrease.

Authorized capital- is formed during the formation of the enterprise and consists of the contributions of the founders.

Extra capital is formed if the founders of the company invest in it additional funds in excess of their share in the authorized capital. In addition, an additional fund can be formed in the event of income from the issue, funds from the revaluation of non-working assets and a part of the profit remaining after distribution can also be sent here.

Reserve capital- these are funds set aside by the enterprise for various force majeure so that losses can be reimbursed.

Undestributed profits- this is the remaining available funds from the profit after the company has paid all tax and other mandatory payments. The balance sheet for this line also reflects the balances of various special funds formed at the enterprise.

Equity by balance

If we take the current form of the balance sheet (OKUD 071001, taking into account the latest edition of 04/06/2015), then the indicator of the amount of equity capital can be found in the final line of section III "Capital and reserves". Accordingly, the equity capital will be equal to the sum of the lines in this section.

Consider example no. 1 determination of equity capital on the balance sheet.

Accordingly, equity at the end of the first quarter of 2016 will be equal to: (15.0-5.0) + 1.2 + 50.0 + 255.0 = 316.2 thousand rubles. If you look at the previous periods, it becomes noticeable that the company is in the stage of active growth in its financial well-being.

This formula for determining equity capital is most often used in accounting. There is a second way to find the indicator - through the left, active part of the balance. In this case, the company's equity capital is defined as the aggregate of non-working and current assets (lines 1100 and 1200) minus long-term and short-term liabilities (lines 1400 and 1500).

Example No. 2

Accordingly, in this example, the company's equity capital will be: (700 + 300) - (300 + 300) = 400 thousand rubles.

The size of equity capital is growing - the investment potential of the company and its financial strength are also increasing. This is an important indicator of the economic condition of an enterprise. If it is secured with its own funds, it does not have to resort to loans, which speaks of stability and independence. In existing realities, of course, few people do without borrowed funds, but if the amount of equity capital is sufficient, there is no need to be afraid for the financial independence of the enterprise.

at. It includes charter capital, additional capital, reserve capital, as well as retained earnings and special purpose funds. All these values ​​can be found in the III section of the balance sheet "Capital and reserves".

Let's consider in more detail the formation of each article in this section. The authorized capital (line 410 of the balance sheet) is the amount invested by the founders in the enterprise. It is stipulated in the constituent documents of the organization. The authorized capital can only be changed after making the appropriate entries in the constituent documents. Equity should also include line 411 "Own shares repurchased from shareholders" if the organization repurchased securities from shareholders.

Additional capital (line 420) is a part of the company's equity capital, which includes the amounts contributed by the founders in excess of the authorized capital. Remember that the amount of share premium of the joint-stock company, the amount of revaluation of the organization's non-current assets, as well as part of retained earnings remaining at its disposal can be reflected as additional capital.

Reserve capital (line 430) is a part of equity capital that is allocated from the company's profits to cover possible losses and losses. Please note that the reserve capital is divided into reserves formed in accordance with the legislation (line 431) and reserves formed in accordance with the constituent documents (line 432).

Remember that the main source of accumulation of property of the enterprise is retained earnings (line 470). It is equal between the financial result for the reporting period and the amount of taxes, as well as other payments made from profit. It also includes balances of special purpose funds created in the organization, which are not shown on a separate line.

Related Videos

Sources:

• how to calculate the authorized capital

Do you want to start a business or get a second degree? This will undoubtedly require funds. Many people refuse such ideas, because there are no free funds and, as it seems, there is nowhere to get them. Consider options for finding capital.

Instructions

The easiest way to find, and a rather big one, is to take a closer look at what you have and what you do not need at the moment. This can be a summer cottage to which you, for lack of time, come twice a year at most, and where no one lives. Rent it out for the summer: depending on the state of the dacha, you can get from 60,000 rubles for it. The same can happen with a car and other property. If you hardly ever drive your old car, it is better to sell it and get at least the same 60,000 rubles or more.

In some situations, it happens that you do not need a certain amount of capital (that is, a fixed amount), but the ability to periodically give a certain amount. This is especially true for those who pay for loans, etc. Rational saving will help here. Get used to recording your income and expenses, analyze how much money you usually spend per week (month), what expenses are really important and what is not, think about whether there is an opportunity to buy something you need cheaper. There are many ways without much damage to the level: these are products in large inexpensive supermarkets, and the use of various kinds of discounts and coupons, and much more. By making sure that you can actually provide yourself with about the same standard of living for less, you can save at least a small amount that may help you achieve your goals.

If the above methods do not work, you can always resort to the help of banks. Of course, this is not the best way out in this situation, because before you take it, you need to be sure that you can do it. However, in any case, look at the websites of banks, ask what credit programs they offer. Consumer loans are issued by almost all banks; certain difficulties can be experienced only with educational or business loans.

Anyone who needs capital for business development can try to find it. For this, of course, it is necessary that your business idea is really bright and extraordinary and guarantees income. As a rule, small businesses are looking for investors either through acquaintances or at forums and meetings organized for this purpose. In this case, the main thing is to secure a competent business plan and successfully present it, since it is through the business plan that the investor will get acquainted with your project.

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Sources:

• Return on equity

Equity capital is a certain set of financial resources of an enterprise, which are formed at the expense of the founders of this company, as well as the financial results of its own activities. In turn, in any joint stock company, equity is called joint stock.

Instructions

When determining the carrying or book value of the company's own and all of its assets and liabilities are taken into account at their cost of occurrence. In this case, equity is the difference between the carrying amount of all assets and liabilities. This method of calculation is suitable only when the market and liabilities between are not very different. If the market value deviates significantly from the basic book value, then the specified calculation method will distort the results, as well as inadequate estimates of the firm's equity capital.

Another way of calculating equity capital is to calculate its value according to the rules and requirements that are established by the supervisory authorities, as well as the activities of the organization. In this case, equity is calculated as the sum of a number of its constituent elements. At the same time, there are different ways of calculating equity capital, depending on the type of organization (for example, in enterprises).

The algorithm for calculating the amount of equity (regulatory) capital is as follows: RVK = OK + DC-V, where RVK is the amount of the bank's regulatory equity capital;
OK - fixed capital, reduced by the sum of all under-formed reserves for the existing active operations of the bank;
DC is an indicator of the bank's additional capital;
B is prevention.

When calculating the total amount of the value of own regulatory capital, the additional capital should in no way exceed the value of the fixed capital. At the same time, the inclusion of a certain, existing debt in the calculation of equity capital is practically limited to 50% of the amount of fixed capital.

Sources:

• the book value of equity is

The capital of an enterprise can be viewed from several points of view. There are real capital, which exists in the form of means of production, and money capital, which exists in the form of money and is necessary for the acquisition of the means of production. It is a collection of sources of funds required for the normal functioning of the enterprise.

The capital of an enterprise can be viewed from several points of view. First of all, it is advisable to distinguish real capital, i.e. existing in form, and money capital, i.e. existing in the form of money and used to acquire the means of production, as a set of sources of funds to ensure the economic activity of the enterprise. Consider money capital first.

Equity and debt capital

Funds supporting the activities of an enterprise are usually divided into own and borrowed funds.

Equity the enterprise represents the value (monetary value), wholly in its ownership.

In accounting, the amount of equity capital is calculated as the difference between the value of all property on the balance sheet, or assets, including amounts unclaimed from various debtors of the enterprise, and all the liabilities of the enterprise at a given point in time.

The equity capital of an enterprise is made up of various sources: charter, or reserve, capital, various contributions and donations, profits that directly depend on the results of the enterprise. A special role belongs to the authorized capital, which will be discussed in more detail below.

Borrowed capital- this is capital that is attracted by the enterprise from outside in the form of loans, financial assistance, amounts received on collateral, and other external sources for a specific period, under certain conditions under any guarantees.

Fixed and working capital

Capital in material and material embodiment is subdivided into and.

TO fixed capital includes material factors of durable use, such as buildings, structures, machinery, equipment, etc.

Working capital spent on the purchase of funds for each production cycle (raw materials, basic and auxiliary materials, etc.), as well as on.

Fixed capital serves for a number of years, circulating capital is fully consumed during one production cycle.

Fixed capital in most cases is identified with fixed assets (fixed assets) of the enterprise. However, the concept of fixed capital is broader, since in addition to fixed assets (buildings, structures, machinery and equipment), which represent its significant part, the structure of fixed capital also includes construction in progress and long-term investments - funds aimed at increasing the capital stock.

Financial capital structure and financial risk

Any financial and economic activity requires a constant investment of capital. To maintain and expand the production process and increase its efficiency, the introduction of new technologies and the development of new markets, direct investments are required (). One of the main tasks of financial management, along with the approval, development of the investment budget, is the optimization of the costs of attracting financial resources, optimization of the capital structure.

The choice of funding sources depends on many factors, including the industry and the scale of the enterprise's activities, technological features, the specificity of the products, the nature of government regulation and business taxation, relations with banking structures, reputation in the market, etc.

Capital structure used by the company, determines many aspects of not only financial, but also operating and investment activities, has an active impact on the final result of these activities. It affects the indicators of return on assets and equity capital, the ratios of financial stability and liquidity, forms the ratio of profitability and risk in the process of enterprise development.

Financial structure capital is the structure of the main sources of funds, that is, the ratio of equity and debt capital.

The financial capital of the enterprise consists of its own and debt.

Equity

Equity and reserves include invested capital and accumulated capital.

Invested capital Is the capital invested by the owner (, targeted receipts). Equity capital of the enterprise - retained earnings, various funds.

Accumulated profit- this is the profit, net of taxes and dividends, which the company earned in the previous and present period.

Debt capital (liabilities of the enterprise)

Debt capital in the capital structure of an enterprise consists of short-term and long-term liabilities.

long term duties- these are loans and borrowings with a maturity of more than a year.

short-term obligations- these are liabilities with a maturity of less than 1 year (for example, short-term loans and borrowings, accounts payable).

World practice shows that the "cheapest" source is debt financing, since creditors are in a more privileged position in comparison with the owners of the enterprise. They reserve the right to return their investments, and in the event of bankruptcy, their claims will be satisfied before the shareholders' claims. Nevertheless, the uncontrolled growth of debt financing can significantly reduce the financial stability of an enterprise, cause a fall in the market price of its shares, and in the event of an unfavorable development of events, put the enterprise in the face of bankruptcy.

The coefficients for assessing the financial stability of the enterprise are as follows:

1. Ratio of concentration of equity capital

where K c - equity; К - total (own and borrowed) capital; К кск - the share of equity capital in the financial structure of capital.

To maintain financial stability, K ksk must be at least 60% (K ksk ≥ 60%).

2. The ratio of financial dependence

where K z - borrowed capital; K c - equity capital; K fz - characterizes the financial dependence of the enterprise on external loans.

The higher K fz, the higher the financial dependence, the worse the financial stability of the enterprise.

The financial stability of the enterprise is associated with the concept "Price of capital".

Price (cost) of capital Is the total amount of funds that must be paid for the use of a certain amount of financial resources, expressed as a percentage of this amount.

Capital price characterizes:

• the level of the price that the company must pay to the owners
• rate of return on invested capital

Each source of funds has its own price. Therefore, they distinguish indicator of the weighted average cost of capital.

The price of sources of funds raised is calculated as a percentage of the funds raised. Knowing the prices of individual sources and their share in the total amount of advanced capital, it is possible to determine weighted average price of capital:

where C to - the price of the capital of the enterprise; j is the number of sources of funds; Ц j - the price of each source; q j - the share of sources in the total amount of capital.

Financial risk

Assessment of the financial structure of capital is inextricably linked with the calculation financial risk.

Payment leverage effect quantifies financial risk.

Financial risk- a complex concept, including probability:

• loss of profit due to excessive amounts of borrowed capital;
• payment of interest and the main part of the debt not on time.

Leverage calculation methods:

Imethod:

where SNP is the income tax rate; ER - economic profitability; K z - borrowed capital; K c - equity capital; SRSP - average calculated interest rate; EFR - the effect of financial leverage (a possible increase in the profitability of equity, associated with the use of borrowed funds).

If the SRSP< ЭР, то у предприятия, использующего заемные средства, рентабельность собственных средств возрастет на ЭФР.

If the SRSP> ER, then the profitability of own funds from an enterprise that takes out a loan will be lower than that of an enterprise that does not.