In addition to the firm's overall budget, planning may include preparing a projected income statement and a cash plan.
The most important planning documents include the organization's business plan. It can help you understand how the sources of funds and the company's working capital are related. The structure of the plan can be presented as follows:
Funds from all sources, including:
loans;
net profit;
depreciation;
other own funds.
Use of funds, including:
purchase of equipment, structures;
increase in stocks of raw materials and supplies;
repayment of loans;
acquisition of securities;
dividend payment.
The plan also includes an increase in working capital and calculation of the break-even point.
When a financial manager is faced with papua new guinea email list the task of forecasting the results of a project launch, he must get an idea of the point at which the investment will be returned - this is the break-even point.
In other words, a firm reaches the break-even point when the revenues received are equal to the costs incurred.
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Formation of an optimal structure of financial resources
The activities of any enterprise are related to financial management, product sales and profit distribution. The organization's balance is periodically replenished, and the proceeds are used to purchase materials, raw materials, repair equipment, expand production areas, pay taxes and interest on loans. To successfully run a business, it is first necessary to form an optimal structure of financial resources.
The optimal structure of the enterprise's financial resources is the ratio of the company's own and borrowed capital, due to which the return on business increases with minimal investment. To create such conditions, a minimum credit load is needed, in other words, the debt should not exceed the cost of equity capital.
The development of the enterprise's financial resources consists of reducing the company's total debt and using instruments to increase liquidity:
replacing credit with leasing;
attracting external investors;
increase of the authorized capital through additional shares;
debt restructuring.
The cost of capital is calculated using the WACC formula as the average interest rate for all sources of financial resources. As a result, it is possible to draw a conclusion about the risk that the company and its financial resources are exposed to.
Real experience shows that equity and borrowed funds can be used in different combinations, none of which can be called universal. When forming an optimal capital structure, many factors are taken into account: the scope of activity, related industries, directions and stages of the company's development, location, features and structure of the market, legislative requirements. And yet, to attract investors or optimize capital, it is recommended to reduce the share of borrowed funds, since in this case, risks are minimized and the attractiveness of the enterprise increases.