What is the difference between borrowed funds and accounts payable. Accounts receivable and payable - who owes to whom? The dual nature of accounts payable
Otherwise, overdue accounts payable may arise, which leads to the payment of fines and a deterioration in financial condition. Therefore, in the management process, it is necessary to study the composition, the prescription of the appearance of accounts payable, the presence, frequency and causes of formation.
Accounts payable is essentially a free loan and is one of the funds attracted by the enterprise in the economic turnover. Unlike stable liabilities, accounts payable are not a planned source of the formation of working capital. Accounts payable refers to the company's short-term liabilities.
Part of the accounts payable is natural, as it arises in connection with the peculiarities of settlements. However, in most cases, accounts payable arise as a result of violation of settlement and payment discipline and is the result of non-compliance by the enterprise with the terms of payment for products and settlement documents.
Accounts payable characterizes the most short-term type of borrowed funds used by the enterprise, formed from internal sources.
Accruals on various types of these accounts are made by the enterprise on a daily basis, and the repayment of obligations on these accounts payable - within a certain time frame in the range of one month. Since from the moment of accrual, the funds that are part of the accounts payable are no longer the property of the enterprise, but only used by them until the maturity of obligations, according to their economic content, they are a kind of borrowed capital.
Accounts payable, as a form of borrowed capital, is characterized by the following main features:
1. It is a free source of used borrowed funds. As a free source of capital formation, it provides a decrease not only in its borrowed part, but also in the entire cost of the enterprise's capital.
2. The size has an impact on the duration of the financial cycle of the enterprise. It influences to a certain extent the amount of funds required to finance current assets. The higher the relative size of accounts payable, the less funds the company needs to attract for the current financing of its economic activities.
3. The amount of accounts payable is in direct proportion to the volume of economic activity of the enterprise, first of all - from the volume of production and sales of products. With an increase in the volume of production and sales of products, the expenses of the enterprise increase, accrued as part of the accounts payable, and, accordingly, its total amount increases, and vice versa.
The projected size for most species is only an estimate. This is due to the fact that the size of many charges included in accounts payable cannot be accurately quantified due to the uncertainty of many parameters of future economic activities.
The size for its individual types and for the enterprise as a whole depends on the frequency of payments of the accrued funds. The frequency of these payments is regulated by state regulatory legal acts, the terms of contracts with business partners, and only a small part of them - by the internal regulations of the enterprise. This high degree of dependence of the periodicity of payments on individual accounts included in accounts payable on external factors determines the low level of regulation of this source of borrowed funds in the process of financial management.
The amount of the accounts payable of the enterprise is influenced by the total volume of purchases and the share of acquisitions in it on terms of subsequent payment, the terms of contracts with counterparties; terms of settlements with suppliers and contractors, the degree of market saturation with these products; the policy of repayment of accounts payable, the quality of the analysis of accounts payable and the consistency in the use of its results, the settlement system adopted at the enterprise.
With an increase in non-cash payments, the turnover and quality of accounts payable increases, and the size decreases, therefore, the solvency and stability of the enterprise increases.
Accounts payable can be terminated by the fulfillment of obligations (including offset), and also written off as unclaimed.
1.2 Types of accounts payable
Among the main types of accounts payable, there are debts for:
1. transfers of premiums for insurance of the property of the enterprise;
2. transfer of contributions for personal insurance of personnel;
3. to suppliers and contractors;
4. bills payable;
5. subsidiaries or affiliates and personnel of the organization;
6. transfers of taxes to budgets of different levels;
7. to the founders for the payment of income;
9. contributions to off-budget social insurance funds, health insurance and pension funds, etc.
Depending on the legal nature and legal regime, accounts payable can be divided into three groups:
1. The organization's debt to the budget and social funds,
2. Debts of the organization to its personnel: debts in payments to employees of wages, compensations, payments in order to compensate for harm caused to the health of the employee or as a result of the death of an employee at work,
3. Debts to partners and counterparties under contractual and cooperative obligations: debts in payments to suppliers for delivered goods, to contractors for work performed to return received but unworked advances, payment of bills.
Upon payment, accounts payable may be:
overdue (debts on obligations, the maturity of which at the time of compilation of the balance sheet has come);
not overdue (the company's debts on obligations, the maturity of which at the time of compilation of the balance sheet has not come).
As part of overdue accounts payable, two types of accounts payable can be distinguished:
1. accounts payable, the chances of repayment of which, despite missing the repayment deadline, the company still has;
2. accounts payable, the repayment of which is unrealistic for any factual reasons. The unreality of repayment of overdue debts may be due, for example, to the expiration of the statute of limitations for enforced debt collection.
The reality and unreality of debt repayment is assessed by the debtor organization itself, taking into account specific circumstances.
The most common type of accounts payable is a debt to suppliers and contractors for the supplied inventories, services rendered and not paid on time.
The structure of accounts payable includes the organization's debt:
1. to suppliers and contractors (balances as of the reporting date on the credit of accounts 60 "Settlements with suppliers and contractors" and 76 "Settlements with various debtors and creditors");
A liability is classified as current if it meets any of the following criteria:
- it is supposed to be repaid within the normal operating cycle of the enterprise;
- it is intended primarily for the purpose of trading;
- it is due for repayment within twelve months after the reporting date;
- or the entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date.
All other liabilities should be classified as non-current.
An entity classifies its financial liabilities as current if they are due to be settled within twelve months after the reporting date, even if:
- the original maturity was more than twelve months;
- after the reporting date and before the financial statements are approved, an agreement has been concluded to refinance or change the payment schedule on a long-term basis.
If an entity expects and has the option to refinance or renew an obligation for at least twelve months after the reporting date under an existing facility of credit, it classifies the liability as non-current, even if the obligation would otherwise be subject to repayment in a shorter period. However, if an entity is unable, at its discretion, to refinance or renew the obligation (for example, in the absence of a refinancing agreement), the potential for refinancing is disregarded and the liability is classified as current.
If an entity breaches any of the terms of a long-term loan agreement as at the reporting date or an earlier date, causing the liability to be settled on demand, the liability is classified as current, even if the lender has agreed, after the reporting date and before the financial statement is approved. reporting, do not demand payment on the basis of a violation. The liability is classified as current because at the reporting date the entity did not have an unconditional right to defer settlement for at least twelve months after the reporting date.
However, a liability is classified as non-current if the obligee at the reporting date has agreed to provide a grace period ending no earlier than twelve months after the reporting date during which the entity can correct the violation and during which the obligee cannot demand immediate repayment.
- long-term bank loans used for capital investments for a long time: for the purchase of expensive equipment, construction of buildings, modernization of production;
- long-term loans, reflecting long-term loans (except for bank loans) and other borrowed funds for a period of more than one year, including long-term bonds issued by the company and issued long-term bills.
Certain short-term liabilities, such as trade payables and some accruals in labor and other operating costs, form part of the working capital used during the entity's normal operating cycle. Such operating items are classified as current liabilities even if they are due no earlier than twelve months after the reporting date. An entity's assets and liabilities are classified using the same normal operating cycle. If an entity's normal operating cycle cannot be clearly identified, it is assumed to be twelve months in duration.
Read also: Acceleration of accounts receivable turnover
Other current liabilities are not settled in the normal operating cycle but are due to be settled within twelve months after the reporting date or are held primarily for trading purposes. Examples are financial liabilities classified as held for trading in accordance with IAS 39, bank overdrafts, and the short-term component of long-term financial liabilities, dividends payable, income taxes and other non-trading payables. Financial liabilities that provide long-term financing (that is, do not form part of the working capital used in the entity's normal operating cycle) and that are not due to be settled within twelve months after the reporting date are non-current liabilities.
- liabilities that are covered by current assets or are repaid as a result of the formation of new short-term liabilities. These liabilities are settled over a relatively short period of time (usually within a year). Short-term liabilities are presented in the balance sheet either at their current price, which reflects the future cash expenditures to settle these liabilities, or at the price at the date of debt repayment.
Current liabilities include items such as:
- bills and bills payable arising from the provision of a loan to the company, debt certificates of receipt by the company of a short-term loan;
- tax arrears, which is essentially a form of credit provided by the state to the given company;
- wage arrears;
- part of long-term liabilities to be settled in the current period.
Short-term payables are payables that are usually due within one year and are usually paid from working capital. Accounts payable, promissory notes issued, interest indebtedness, dividend indebtedness, salary indebtedness and advances received are all short-term liabilities discussed in this chapter.
Accounts payable are amounts payable to creditors for purchased products (services received). In the balance sheet, accounts payable is reflected in a single amount, which is made up of individual balances.
A bill payable is an unconditional written commitment to pay a specified amount at a specified time in the future. The reasons for promissory notes issued are obtaining bank loans, purchasing assets or issuing promissory notes to secure accounts payable.
Indebtedness on short-term loans and borrowings - outstanding at the end of the reporting period amounts of borrowed funds due to be repaid in accordance with agreements within 12 months after the reporting date.
Interest debt is interest accrued, for example, on bills of exchange or bonds, short-term loans and borrowings. At the balance sheet date, this accrued interest has not yet been paid.
Dividend payables are dividends payable to shareholders and represent distributions of profits. As of the balance sheet date, these declared dividends have not yet been paid and are therefore payable by the company.
Salary arrears represent the amount of salaries due to employees due but not yet paid at the balance sheet date. As of the balance sheet date, the salary has not yet been paid due to the fact that the due date for salary payment has not come.
Other payables are amounts payable for products or services that are not directly related to the main activities of the enterprise.
Advances received arise upon receipt of payment for the supply of material values or for the performance of work, for example, received by the publisher when subscribing to a magazine or making an advance payment by the customer for raw materials. Advances received represent a commitment to return an asset received or to provide a specific service or other contractual obligation, usually within the period following the reporting period.
Long-term liabilities are liabilities with a maturity of more than 12 months.
Long-term liabilities are the organization's debt on loans and borrowings. Long-term liabilities also include deferred tax liabilities. Assessing the financial condition of an organization with long-term borrowings, one cannot say that their presence is negative. In addition, long-term liabilities can be equated to own funds. Also, taking into account inflationary processes, it can be considered that the presence of long-term liabilities is a beneficial factor for the organization, since their real value at the time of receipt differs significantly from the cost at the time of payment.
Types of long-term liabilities:
- loans and borrowings with a maturity of more than 12 months;
- promissory notes issued with a maturity of more than 12 months;
- bonds issued for a period exceeding 12 months;
- deferred tax liabilities.
Long-term loans to banks are issued for the purchase of investment assets, to replenish working capital or to pay off current liabilities.
When assessing the financial condition of an enterprise, long-term liabilities are usually divided into two groups:
- part of long-term payables that will be repaid more than 12 months after the reporting date;
- part of long-term payables that will be repaid before the expiration of the next 12 months after the reporting date.
The sustainability of the economic development of an enterprise is impossible without financial stability. It is stability that is the guarantor of survival and the basis of a solid position of the enterprise. The stability of the enterprise is influenced by various factors: the position of the enterprise in the commodity market; its potential in business cooperation; the degree of dependence on external creditors and investors; the presence of insolvent debtors; efficiency of business and financial transactions, etc. All these factors differ in structure (simple and complex), in the time of impact on the enterprise (permanent and temporary), in the importance of influencing the result (main and secondary). All factors, depending on the place of their origin, can be divided into internal, depending on the organization of the enterprise itself, and external, not subject to the will of the organization.
Internal factors exert the greatest influence on the activity of the enterprise. Among them, a special place is occupied by the presence of accounts payable at the enterprise.
The shortage of funds in the economy and the insolvency of many enterprises made the issues of working with creditors one of the main in the list of functions of financial managers. According to the general recognition of managers and specialists of Russian firms, the problem of managing accounts payable is to a large extent complicated by the imperfection of the regulatory and legislative framework in terms of debt collection. These reasons led to a different perception of the essence of accounts payable management in Russia compared to countries with a stable market economy: in our country it is reduced to the search for chains of netting, to the assessment of the possibilities of barter and other surrogate payments.
A modern accounts payable management system should include the entire set of methods of analysis, control and assessment of them. At the same time, the management of accounts payable is the work with the sources of their origin, the formation of the credit policy of the enterprise and the organization of contractual work, as well as the management of debt obligations.
Conducting business activities, almost any company cannot do without accounts payable. If you settle accounts with counterparties in a timely manner, then no problems arise.
Accounts payable management involves the use of the organization of the most suitable and beneficial forms and terms of settlements with counterparties, and in the most general terms it boils down to maintaining the financial stability of the company while reducing the deficit of working capital.
Effective debt management of a company is largely determined by a selective approach to counterparties and a flexible settlement system with them.
In practice, in order to ensure that credit liabilities arising in the course of economic activity do not threaten the financial well-being of the company and the level of its profitability, the management of the organization or enterprise (including lawyers and accountants) develops a detailed strategy in advance regarding the nature of attracting and using borrowed capital. In this case, the first and fundamental question is whether it is worth running a business using your own funds or attracting funds from other companies or a bank.
Accounts payable management problems are very relevant for the majority of Russian enterprises, however, due to the lack of financial resources, as well as trained personnel at many enterprises, due attention is not paid to their solution.
The concept and types of accounts payable
Accounts payable - the debt of an enterprise to counterparties, individual entrepreneurs, individuals, including its own employees, formed in the course of settlements for purchased production and material stocks, works and services, in settlements with the budget, as well as in payments for wages.
Read also: Cancellation of enforcement proceedings of bailiffs
In other words, the company's liabilities that arise in the course of its current production activities constitute accounts payable, that is, the totality of financial obligations to creditors.
In accounting, it is believed that the formation of accounts payable takes place while observing such conditions as:
the debt is formed in accordance with a specific agreement, the requirement of legislation and regulations, business customs;
the amount of debt can be quantified;
the formation of debt will lead to a decrease in the economic benefits of the enterprise.
Accounts payable are accounted for in the reporting period in which, in accordance with the above procedure, they should be recognized, regardless of the time of actual payment of funds and other form of implementation by the enterprise of its obligations.
A creditor is a legal entity or an individual who provides an enterprise with money or goods on credit and are entitled to subsequent reimbursement of these funds in cash or by exchange for other goods or work (services). In a broad sense, creditors include banks and other credit institutions, enterprises that release products and goods with subsequent payment (within the payment deferral period), employees who have been accrued but not paid wages, tax authorities in terms of taxes assessed but not paid. and equivalent payments, etc.
The economic concept of accounts payable is that it is not only part of the property of the enterprise (usually cash), but also inventory (for example, liabilities for a commodity loan).
The legal concept of accounts payable is a special part of the property of an enterprise, which is the subject of mandatory legal relations between the enterprise and its creditors. The company owns and uses accounts payable, but it is obliged to return this part of the property or pay the creditors who have rights, money for it.
Based on the noted signs, accounts payable can be defined as part of the property of the enterprise, which is the subject of debt obligations of the debtor enterprise to the authorized persons - creditors, arising from various legal grounds, subject to accounting and reflected in the balance sheet, as debts of the balance-holder enterprise.
The concept of "accounts payable" covers the debt obligations of the debtor enterprise, which have different origins, and, therefore, different legal nature and legal regime, which, in fact, determines the practical need for the use of an agreed conceptual apparatus. Since accounts payable serves as one of the sources of funds at the disposal of the debtor, it is shown in the liabilities of the balance sheet. Accounts payable are accounted for for each creditor separately, and in summary indicators they reflect the total amount of accounts payable.
Accounts payable is divided into short-term or long-term accounts payable (long-term and short-term liabilities).
Long-term liabilities include:
long-term bank loans used for long-term capital investments: for the purchase of expensive equipment, construction of buildings, modernization of production;
long-term loans reflecting long-term loans (except for bank loans) and other borrowed funds for a period of more than one year, including long-term bonds issued by the enterprise and long-term bills issued.
Short-term liabilities include:
liabilities that are covered by current assets or are repaid as a result of the formation of new short-term liabilities. These liabilities are settled over a relatively short period of time (usually within a year). Short-term liabilities are presented in the balance sheet either at their current price, which reflects the future cash expenditures to settle these liabilities, or at the price at the date of debt repayment.
Current liabilities include items such as bills and bills payable arising from the provision of a loan to the company, debt certificates of receipt by the company of a short-term loan; tax arrears, which are essentially a form of credit provided by the government to a given company; wage arrears; part of long-term liabilities to be settled in the current period.
1.2 Goals and objectives of accounts payable management
Accounts payable management means the use by an enterprise of the forms, terms, and volumes of settlements with counterparties that are most acceptable to it. Accounts payable management involves a selective approach to the counterparties of the enterprise, which makes it possible to:
evaluate the effectiveness of the credit policy of counterparties, determine the value of accounts payable, taking into account discounts, bonuses, deferrals, credit limits and obligations;
make decisions on the feasibility of working with counterparties both at the operational and strategic levels;
increase the profitability of accounts payable and the enterprise as a whole;
coordinate the management of accounts payable and receivable, which will improve the financial stability of the enterprise;
promptly identify areas and eliminate the causes of ineffective accounts payable management;
to motivate employees to solve problems of accounts payable management.
The company's accounts payable management policy is to ensure the timely accrual and payment of funds included in its composition. Let's highlight the following stages of the analysis of accounts payable:
1. determination of the structure of the total accounts payable of the enterprise at the end of each reporting period, analysis of the dynamics of the calculated indicators for a number of years;
2. determination of the amount of overdue accounts payable in its general structure;
3. ensuring control over the timeliness of the accrual and payment of funds in the context of certain types of accounts payable;
4. Comparison of the values of accounts receivable and payable of the enterprise, as well as analysis of the dynamics of their changes for a number of reporting periods.
Internal accounts payable (or internal accounts of the accrual of funds) characterizes the most short-term type of borrowed funds used by the enterprise, formed by it from internal sources. Accruals on various types of these accounts are made by the enterprise on a daily basis (as current business operations are carried out), and the repayment of obligations for this internal debt is made within certain (established) periods in the range of up to one month. Since from the moment of accrual, the funds that make up the internal accounts payable are no longer the property of the enterprise, but only used by it until the maturity of the obligations, according to their economic content, they are a kind of borrowed capital.
As a form of debt capital used by an enterprise in the course of its business activities, internal payables are characterized by the following main features:
The concept of accounts payable is very common in accounting and auditing of many organizations.
Accounts payable types
In the balance sheet, you can find several articles that are devoted to accounts payable. Its main types are as follows:
to suppliers for products and services; to employees for non-payment or delay in wages; before the tax office, related to all kinds of taxes and fees in the organization; to banking organizations and other extra-budgetary funds; in front of other persons who are not described above.
Also, accounts payable very often include a debt to the founders of an organization, for example, for non-payment of dividends on time.
Thus, we can conclude that the debt to creditors is the company's outstanding obligations to other business entities that provided this organization with certain types of services or sold goods. The most common type of accounts payable is obligations to suppliers and contractors, in other words, for the materials provided on credit, without which the company cannot function.
How to manage debt
To prevent the obligation to creditors from becoming a problem for the enterprise, it needs to learn how to manage. This can be done with a few steps:
Assess the types of accounts payable for the company and their impact on the financial stability of the organization. This is done using the balance sheet. Calculation of coefficients; Measures to reduce creditors.
The analysis and regulation of accounts payable at the enterprise should be carried out by an accountant. Accordingly, it is very important that the accountant in your company has the required qualifications and experience in dealing with debts.
In conclusion, it should be noted that the less liabilities an enterprise has to creditors, the more stable it is considered. From this, it can be concluded that the high credit rate of the enterprise adversely affects the financial stability of the organization, and also negatively affects its solvency and liquidity. To assess the volume of credit obligations, there are special ratios with which you can find out the level of such debt. Also, many banks and investors, when studying the financial indicators of an enterprise, pay attention precisely to accounts payable.
Accounts payable is:
(Accounts payable)
Section 1. The essence of accounts payable.
Section 2. Analysis accounts payable .
Accounts payable— this is a debt of the enterprise to other legal entities and individuals. persons as a result of previously committed actions (events).
Accounts payable - this is the subject's debt ( enterprises... companies, physical faces) to other persons, which this entity is obliged to repay.
The essence of accounts payable
Accounts payable arises if the date of receipt of services (works, goods, materials, etc.) does not coincide with the date of their actual payment.
Responsibility for malicious evasion from the return of accounts payable is provided for by Article 177 of the Criminal Code of the Russian Federation.
In accounting, it is customary to distinguish several types of accounts payable:
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Introduction
financial borrowed funds payables
The financial resources of enterprises are the basis of the financial system of the entire country. They occupy a separate position in this system, since they cover the most important part of all monetary relations in the country, namely, financial relations in the sphere of social monetary reproduction of the country. The financial policy is formed by the state, it also determines the procedure for the formation, distribution and use of funds from centralized funds of financial resources, which serve as one of the sources of financing for enterprises. With the help of financial resources, entrepreneurs reveal huge reserves in improving financing and organizing their work, optimizing the capital structure, which ensure an increase in production volumes and profit sales, a balance of material and financial resources. The main principle of enterprise finance is to align the opportunities for making a profit while overcoming the risk of advancing funds into various areas of entrepreneurial activity. In financing with the help of borrowed funds, much attention is paid to stimulating commercial initiatives, increasing labor productivity.
Debt management is of great importance both for large companies, where working capital accounts for more than half of all its assets, and for small companies, for which short-term liabilities are the main source of financing.
In this course work, the definition of borrowed funds is given, the policy of formation, the value in the activities of the enterprise, and financial management methods are disclosed. At the same time, in the course work, the theoretical foundations of increasing the efficiency of the use of borrowed funds are used, an analysis is made according to the data of JSC "PLASTIC".
Each enterprise, starting its production and economic activities, must have a certain amount of money. With these monetary resources, the enterprise buys raw materials, materials, fuel on the market or from other enterprises under contracts, pays electricity bills, pays wages to its employees, bears the cost of developing new products, all this is one of the most important parameters of management that has received the name "borrowed funds".
In the conditions of market relations, borrowed funds become especially important. After all, they represent a part of productive capital, which transfers its value to the newly created product in full and returns to the entrepreneur in monetary form at the end of each circulation of capital. Thus, working capital is an important criterion in determining the profit of an enterprise.
Thus, borrowed funds can serve as an important tool for economic stimulation, control over the country's economy and management of financial resources. This will explain my interest in this work. Its purpose is to analyze the financing of the enterprise as a whole, as well as the forms of financing, with an emphasis on borrowed funds.
1. The economic essence of the organization's borrowed funds
1.1 Concept and essence of borrowed funds
As you know, the formation of the financial resources of the enterprise is carried out at the expense of its own and borrowed funds. The own sources of financial resources at operating enterprises include profit (from core and other types of activity), depreciation deductions, proceeds from the sale of retired property. Along with them, the sources of financial resources are stable liabilities, which are equated to their own sources, since they are constantly in the turnover of the enterprise, are used to finance its economic activities, but do not belong to it. These include: the minimum carry-over arrears on wages and deductions for social insurance, pension fund, health insurance, employment fund; minimum debt on reserves to cover future expenses and payments; indebtedness to customers for advances and partial payment for products; arrears to the budget for certain types of taxes, etc. As the enterprise functions (growth of the production program, depreciation of fixed assets, etc.), the need for funds increases, which requires appropriate financing of capital gains. therefore, with a lack of its own funds, an enterprise can attract funds from other organizations, which are called borrowed capital.
Debt capital is a part of the capital used by an economic entity, which does not belong to it, but is attracted on the basis of a bank, commercial loan or issue loan on the basis of repayment. The need to attract borrowed capital should be justified by a preliminary calculation of the need for working capital. The structure of borrowed funds includes a financial loan received from banking and non-bank financial institutions, commercial loans from suppliers, accounts payable of an enterprise, debt on the issue of debt securities, etc. In accounting, borrowed funds and accounts payable are shown separately. Therefore, in a broad sense, it is possible to allocate borrowed funds and in a narrow sense - a financial loan itself. The difference between borrowed funds in a broad and narrow sense is borrowed funds. On the one hand, attracting borrowed funds is a factor in the successful functioning of an enterprise, which contributes to the rapid overcoming of a shortage of financial resources, testifies to creditors' confidence and ensures an increase in the profitability of own funds. On the other hand, the company is burdened with financial obligations. One of the main evaluative characteristics of the effectiveness of managerial financial decisions is the size and efficiency of the use of borrowed funds.
1.2 Policy of formation of debt capital
Any business must pay its bills so that there is still enough money left to improve the business. But the main goal of a business is to increase the value of the enterprise, and therefore to increase the wealth of the owners, by expanding the business. "Increasing the owner's wealth" sounds pretty simple. All that is needed for this is to sell good goods and services for more than the cost of their production. However, before you start generating any sales revenue, you need money to get the business up and running. But even getting your business back on its feet won't eliminate the need for external funding — you may need additional cash to weather a downturn or upgrade production facilities and equipment.
Since you cannot make money without money, companies often face the need to borrow additional funds. In the use of borrowed money for profit, the action of the borrowing mechanism is manifested; the loan in this case is used as "leverage": it increases the borrower's potential to generate profits. If you combine your own funds (your capital) with borrowed money, you thereby increase the amount of capital that can be invested in the business. As long as your rate of return on borrowed funds exceeds the percentage you pay for this loan, you are doing well. However, the borrowing mechanism is a double-edged sword: it can increase your profits, but it can also bring you losses.
Borrowing is complicated by the fact that there are many sources, and each of them has its own advantages and disadvantages, costs and benefits. The task of the finance manager is to find the combination of funding sources that has the lowest cost. This process is dynamic, since changes in economic conditions also affect the cost of the loan.
The borrowed capital used by the enterprise, in aggregate, characterizes the volume of its financial liabilities (the total amount of debt). These financial obligations in modern economic practice are differentiated as follows (Table 1. Forms of financial obligations of the enterprise, reflected in its balance sheet.)
Table 1.
Debt capital of the company (financial liabilities) |
||
Short-term debt capital (short-term financial liabilities) |
Long-term debt capital (long-term financial liabilities) |
|
short-term bank loans, the maturity of which has not yet arrived |
Long-term bank loans, the maturity of which has not yet arrived |
|
short-term borrowed funds, the maturity of which has not yet arrived |
||
Short-term loans and loans not repaid on time |
Long-term borrowed funds, the maturity of which has not yet arrived |
|
Settlements with creditors (accounts payable) |
Long-term loans and loans not repaid on time |
2. Methods of debt management
2.1 Sources and forms of external financing
The division of sources of working capital into equity and debt is carried out on the following conditions. Internal sources cover the basic need of the enterprise for resources, ensuring the continuity of production and sale of products and services. External sources cover the additional need for the formation of seasonal stocks of raw materials, materials, components, finished products, covering production costs.
table 2
There are various sources of external financing for working capital. The most widespread are:
· Russian banks - short-term loans, factoring, operations with bills of exchange;
· Leasing companies - property rent;
· Investment funds - operations with promissory notes, factoring;
· Enterprises - commodity credit, tolling, bill settlements, mutual settlements;
· The state - offsetting, deferred tax payments.
· Shareholders - dividend calculations.
Short-term loans are provided to enterprises on a paid basis. For this, credit agreements are concluded with banks, which reflect the conditions for the targeted use of credit resources, their security, urgency and payment.
Commercial banks provide short-term loans for a period of less than one year under:
· Secured by the property and valuables of the client;
· Under the guarantee or surety of a third-party legal entity or individual.
There are blank loans that are provided to first-class borrowers without a guarantee or surety.
As a security for the repayment of the loan, banks accept the client's property, which belongs to him on the basis of property rights, with the exception of property, the sale of which is prohibited.
When lending secured by property, not only its book value is taken into account, but also its market or liquid value, which takes into account the possibility of quick sale of goods, securities, currency, etc.
Short-term bank financing can be divided into overdraft funds and short-term bank loans.
Overdraft characteristics:
· The cost depends on the actual amount and term of the overdraft;
· The amount of financing may exceed the existing collateral;
· Flexibility, simplicity of contract prolongation.
Short-term loan characteristics:
· Less flexible than overdraft;
· More expensive.
The cost of an overdraft depends on the amount of funds at the disposal of the borrower at any given time, and the cost of a bank loan remains constant for the entire period of the loan agreement. Therefore, overdraft is economically beneficial in comparison with a short-term loan, but it is available only to a limited number of highly reliable and stable enterprises.
To obtain short-term loans, the borrower provides the bank with the following documents characterizing his solvency:
· Financial statements (balance sheet, profit and loss statement), on the basis of which indicators of profitability, liquidity, turnover and other financial ratios are determined.
· A feasibility study or business plan that would reveal the essence of business activities and confirm the efficiency of resource use.
· A marketing plan, according to which the level of risk is assessed from the point of view of the feasibility of the enterprise of the credited event or project as a whole.
Trade credit
This credit is provided in commodity form by suppliers in the form of a deferred payment for goods sold in the ordinary course of business. This form of credit is one of the most common in Russia.
A trade loan appears to be free at first glance, but it contains the supplier's costs associated with investing in receivables. The supplier, as a rule, includes these costs in the price, which depends on market conditions and on the mutual agreements of the parties.
In cases of payment for goods on the fact or in advance, as a rule, the supplier provides substantial discounts, therefore, before accepting a trade loan, it is necessary to determine the amount of this discount and compare this financing option with other forms.
Tolling
Tolling - work on "give-and-take raw materials". This is a way of obtaining raw materials by the processor without any costs on his part, with the subsequent return of the final product to the supplier.
The supplier rewards the processor for the work. The remuneration can be in the form of cash or in the form of finished products.
A converting company may resort to tolling if it currently does not have any other means 24b8 to finance and purchase raw materials and wants to continue production activities, as well as load production facilities, making non-tolling operations more profitable.
Promissory notes
A bill of exchange is a written promissory note in the form established by law, issued by the borrower (drawer) to the creditor (drawer), which gives the latter the right to demand from the borrower the payment of the amount specified in the bill of exchange by a certain date.
Traditionally, bills of exchange are issued for a trade loan and are used as a cash equivalent for current settlements in the event of a shortage of "live" funds.
In addition to issuing its own bills, the company can use bank bills for settlements with suppliers. The company, carrying out transactions with bank bills, can receive the following benefits:
· The company, which received a loan in the form of a bank bill, can remove the problem of solvency, because the promissory note of a stable bank is more liquid than the promissory note of the enterprise itself;
· Bank bills contribute not only to resolving the problems of non-payment of the enterprise, but also to increase working capital.
The investor's benefit from the purchase of promissory notes consists of:
· Savings on tax payments: the tax on income received on the promissory note is 15%;
· Liquidity of investments due to the maturity of the promissory note, as well as the presence of the promissory note market, where the sale of promissory notes or their accounting in the bank is possible;
· The ability to pay them their own obligations;
· The ability to pledge them and get a loan.
Factoring
The sale of a company's receivables to a financial institution known as a factor company. A transaction for the sale of a receivable at a reduced price to a specialized company - factor - or a financial institution for the purpose of obtaining funds.
When selling goods on credit, the seller can receive immediate payment from the factoring bank with a discount of 15-50%, depending on the buyer's creditworthiness and the quality of the goods.
The main advantage of factoring is to ensure the turnover and liquidity of funds.
Mutual settlements
Mutual settlements - monetary obligations between enterprises, repaid by the supply of goods or services with the participation of two or more parties.
Despite the fact that mutual settlements are not monetary transactions, any acceptance of goods from one party to the other is tantamount to a short-term loan.
Barter
As well as mutual settlements, barter implies the repayment of monetary obligations between enterprises by the supply or exchange of goods. In Russia, barter transactions are one of the main sources of funding. The volume of barter transactions in Russia accounts for more than half of the sales among the largest enterprises in the country.
Short term leasing
Short term leases can reduce investment by investing in equipment that a business needs for a limited time.
Optimal financing of working capital depends on the quality of management, which must ensure the availability of the required amount of working capital. The required volume of working capital is understood to be such a size that would be minimal, but quite sufficient to ensure normal economic activity in a specific period of time.
2.2 Accounts payable management
In order to effectively manage the company's debts, it is necessary, first of all, to determine their optimal structure for a specific enterprise and in a specific situation: draw up a budget of accounts payable, develop a system of indicators (coefficients) that characterize both quantitative and qualitative assessment of the state and development relations with the company's creditors and take certain values of such indicators as planned. The second step in the process of optimizing accounts payable should be an analysis of the compliance of actual indicators with their framework level, as well as an analysis of the reasons for the deviations that have arisen. At the third stage, depending on the identified inconsistencies and the reasons for their occurrence, a set of practical measures should be developed and implemented to bring the debt structure in line with the planned (optimal) parameters.
In order for relations with creditors to be as consistent as possible with the goals of ensuring the financial stability (security) of the company and increasing its profitability and competitiveness, the company's management needs to develop a clear strategic line regarding the nature of attracting and using borrowed capital.
The first fundamental question that arises in this regard for the management of the company is: to conduct business at the expense of its own or borrowed funds? The second "dilemma" is the quantitative ratio of equity and debt capital. The answers to these questions depend on many factors, both external (industry specifics, macroeconomic indicators, the state of the competitive environment, etc.) and internal (corporate) order (opportunities of founders, creditworthiness, asset turnover, level of profitability, shortage of funds, short-term goals and objectives, long-term plans of the company and much more).
It is generally accepted that an enterprise that uses only its own capital in the course of its economic activity has maximum stability. However, this assumption is fundamentally wrong. From the point of view of competition in the market, it does not matter what kind of capital a business operates: its own or borrowed. The only difference may be the difference in the cost of these two categories of capital. Lenders (whether banks or suppliers of goods and services) are ready to lend to someone's business only in exchange for a certain (sometimes quite high) income (interest). Moreover, even equity capital is not "free", since investments are made in the hope of making a profit, higher than that which banks pay on deposit accounts. From the point of view of the strategic development of the company, the starting point should be: the size and dynamics of business profitability, which directly depend on the size of the market share, pricing policy and the size of production (circulation) costs. The question of sources of financing for business is, in relation to the goals of achieving the competitiveness of the enterprise, secondary.
In order to optimize accounts payable, it is necessary to determine its "planned" characteristics. The most commonly used ratio associated with the assessment of an enterprise's accounts payable is the liquidity ratio, which is calculated as the ratio of working capital to short-term debt obligations.
Managers and financiers also often use the so-called "acid test" ratio, which is the ratio of the difference between current assets and the cost of inventories to current liabilities. Both the first and second indicators should characterize the enterprise's ability to meet its obligations to creditors. These coefficients have two significant drawbacks:
1. they operate with such concepts as "short-term" or "current" obligations, the term of which can range from one day to one year. Therefore, the ratio of payment terms in both payables and receivables is not taken into account in more detail;
2. the calculation is made, as a rule, on the balance sheet date, or any other fixed moment, which cannot fully speak about the actual state of the company's liquidity. This is due to the influence of many different (including random) circumstances at some particular moment (for example, on the balance sheet date, the company received a "grant" or "subsidy", which does not lead to an increase in accounts payable, and the next day it returned them ).
Eliminate such "shortcomings" in the system for analyzing the state of the enterprise allow:
In the first case, for example, making calculations using more discrete values (distribution of debts over monthly periods or (if necessary) weekly periods).
In the second case - to determine the average monthly or average annual value of the liquidity ratio and other similar indicators.
One of the most optimal framework indicators of a company's healthy state can be called a situation when accounts payable does not exceed accounts receivable. At the same time, as we have already noted, this "non-exceeding" should be achieved in relation to the most discrete range of values (terms): the annual accounts payable should be no more than the annual accounts receivable, the monthly and 5-day accounts payable no more than a month and 5- These daily receivables, respectively, etc.
When this "temporary balance" of accounts receivable and payable is reached, it is also necessary to achieve a "balance of their value": that is, in this situation, interest and other expenses associated with servicing accounts payable (at least) should not exceed incomes caused by benefits that are related to the very fact of the postponement of their own receivables (in this case, the "normal" amount of the margin is not taken into account).
In order to determine the degree of dependence of the company on accounts payable, it is necessary to calculate several of the following indicators.
Coefficient of dependence of the company on accounts payable. It is calculated as the ratio of the amount of borrowed funds to the total assets of the enterprise. This coefficient gives an idea of how much the assets of the enterprise are formed at the expense of creditors.
The coefficient of self-financing of the enterprise. It is calculated as the ratio of equity (part of the authorized capital) to the attracted one. This indicator allows you to track not only the percentage of equity capital, but also the management capabilities of the entire company.
Debt balance. It is defined as the ratio of the amount of accounts payable to the amount of accounts receivable. This balance should be compiled taking into account the timing of these two types of debts. At the same time, the desired level of the ratio largely depends on the strategy that is adopted at the enterprise (aggressive, conservative or moderate).
The economic indicators described above provide mainly a quantitative assessment of accounts payable. For a more complete analysis of the state of accounts payable, it is necessary to give a qualitative description of these liabilities.
Time factor. It is defined as the ratio of the weighted average of the maturity of accounts payable to the weighted average of the maturity of accounts receivable. At the same time, the average maturity of accounts payable must be kept at a level not lower than the average terms that the company's debtors must comply with.
Accounts payable profitability ratio. It is defined as the ratio of the amount of profit to the amount of accounts payable, which are reflected in the balance sheet. This indicator characterizes the effectiveness of the funds raised and it is especially advisable to analyze it by periods. At the same time, the dependence of the dynamics of changes in this coefficient on those main factors that influenced its growth or decline (changes in the terms of repayment, the structure of creditors, the average size and cost of accounts payable, etc.) should be determined.
2.3 Financial methods of debt management
2.3.1 Debt accounting
When receiving a loan (credit), the organization - the borrower reflects in the accounting the debt on the loan (credit) at the time of the actual transfer of money (other things) based on the actual amount received or in the value of other things provided for by the agreement (PBU 15/01).
Debt on loans and credits received is divided into short-term (the repayment period of which, according to the terms of the agreement, does not exceed 12 months) and long-term (the repayment period of which, according to the terms of the agreement, exceeds 12 months).
Upon receipt of borrowed funds, the following entry is made in the accounting: Dt. 51 - Kt. 66 (67) - for the actually received amount of the loan (credit).
The return of the loan (credit) received is reflected by the entry: Dt. 66 (67) - CT 51.
When keeping records of borrowed funds, the organization - the borrower must ensure separate accounting of urgent and overdue debts.
The term debt is understood as the debt on the received loans (credits), the maturity date of which under the terms of the agreement did not come or was extended in accordance with the established procedure.
Arrears are considered arrears on received loans (credits) with expired repayment terms according to the terms of the agreement.
The organization - the borrower is obliged to transfer the urgent debt to the overdue one on the day following the day when, according to the terms of the loan (credit) agreement, the borrower had to repay the principal amount of the debt.
2.3.1.1 Accounting for borrowing costs
The accounting procedure for costs of loans and credits depends on the purposes for which the organization - the borrower uses the borrowed funds. Costs include:
Interest payable on loans (credits) received;
Exchange rate and amount differences related to interest payable on loans and credits received and denominated in foreign currency or conventional monetary units, formed from the moment of accrual of interest under the terms of the agreement until their actual repayment (transfer);
Additional costs incurred in connection with obtaining loans and credits.
1. If the received borrowed funds are used for prepayment of inventories, works, services or for the issuance of advances and deposits in payment for them, then the costs of these loans and credits are related to an increase in receivables arising from prepayment and (or ) the issuance of advances and deposits for the above purposes. After the organization - the borrower receives inventories, the performance of work and the provision of services, the further accrual of interest and the implementation of other costs associated with servicing loans (credits) is reflected in the accounting records as part of the operating expenses of the organization - the borrower.
The organization took out a bank loan in the amount of 120,000 rubles for a period of 2 months with payment of interest at a rate of 30% per annum. The loan amount was credited to the current account on 15 January. The organization repaid the loan along with interest for the entire period of using the borrowed funds on March 15.
The borrowed funds were used by the organization for prepayment of materials. Payment was made on January 16, and the materials themselves were received from the supplier on January 26.
The following transactions appear in the organization's accounting:
Dt. 51-CT. 66 - 120,000 rubles - received a loan
Dt.60 -Kt.51 - 120,000 rubles - an advance payment for materials has been made (including VAT - 20,000 rubles)
Dt.60 -Ct.66 - 1,085 rubles - interest under the loan agreement for the period from January 16 to January 26 is attributed to an increase in accounts receivable (120,000 * 0.3 / 365 * 11 = 1,085)
Dt. 41-Kt.60 - 101.085 rubles - the received materials were capitalized at the actual cost, including the amount of interest accrued before the date of posting of materials
Dt.19 -Kt.60 - 20,000 rubles - VAT on purchased materials
Dt.91 - Kt.66 - 4.833 rubles - interest under the loan agreement for the period from January 27 to March 15 are included in operating expenses (120.000 * 0.3 / 365 * 49 = 4.833)
Dt. 66 -Ct.51 - 125.918 rubles - loan repayment along with interest.
2. If the received borrowed funds are used by the organization for the acquisition and (or) construction of an investment asset, then the costs of them must be included in the cost of this asset and repaid through depreciation, unless the accounting rules do not provide for depreciation of the asset.
An investment asset is understood as an object of property, the preparation of which for the intended use requires a significant time (fixed assets, property complexes, etc., requiring a lot of time and costs for acquisition and (or) construction).
The inclusion of the costs of loans (credits) received in the initial cost of the investment asset ceases from the first day of the month following the month the asset was accepted for accounting as an object of fixed assets or property complex, or from the first day of the month following the month of actual start of operation (if the actual operation began before its acceptance as an object of fixed assets or property complex). After this date, the costs of the borrowed funds received are included in the operating expenses of the organization - the borrower.
3. If the received borrowed funds are used by the organization for other purposes not specified above, then the costs of loans (credits) are included in the operating expenses of the organization.
2.3.1.2 Accounting for issued borrowed funds
In cases stipulated by law, organizations can raise borrowed funds by issuing bills of exchange, issuing and selling bonds - issued loan obligations.
1. In PBU 15/01, for the first time, the procedure for accounting for operations related to the attraction of borrowed funds by issuing their own bills is prescribed.
When issuing a bill for the purpose of attracting borrowed funds, the organization - the drawer reflects the amount indicated in the bill (bill of exchange) as accounts payable.
If a condition on the accrual of interest is included in the text of a bill of exchange, then the debt on such a bill of exchange is shown at the drawer, taking into account the interest due at the end of the reporting period. In this case, the amount due to the holder of the bill for payment of interest is included by the drawer in the composition of operating expenses.
If the amount of money received by the organization - the drawer when placing the bill of exchange is less than the bill amount, then this difference (discount) is included by the drawer in operating expenses.
In order to evenly (monthly) include the amounts of interest or discount due to the composition of operating expenses, the organization - the drawer may preliminarily account for them as deferred expenses. The approximate way of accounting for interest (discount) should be fixed in the Order on the accounting policy of the organization.
Organization A (borrower) entered into a loan agreement with organization B (lender). In accordance with the terms of the loan agreement, organization B transfers to organization A an amount of 470,000 rubles for a period of 3 months with a payment of 30,000 rubles.
The loan amount was received on March 20. In support of its debt under the loan agreement, organization A issues a promissory note to organization B in the amount of 500,000 rubles with a maturity date of June 20.
a) if the accounting policy of organization A provides for a one-time reflection of the discount as part of operating expenses, then the following entries are made in the accounting:
Dt.91 -Kt.66 - 30,000 rubles - the discount amount is included in the operating expenses of organization A.
June: Dt.66-Kt.51 - 500,000 rubles - the bill presented for payment is canceled.
b) if in the accounting policy the amount of the discount is preliminarily taken into account as part of deferred expenses, then the following entries are made in the accounting:
March: Dt.51 -Kt.66 - 470,000 rubles - the loan amount was received
Dt.97 -Kt.66 - 30,000 rubles - the amount of the discount is reflected as deferred expenses
Dt.91 -Kt.97 - 3587 rubles - the amount of the discount attributable to the period from March 21 to March 31 was written off to operating expenses (30,000 / 92 days * 11 days = 3587 rubles)
April: Dt.91 -Ct.97 - 9783 rubles - the amount of the discount attributable to the period from April 1 to April 30 was written off to operating expenses (30,000 / 92 days * 30 days = 9,783 rubles)
May: Dt.91 -Kt97 - 10.109 rubles - the amount of the discount attributable to the period from May 1 to May 31 was written off to operating expenses (30,000 / 92 days * 31 days = 10,109 rubles)
June: Dt.91 -Kt97 - 6521 rubles - the amount of the discount attributable to the period from 1 to 20 June was written off to operating expenses (30,000 / 92 days * 20 days = 6521 rubles).
2. When the organization attracts borrowed funds by issuing and placing bonds, the accounting of the transactions performed in this case is practically the same as when accounting for bills.
When placing bonds at a price lower than their par value, the difference between the offering price and the par value is additionally charged evenly during the circulation period of the bond with CT. 66 (67) in Dt. 91.
a) if the accounting policy of the organization provides for a one-time inclusion of the discount amount in the composition of operating expenses, then in the period when the bond is placed, two entries must be made in the accounting:
Dt.51-Kt.66 (67) - reflected the actually received amount of funds
Dt.91 -Ct.66 (67) - the amount of the difference between the offering price and the par value of the bond is reflected in operating expenses.
b) if the accounting policy provides for the reflection of the discount amount as part of deferred expenses with subsequent equal write-off to operating expenses during the bond circulation period, then in the period when the bond is placed, the following entries should be made in the accounting:
Dt.51 - Kt.66 (67) - reflected the actually received amount of funds
Дт.97 - Кт.66 (67) - the amount of the difference between the offering price and the par value of the bond is reflected in the deferred expenses.
Subsequently, on a monthly basis during the bond circulation period, the discount amount is written off to the operating expenses: Dt.91 -Ct.97.
2.3.2 Analysis of borrowed funds
2.3.2.1 Effect of financial leverage
One of the indicators used to assess the efficiency of the use of borrowed capital is the effect of financial leverage (EFI):
EFR = (ROA - Tszk) * ZK / SK, (1)
EFR = [BEP (1 - Kn) - Tszk] * ZK / SK, (2)
where ROA is the economic profitability of the total capital after taxes (the ratio of the amount of net profit and interest on the loan, taking into account the tax corrector, to the average annual amount of the total capital),%;
Цзк - the price of borrowed resources, taking into account the tax corrector,%;
Кн - the level of tax exemption from profit (the ratio of taxes from profit to the amount of profit after interest before tax);
ЗК - the average amount of borrowed capital;
SK is the average amount of equity capital.
The effect of financial leverage shows how many percent the amount of equity capital increases by attracting borrowed funds into the company's turnover. A positive EFR occurs when the return on total capital is higher than the weighted average price of borrowed resources, i.e. if ROA> Czk. For example, the return on total capital after tax is 15%, the WTO while the price of borrowed resources is 10%. The difference between the cost of borrowed funds and the return on total capital will increase the return on equity. Under such conditions, it is beneficial to increase the leverage of financial leverage, that is, the share of borrowed capital. If ROA< Цзк. создается отрицательный ЭФР (эффект дубинки), в результате чего происходит «проедание» собственно капитала и это может стать причиной банкротства предприятия. Из этого следует, что заемные средства могут способствовать как накоплению капитала, так и разорению предприятия. Поэтому недаром долги образно сравнивают с заряженным ружьем, которое при умелом обращении с ним может защитить, а при неосторожном - убить.
In an inflationary environment, if debt and interest are not indexed, the EFR and return on equity increase as debt servicing and the debt itself are paid for with already depreciated money. Therefore, in this case, when determining the EFR, one should take into account not the nominal price of borrowed funds, but the real one, which is determined as follows:
Tszkr. = (Tszk.n.-И) / 1 + И (3)
where Tszk.r. - the real price of borrowed capital
I - inflation rate for the reporting period
Tszkn. - the nominal price of the borrowed capital, taking into account tax savings
Since as a result of inflation, both the amount of interest paid and the amount of the debt itself are depreciated, its effect on the EFR can be presented in more detail:
EFR = (ROA - Tsz.n / 1 + I) * ZK / SK + (ZK + I) / SK * (1 + I) * 100 (4)
To determine how the EFR changed due to each factor of the selected model, you can use the chain substitution method, sequentially replacing the base level of each factor with the actual one in the reporting period and comparing the EFR before and after the change in the actual factor.
The effect of financial leverage can be calculated not only for the entire borrowed capital, but also for each of its sources (long-term, short-term bank loans, loans, commodity loans, accounts payable, interest-free borrowed resources, etc.)
3. Practical part
Analysis of the use of borrowed funds based on the data of OJSC "PLASTIC" by calculating the effect of financial leverage.
Table 3
Indicators |
Reporting period |
|
1. The total amount of gross profit, thousand rubles. |
||
2. Interest payable, thousand rubles. |
||
3. Profit after interest before taxes, thousand rubles. |
||
4. Taxes from profit, thousand rubles. |
||
5. Level of taxation, coefficient,% |
||
6. Net profit, thousand rubles. |
||
7. Average total capital, thousand rubles. |
||
8. Equity capital |
||
9. Debt capital |
||
10. The ratio of debt to equity (leverage) |
||
11. Return on equity after taxes (ROA),% |
||
12. The nominal average price of borrowed resources, taking into account the tax corrector,% |
||
13. Inflation rate,% |
||
14. The real price of borrowed funds, taking into account tax savings and inflation index,% |
||
15. Effect of financial leverage |
a) Profit after interest before taxes = Amount of gross profit - interest payable = 732433-301482 = 430951 thousand rubles.
b) Taxation level = item 4 (taxes from profit) / item 3 (profit after interest before taxes) = = 503/430951 * 100% = 0.1167%
c) Net profit = item 3 - item 4 = 430448
d) ROA profitability = p.1 / p.7 * (1-Kn) * 100 = = 732433/2775519 * (1-0.0114) * 100 = 26.088%
Kn = the ratio of taxes from profit to the amount of profit after interest before tax = 503/44267 = 0.0114
e) The nominal price of borrowed resources Tsz.n = p.2 / p.9 * (1-Kn) * 100 == 301482/9359789 (1-0.0114) * 100 = 3.185
f) The real price of borrowed funds Tsz.r = Tszkn - I (inflation) / 1+ I = (3.185 - 3.1 / 1 + 3.1) * 100 = 0.5056
g) EGF = (item 11 - item 14) * item 10 = (26.088- 0.5056) * 86.222 = 2.205
Conclusion: For each ruble of invested capital, the organization received a profit of 26,088 kopecks this year, and paid 2,205 kopecks for the use of borrowed funds. Under such conditions, it is beneficial to further increase the leverage of the financial leverage, that is, the share of borrowed funds.
Since the return on total equity after tax is 26.088%, while the real cost of borrowed funds is 2.205%, the difference between the cost of borrowed funds and the return on total equity can increase the return on equity by 23.883%.
Conclusion
Currently, the guarantees of the normal process of expanded reproduction is the financing of capital investments by borrowing funds.
Debt capital is a part of the capital used by an economic entity, which does not belong to it, but is attracted on the basis of a bank, commercial loan or issue loan on the basis of repayment.
Debt capital can be used both for the formation of long-term financial assets in the form of fixed assets (capital), and for the formation of short-term (current) financial assets for each production cycle.
The structure of borrowed capital may be different depending on the affiliation of the enterprise, the availability of a particular source of financing, etc. In modern economic conditions at Russian enterprises, as a rule, in the structure of borrowed funds, the largest share is taken by short-term bank loans.
In addition to finding sources of funding, the financial manager must monitor the effectiveness of spending. Most companies have many potential items of expenditure, and the amount of capital is limited. To choose the most rational way to spend funds, the financial manager needs to develop a selection methodology that would accurately determine the options that are most consistent with the goals of the organization.
To effectively manage the company's debts, it is necessary, first of all, to determine their optimal structure for a specific enterprise and in a specific situation: draw up a budget of accounts payable, develop a system of indicators (coefficients) that characterize both quantitative and qualitative assessment of the state and development of relations with creditors companies and take certain values of such indicators as planned. The second step in the process of optimizing accounts payable should be an analysis of the compliance of actual indicators with their framework level, as well as an analysis of the reasons for the deviations that have arisen. At the third stage, depending on the identified inconsistencies and the reasons for their occurrence, a set of practical measures should be developed and implemented to bring the debt structure in line with the planned (optimal) parameters.
This course work discusses in detail the sources and forms of external financing (overdraft, trade credit, tolling, bill of exchange, factoring, mutual settlements, barter, short-term leasing), as well as methods of keeping records of borrowed funds: accounting for costs on loans and borrowings, accounting for issued loan obligations ...
In the practical part, the analysis of the use of borrowed funds is made.
Bibliography
1. Mironov M.G., Zamedlina E.A., Zharikova E.V. Financial Management - M .: Exam Publishing House, 2009.
2. Yablukova R.Z. Financial management in questions and answers. - M .: ed. "Prospect", 2010.
3. Blank I.A. Fundamentals of Financial Management. - M .: 2010.
4. PBU 15/01 "Accounting for loans and credits, and the cost of servicing them."
5. A. Komakha, Financial Director magazine, No. 4/2010.
6. Sirotkin V. B. "Financial management of companies" - SPb2010.
7. Balabanov I.T. “Fundamentals of Financial Management. How to manage capital? " - M. "Finance and Statistics" 2010.
8. Serdyuk V. B. Financial management. Methodology and experience - DSM, 2010.
9.www.conculting.ru
11. Kovalev V.V., Kovalev Vit. B. Analysis of the balance, or How to understand the balance. 2nd ed., Rev. and add. M .: Prospect, 2010 (a).
12. Kovalev V.V., Kovalev Vit. B. Corporate finance and accounting: concepts, algorithms, indicators. M .: Prospect, 2010 (b).
13. Essays on the history of financial science / ed. V.V. Kovalev. M .: Prospect, 2010.
14. Finance: textbook / ed. V.V. Kovalev. 3rd ed., Rev. and add. M .: Prospect, 2010.
15. Common money market instruments (Van Horn J.K. Vakhovich J.M. Jr. Fundamentals of financial management, 2010, pp. 415-422).
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term paper, added 02/24/2012
The economic essence of settlements with debtors and creditors. Classification of receivables and payables in the structure of the company's working capital. Methods for managing accounts receivable and payable.
Absolutely any association in the course of economic activity can play the role of a supplier (executor) or a customer. When making settlements on his accounts, as a rule, both accounts payable and accounts receivable are formed. In this article, it would be appropriate to consider the concept and types of accounts payable and receivable. In addition, it is important to study the relevant aspects of the first category today.
Features of debts
For a full understanding of such a category as accounts payable, it is advisable to consider the relevant system as a whole (namely, the concept, features, types of accounts receivable and payable of the enterprise).
Today accounts receivable are defined as the debt of other associations, employees and citizens of this structure. In other words, this is the debt of buyers for the purchased product, services rendered or work performed; indebtedness of persons of accountable importance for the amount of money issued to them. It is important to know that individuals and organizations that owe a certain amount of funds to this organization are called debtors.
Accounts receivable: classification
It should be emphasized that accounts receivable are endowed with a fairly extensive classification. So, in accordance with the content of obligations, it is customary to distinguish the following types of categories:
- Debt that is directly related to the sale of marketable products, works or services.
- Debt that is in no way related to the sale of commercial products, works or services.
When considering the types of receivables and payables, it should be noted that the duration criterion involves dividing receivables into long-term and short-term, which is often called current in modern literature. In accordance with such a factor as the timeliness of payment, the following types of debt are distinguished:
- Normal.
- Overdue (sometimes hopeless and doubtful).
The concept and types of accounts payable
Accounts payable as an independent category of legal significance is a special part of the general property complex of the structure, which is the subject of an obligatory relationship between the association and its creditors. It is important to note that the economic aspect, one way or another, consists of a part of the organization's property (we are talking mainly about money) and inventory. It must be remembered that the structure uses and owns all types of accounts payable that are currently relevant, however, it, one way or another, undertakes to pay or return the corresponding part of the property complex to creditors. The latter are endowed with the right to demand the fulfillment of the presented obligation.
The dual nature of accounts payable
From the materials of the previous chapter, we can conclude that the essence and types of accounts payable are determined by a dual legal nature. In other words, as part of the general property complex, the category belongs to the organization in accordance with the right of ownership in relation to things or money received by the borrowing method. On the other hand, as an object of obligatory legal relations, the considered economic category is nothing more than the organization's debts to creditors. It is important to note that the latter are the persons vested with all the rights to collect or reclaim the specified part of the common property complex from this association.
In accordance with the simplified aspect, accounts payable is a type of obligations to creditors; what this organization owes to other individuals or legal entities. A full-fledged definition of the category in question presupposes the obligatory consideration of the characteristics noted above. So, accounts payable is a part of the general property complex of the organization, which is the subject of debt obligations of the debtor's association, arising in accordance with various kinds of legal grounds, to direct creditors (eligible persons).
Accounts payable accounting is a must
It is important to know that all currently existing types of accounts payable, one way or another, are subject to accounting and, of course, reflected in the balance sheet. They are reflected as debts of the balance-holder association.
Then, when the creditor structure does not intend to take any actions related to the voluntary return of debts, the debtor has the opportunity to collect them forcibly. It is important to add that, depending on the type of accounts payable, today there is both a judicial and an extrajudicial procedure.
Debt obligations of various origins
It is interesting to know that the definition of accounts payable currently covers those debentures of the association-creditor, which have various origins. Since the currently known types of accounts payable serve as bright sources of monetary or other material resources at the disposal of the organization, they are present in the liability of the balance sheet. It should be added that the accounting of the category analyzed in the article is kept in accordance with each creditor separately. In the indicators of a generalizing nature, the total amount of accounts payable is reflected. By the way, it is given only on condition of division into certain groups.
Temporary improvement in financial condition
The concept and types of accounts payable, its features at the present stage of economic development, suggest that the attraction of borrowed money or other material resources into the turnover of a structure is a phenomenon that in any case implies a temporary improvement in the general state of the organization in financial terms. The main condition here is that the borrowed funds are not frozen for a long period in circulation - they are returned at the time that is determined in accordance with the official agreement.
You need to know that otherwise there is a threat of an overdue type of accounts payable of the enterprise. This alignment, as a rule, involves the payment of a certain amount of the fine, as well as a significant deterioration in the financial life of the structure. That is why, when managing, it is imperative to study the prescription, the composition of the occurrence of accounts payable, as well as the presence, reasons and frequency of its formation.
Free loan
All types of accounts payable of an organization, in accordance with their essence, act as a free loan and belong to the category of monetary and other material resources attracted by the structure in economic circulation. It should be noted that, unlike liabilities of a stable nature, accounts payable are not a planned source of the formation of working capital. Either way, it serves as a short-term commitment of the enterprise.
It is interesting to note that part of the structure under consideration is determined by its lawful nature, because it appears, as a rule, due to certain features of the calculations. However, most accounts payable arise as a result of a breach of payment-type discipline. So, it is the result of non-observance on the part of the structure of the actual terms of payment for a commodity product and the submission of settlement documentation.
Short-term type of borrowed funds
The considered category characterizes the most short-term type of borrowed funds used by the structure. You need to know that these funds are formed at the expense of sources of internal value. Their accrual in accordance with various types of accounts is carried out by the organization on a daily basis. Repayment of the same obligations on these accounts payable is made in specific terms, where the range, as a rule, does not exceed a month. Since after accrual, the funds included in accounts payable no longer belong to the property of the organization, but are only applied until the deadline specified for the repayment of current obligations, in accordance with their economic content, they act as one of the varieties of borrowed capital.
Accounts payable classification
In this and subsequent chapters, it will be advisable to consider the main types of accounts payable. Today it is customary to allocate debts for:
- Contractors and suppliers.
- Transfer of contributions in accordance with the insurance of the property of the structure.
- Transfer of contributions in accordance with the personal insurance of employees.
- Bills payable.
- Founders in accordance with the payment of income and so on.
So, depending on the legal nature and legal regime, the considered category is reduced to three groups:
- Before social funds and the budget.
- To employees (for example, wage arrears).
- To contractors and partners.
According to the criterion associated with the fact of payment, the debt is:
- Not overdue (debts, the maturity of which has not come at the time of the balance sheet formation).
- Overdue (maturity has arrived).
What else?
You need to know that in the structure of accounts payable it is customary to distinguish the debt of the association:
- To contractors and suppliers.
- To employees and organizations.
- In front of off-budget funds of a state nature.
- Before the budget.
- In accordance with the loans and credits received.
- To other creditors.
Features of accounts payable
- It is a free source of borrowed funds. As a free source of capital formation, accounts payable provide some reduction not only in its borrowed share, but also in the total cost of capital.
- The size, one way or another, affects the duration of the financial cycle of the structure. It has an effect to some extent on the required amount of funds in order to finance current assets. The larger the relative value of the category under consideration, the smaller the amount of funds the structure needs to attract for the current financing of its own economic activity.
- The total amount of debt directly depends on the volume of economic activity of the structure (primarily - on the volume of output and product sales). It is important to note that with an increase in the volume of production and sales of marketable products, the organization's expenses increase, which are accrued as part of the debt. So, the total amount of accounts payable rises, and vice versa.
It is important to emphasize that the size of the category under consideration is influenced by the volume of all purchases, as well as the corresponding percentage of purchases under the terms of subsequent payment. In addition, factors accompanying the execution of contracts with counterparties have a significant impact; terms of settlements with contractors and suppliers; the level of market saturation with this product; the policy related to the repayment of accounts payable; consistency in the application of the results of the analysis of the category under consideration, as well as its quality; settlement system adopted in the structure.
It is important to note that in the case of an increase in non-cash settlements, the quality and turnover of accounts payable increases proportionally. Its size decreases, therefore, the stability and solvency of the structure increases significantly. In addition, accounts payable can be terminated by the executor of obligations, and also written off as unclaimed.
In economic science, the postulate is adopted that an enterprise that uses its own circulating assets in economic activity is more stable than an organization that has in its structure a certain part of borrowed funds. This statement can be challenged, because credit money can allow an enterprise to get more profit with their effective use and, accordingly, improve its financial position.
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The difference lies in the cost of capital - the company uses its money for free, for borrowed money you have to pay interest. The proportion between own circulating assets and borrowed assets should be reasonable, maintaining a high financial stability ratio.
Competent management of accounts payable significantly affects the stability of the enterprise: the higher the debt, the more problems the organization experiences, ranging from the payment of salaries to employees and to a decrease in staff motivation. Relations with partner organizations and tax authorities can deteriorate, which can literally put the organization on the brink of survival.
Among the borrowed funds, a special place is occupied by long-term accounts payable.
What it is
Long-term accounts payable (KZ) - the organization's obligations in relation to other business entities exceeding a period of one year. To be able to successfully manage the company's debts, it is necessary to determine their optimal ratio to its own working capital and develop a system of relations with creditors that allows the most profitable use of other people's funds.
On the one hand, it turns out that a long-term KZ is a part, a share of property that belongs to the enterprise on a legal basis, transferred to it by the creditor on the basis of an agreement, on the other hand, it is a debt that is the object of the legal obligations being created.
Taking into account the mechanisms of inflation, it can be noted that the use of long-term debt in the financial activities of a company can be useful, since the actual cost of money at the time of receipt differs significantly from the cost of funds at the time of payment.
The reasons for the debt can be different: a lack of working capital of the enterprise or a long production cycle that requires additional financial injections. Also, one of the main reasons for the occurrence of a long-term short circuit may be the specifics of production.
The appearance of a long-term shortfall arises in the acquisition of assets in the event that the buyer is provided with a deferred payment. Its actual value will be equivalent to the amount of money required to be paid as of the date of its acceptance for accounting (discount).
The difference between the price in case of immediate payment and its value at the date of acceptance for accounting is recognized as the amount of depreciation. If the price of the asset is not known when the payment is made immediately, you can apply the interest rate on bank loans with similar terms or the weighted average interest rate of the Central Bank. Tax liabilities cannot be discounted.
What belongs
The chart of accounts of accounting in Russia defines 7 main types of debts as long-term obligations:
- long-term bank loans - amounts that the company must pay creditors, taking into account the accrued interest;
- loans and credits taken from non-bank sources (for example, a loan from the founder);
- bills with maturity over one year;
- bonds issued by the company with a validity period of more than one year;
- deferred tax liabilities - the amount of taxes required to be paid in the near future. A similar situation may arise if there are discrepancies between the standards of accounting and tax accounting and accounting indicators exceed the amount of tax in the reporting tax period;
- retirement benefits of employees - the planned obligations of the enterprise for payments to retired former employees of the organization. This article reflects the amount of money required to be paid today on account of future pension obligations;
- long-term finance lease liabilities.
The timing
Long-term loan commitments include all debts with maturities of more than 12 months or after the end of the operating cycle, if it is longer than one year. These will be reflected as the present value of future payments.
Long-term accounts payable in the balance sheet
Every accountant knows that long-term KZ in the balance sheet is accounted for in section IV with the same name: Balance sheet long-term liabilities. It is located in the passive part of the balance sheet and contains digital data on debt, the maturity of which exceeds one year.
Line 1410 "Borrowed funds"
In the specified line, on the basis of the accounting rules, the amounts of long-term loans, reflected in accounting on account 67 - “settlements for long-term loans and borrowings”, must be indicated. As part of long-term debt, only the amounts actually received by the borrower should be reflected.
If the subject of filling out is borrowed funds in the form of loan agreements, their registration takes place in a completely different way. On the basis, when receiving a loan, the accountant must reflect in the balance sheet not the real amount of funds received, but the figure specified in the contract.
When drawing up an explanatory accounting note, the same approach is applied: it must be indicated in it about the amounts not received under the loan agreement.
Completion of line 1410 Loans and credits includes the amount of loans and credits received by the organization. Interest accrued at the end of the reporting period is also reflected here.
Line 1420 "Deferred tax liabilities"
In the next line, the accountant is required to reflect the amount of deferred tax liabilities that are part of the budgetary allocations. Their presence leads to an increase in the total amount of payment of corporate income tax. How do they arise? It's all about the difference between the two approaches: traditionally, the policy of the tax authorities differs from the accounting requirements based on the requirements of the Ministry of Finance.
When filling out this line, the accountant takes account 77 as a basis.
Line 1430 "Provisions"
In line 1430, the amount of long-term estimated liabilities is entered, including, among other things, reserves for future expenses (account 96).
This may include:
- inevitable costs associated with the economic activities of the organization;
- probable expenses, whose occurrence can be foreseen. They reduce the economic benefit of the enterprise;
- the amount of possible costs that can be estimated. The estimated liabilities also include the payment of vacation money and the insurance premiums accrued on it.
Accounting rules prohibit in this line from including unfulfilled contracts under which one of the counterparties has not yet fulfilled its obligations to the other.
Also, reserves, whose formation occurs from the retained earnings of the organization, are not subject to inclusion in line 1430.
The calculation of estimated liabilities must be officially enshrined in the accounting policy of the enterprise.
Line 1450 "Other liabilities"
In line 1450, the accountant indicates the totality of other long-term liabilities that are not included in the previous lines of the balance sheet.
This, as a rule, includes credit balances on accounts: 60, 62, 68, 69, 75, 76, 86.
Settlements with suppliers and contractors, buyers and customers, settlements for taxes and social insurance, targeted financing are all reflected in line 1450.
The total line 1400 sums up all long-term liabilities of the enterprise at the end of the reporting period and shows the total amount of credit debt
Information requirements for long-term short-circuit protection are usually available at the enterprise.
Sources of information can be:
- loan agreements with banking or other institutions;
- information on the terms of the bond issue;
- long-term finance lease agreements.
Thus, in conclusion, we note that the presence of accounts payable indicates the resulting gaps between the needs of the enterprise to pay current expenses and its capabilities at the moment, requiring the attraction of borrowed funds.
Liabilities = Equity +Commitments
Commitments= Borrowed funds+ Accounts payable
For the purposes of its development, the organization can use not only the funds of the founders (participants) and the profit received. The source of the formation of the organization's property can be creditors' funds: loans, borrowings, bonded loans, etc.
The circumstances of the organization arise from contracts between the organization acting in the role of the debtor and other individuals and legal entities acting in the role of creditors. By virtue of these agreements, the debtor organization undertakes to perform a certain action in favor of the creditors, such as: transfer property, perform work, pay money. Liabilities to legal entities and individuals can also arise as a result of a court decision. Liabilities measured in cash are an integral part of the entity's liabilities. The creditor has the right to demand that the debtor fulfill his obligation.
Grounds for occurrence and types of obligations.
An organization's obligations arise for various reasons. Lenders of the organization can be various individuals and legal entities who have provided the organization with credits and loans. The obligations incurred by the debtor in the performance of the loan agreement are called borrowed funds.
The creditors of the organization are the state and various extra-budgetary funds, to which the organization bears tax liabilities. The organization's creditors are its employees who have entered into collective and individual labor contracts with the organization. On the basis of contracts with employees, the organization is liable for remuneration. These obligations are characterized by the fact that they arise every reporting period and must also be regularly repaid. These obligations are part of the so-called accounts payable organizations.
Obligations may arise from contracts for the supply of inventory, performance of work, provision of services, which provide for:
- receipt by the organization acting as a supplier, an advance payment or an advance payment from buyers and customers;
- receipt by an organization acting as a buyer (customer), a deferral or payment by installments (commercial loan).
The organization's liabilities for advances received and for repayment of a commercial loan are also included in accounts payable. Thus, depending on their origin, liabilities are divided into borrowed funds and accounts payable.
Short-term and long-term liabilities
One of the tasks of the accounting of liabilities is to control the timeliness of settlements with creditors in order to avoid arrears. For this reason, liabilities, depending on the maturity date, are divided into short-term and long-term.
Short-term liabilities (liabilities)- these are liabilities with a maturity period according to the concluded agreement up to one year (starting from the date the obligations were accepted for accounting). Short-term liabilities are also called current liabilities.
Long-term liabilities (liabilities)- these are loans and borrowings received with a maturity in accordance with the concluded agreement for more than one year, starting from the date of acceptance of the obligation for accounting.
The division of the organization's liabilities into short-term and long-term is also necessary for the purposes of financial analysis.
At the same time, the economic content and origin of liabilities does not depend on the urgency of their repayment, therefore short-term and long-term liabilities (liabilities) do not require separate consideration. In this book, the liabilities of the organization are characterized in the division into borrowed funds and accounts payable. This classification reveals the economic nature of various types of liabilities and corresponds to the structure of the balance sheet.
Borrowed funds
Borrowed funds - obligations incurred in the performance of the loan agreement.
By loan agreement one party (lender) transfers money or other things of a certain kind and quality to the other party (borrower), and the borrower undertakes to return to the lender the same amount of money (loan amount) or an equal amount of other things of the same kind and quality received by him. A loan agreement is considered concluded from the moment the money or other things are transferred. Unless otherwise provided by law or the loan agreement, the lender has the right to receive from the borrower percent for the loan amount in the amount and in the order determined by the agreement. Unless otherwise agreed, interest is paid monthly until the day the loan amount is repaid.
Borrowed funds include obligations for:
- received loans from banks (bank loans);
- sold debt securities (bonds, etc.);
- financial bills issued;
- loans and advances received.
The value of borrowed funds.
As the enterprise functions (growth of the production program, depreciation of fixed assets, etc.), the need for funds increases, which requires appropriate financing of capital gains. therefore, with a lack of its own funds, an enterprise can attract funds from other organizations, which are called borrowed capital.
Debt capital is a part of the capital used by an economic entity, which does not belong to it, but is attracted on the basis of a bank, commercial loan or issue loan on the basis of repayment. The need to attract borrowed capital should be justified by a preliminary calculation of the need for working capital. The structure of borrowed funds includes a financial loan received from banking and non-bank financial institutions, commercial loans from suppliers, accounts payable of an enterprise, debt on the issue of debt securities, etc. In accounting, borrowed funds and accounts payable are shown separately. Therefore, in a broad sense, it is possible to allocate borrowed funds and in a narrow sense - a financial loan itself. The difference between borrowed funds in a broad and narrow sense is borrowed funds. On the one hand, attracting borrowed funds is a factor in the successful functioning of an enterprise, which contributes to the rapid overcoming of a shortage of financial resources, testifies to creditors' confidence and ensures an increase in the profitability of own funds. On the other hand, the company is burdened with financial obligations. One of the main evaluative characteristics of the effectiveness of managerial financial decisions is the size and efficiency of the use of borrowed funds.
Debt capital can be used both for the formation of long-term financial assets in the form of fixed assets (capital), and for the formation of short-term (current) financial assets for each production cycle.
Bank loan
If the organization plans to carry out a certain project, then for its financing the organization can attract borrowed funds. One of the types of borrowed funds are bank loans.
Bank loan issued by banks (credit institutions) in the form of cash loans on terms of repayment, urgency, payment, security. Depending on the timing of the return, there are:
- short-term loans issued for a period not exceeding one year;
- medium-term and long-term loans issued for a period of more than a year.
Short-term loans serve as a source of formation of tangible circulating assets of the organization. The transformation of current assets into monetary assets serves as a source of return for short-term loans. The repayment period of such loans is determined by the time of the turnover of funds in the credited business processes. Long-term loans are a source of investment financing and serve to cover the costs of capital construction, reconstruction, etc. The source of the long-term loan repayment is the future profit from the commissioning of the credited objects.
When deciding on the attraction of borrowed funds, the organization prepares feasibility study project. Based on the needs of the project and taking into account the availability of its own sources and the current financial situation, the organization determines the amount of the required loan, its urgency (estimated repayment period), sources of repayment of the loan principal and interest, as well as guarantees of loan security. To obtain a bank loan, an organization must submit to the bank a loan application drawn up in the prescribed form. A feasibility study of the project is attached to the loan application, as well as documents characterizing the borrowing organization:
- notarized copies of constituent documents;
- accounting (financial) reports for the last three years;
- internal financial reports and data of internal operational accounting;
- other accompanying documents.
The bank examines a loan application for compliance with its own credit policy, analyzes the creditworthiness of the organization (the ability to repay the loan and pay interest on time) and its solvency (the ability to timely repay all types of existing liabilities). If the loan application is approved, the borrowing organization and the bank (credit organization) draw up loan agreement.
The loan agreement, together with the bank's rules, regulate the procedure for lending to the organization. According to the loan agreement, the creditor bank undertakes to provide funds (credit) in the amount and on the terms stipulated by the contract, and the borrower organization undertakes to return the received amount at a fixed time and pay interest on it. The loan agreement contains:
- loan objects and loan term;
- conditions and procedure for issuing a loan and its repayment;
- forms of securing obligations;
- interest rates and the procedure for their payment;
- obligations, rights and responsibilities of the parties;
- the list and frequency of submission to the bank of the reporting documents of the organization and other conditions.
Security of a loan or a loan with a financial bill of exchange
The borrower can issue a bill of exchange to the lender to secure the loan received, such a bill is called financial. If a promissory note is issued, the borrower is the drawer, the lender is the drawer. When a borrower transfers a bill of exchange under an endorsement to a lender, the borrower is the endorser and the lender is the remitter. The lender can also be indicated as the payer of a bill of exchange issued by the drawer (borrower) to the drawer. Financial bills can also be issued by an organization as security for a bank loan received to reduce the risk of late payment or non-payment.
Example. Issuance of a financial bill
Organization "A" intended to receive a short-term loan from organization "B" in the amount of 50,000 rubles, but organization "B" demanded guarantees of repayment of obligations. Organization "A", being a subsidiary of organization "C", with the consent of the latter, issued a bill of exchange to secure a loan to organization "B". Organization "B" was the holder of the bill, the parent organization "C" was named the payer of the bill. Under the security of the received promissory note, organization "B" transferred 50,000 rubles. to the account of organization "A". In this case, the issuance of a financial bill extinguished the obligations of the organization "A" on the loan to the organization "B", and at the same time there were obligations under the bill to the organization "C".
Bank loan secured by the account (discount) of a bill
An organization-holder of a bill of exchange can receive cash from the bank before the due date for the bill of exchange for discounting the bill.
Discounting a bill- registration of a bill of exchange in a bank and issuance of a bank loan to the holder of a bill of exchange secured by a bill of exchange on the terms of the established interest rate ( discount) and for a period equal to the due date of the bill. The dictated bill of exchange is kept in the bank, but is on the balance sheet of the organization that holds the bill.
Bills submitted for accounting are checked by the bank for their legal reliability. The likelihood of redemption of the promissory note and the economic situation of the persons liable under the promissory note are also assessed. The loan issued by the bank is equal to the par value of the promissory note minus the discount interest (discount).
For promissory notes, in excess of the nominal value of which interest is indicated, this interest is included in the amount of the bank loan. Upon maturity, the bank presents the bills of exchange to the payer and receives the payments due on them. The closing of a bill of exchange discount operation is made on the basis of a bank notification of payment of this bill by the drawer (or other person obligated by the bill). If the drawer does not pay on the bill of exchange on time, the bank returns the bill of exchange to the organization-holder of the bill with a complete protest of non-payment. The holder of a bill independently repays the loan from the bank and submits a claim to the drawer.
Bank loan on loan account
The holder of a bill can open special loan accounts and receive a loan on them, transferring bills of exchange as collateral. The bank checks the accepted promissory notes for their legal reliability. A loan account secured by promissory notes is a demand account opened before the maturity of promissory notes accepted as collateral. Typically, the loan amount is 60-90% of the face value of the bills. The client, with the permission of the bank, can replace some promissory notes with others before their maturity.
The client pays interest on a special loan account in accordance with the procedure established for the use of bank loans.
The amount of interest paid depends on the client's creditworthiness and the reliability of the promissory notes provided to him. The repayment of the loan on a special loan account is made by the client-holder of the bill, after which the bills of exchange corresponding to the amount of the repaid debt are returned to him from the security.
Bond loan
In cases stipulated by legislative and other legal acts, a loan agreement may be concluded by issuing and selling bonds. Bond certifies the right of its holder to receive from the organization that issued the bonds, the par value of the bond or other property equivalent within the period specified in the bonds. The bond also grants its holder the right to receive a fixed percentage of the par value of the bond or other property rights. The bondholder is the lender of the bond issuer.
Bonds of organizations must have the following requisites: name of the organization and its location, par value of the bond, name of the holder (for registered bonds), maturity, level and terms of interest paid (for interest-bearing bonds), signature of the head of the organization or other authorized person.
The organization has the right to issue bonds secured by a pledge of certain own property, or bonds secured by third parties for the purpose of issuing bonds, as well as unsecured bonds. The issue of bonds by the organization is allowed after full payment of the authorized capital. A joint stock company can issue bonds in an amount not exceeding 25% of the authorized capital. When issuing registered bonds, the organization maintains a register of their owners.
Raising funds by issuing bonds has advantages for the organization in comparison with the issue of shares and other securities:
1) the sale of bonds can be more successful: financial investments in bonds are attractive to creditors due to guarantees of bond redemption and receipt of a set income;
2) loans in the form of bonds entail lower costs for the organization to pay interest on the funds raised;
3) the bonds of the organization do not give their holders the right to participate in the management of this organization.
Payment of interest on bonds. Interest on bonds is calculated in relation to the par value of bonds regardless of their market value. Interest on bonds is paid quarterly, semi-annually or based on annual results. Interest on bonds in the first year of their circulation is paid in proportion to the time the bond is actually in circulation, unless otherwise stipulated by the terms of the issue. Interest on bonds may be paid in securities, goods or other property rights, if provided for by the terms of the issue.
Interest on bonds is paid directly by the issuing institution, agent bank or financial intermediary acting on behalf of the client by check, payment order, postal or wire transfer. A legal entity that independently pays interest on bonds, or an agent authorized to do so, must make a note about the payment of interest to the bondholder by redeeming or cutting off the coupon on the bonds.
Legal entities that independently pay interest on bonds, agent banks or other financial intermediaries that pay them act as agents of the state to collect taxes and pay interest to bondholders after deducting applicable taxes.
In case of non-fulfillment or untimely fulfillment by the organization of the obligation to pay interest and repay the amount specified in the bond, the collection of these amounts is carried out on the basis of a notarial note, made in the manner prescribed by law.
Sources of payment of income and interest on borrowed funds
The cost of paying income and interest on borrowed funds is attributed to the sources listed below.
The cost of products (works, services) includes the amount of interest:
- for bank loans (excluding loans for the purchase of fixed assets, intangible and other non-current assets);
- for commercial loans;
- on borrowed funds, including bank loans, used by leasing entities to carry out financial leasing operations;
for budget loans, except for loans issued for investments and conversion activities.
For capital investments include the amount of interest on loans and borrowed funds received for investments in fixed assets, intangible and other non-current assets until the completion of these investments.
To reduce profits remaining at the disposal of the organization after taxation includes the amount of interest:
- for bonded loans;
- on borrowed funds received for the implementation of investments after the objects of completed investments have been accepted for accounting;
- on bank loans to compensate for the lack of working capital.