Indicators of financial balance

Transcription

1 Indicators of financial balance LUCIAN PATRASCU *, CLAUDIA GEORGETA CARSTEA **,IOAN-GHEORGHE RATIU **, ANDREI OCTAVIAN PARASCHIVESCU ***, FLORIN RADU ***, * Department of Economics, ** Department of Mathematics, Informatics and Socio-Human Sciences *** Department of Economics and Management George Baritiu University, No.6, Lunii St., Brasov George Bacovia University, No.96, Pictor Aman St., Bacau ROMANIA luccianpatrascu@yahoo.com,carstea.claudia@yahoo.com,ratiu_2000@yahoo.com, adiparaschivescu@yahoo.com, radufloryn79@yahoo.com, Abstract Financial analysis shows how to achieve financial balance in the long term and short-term objective analysis based on the balance sheet. In terms of financial balance is analyzed as a description of the resources invested (passive) and allocating these resources (active), thus allowing an early interpretation of the financial situation of the company. Financial undertaking allows highlighting of funding that an owner of property benefited and financing needs. Key-words floating capital, working capital requirements, net treasury; 1 Introduction Stable allocations, in particular assets, consisting of durable goods. Sufficient profits to repay their purchase price will not be released than in many years. Traditional theory considers that their funding should therefore be ensured by the resources themselves are not redeemable only after several years (loans) or that are not required to repay (if equity). A bank to finance a renewal random contests would be dangerous. Functional balance rule requires stable resources to be stable enough to fund allocations.funding allocations based on permanent capital, that is to be financed from equity assets and financial liabilities. In addition, businesses need capital to fund operating requirements, time needed can get a permanent character and is so obvious that it should be funded from stable resources. From the theoretical point of view, it is sufficient that the sum of permanent capital to be at least equal to the permanent use for business but would be effective as part of the assets to be financed from resources of character, that is the sum of permanent resource allocations exceed permanent, in which the company would have a safety margin. Financial balances are calculated based on the financial statement of the company, particularly materialized as three (3) indicators that allow us to further analyze them. 2 Floating capital This surplus of permanent sources, unrestricted funding cycle of investment, can be "run" for the renewal of stocks and receivables. This use of the marks and names of potential, namely floating capital. This surplus of working capital used to finance the operation, playing the first indicator of financial balance which summarizes how to achieve financial balance which summarizes how to achieve structural balance between stable balance sheet items. Financial balance of the company resulting from the confrontation of large masses of balance: floating capital (FR), with working capital requirements (NFR), which shows Treasury (T). This balance is determined concepts of balance sheet presentation: financial optics and optical functional. At company level, static analysis of financial balance can be achieved at three levels: - Balanced long term indicator is used when measuring "revolving fund" through which permanent resources compared with continuous use. - Short-term equilibrium, for which the ISSN: ISBN:

2 indicator used is "working capital requirements, whereby permanent resources compared with continuous use. - Current balance when seeking the treasury, by comparing the availabilities of temporary bank loans. The revolving fund is a classic indicator commonly used in financial analysis.content and its interpretation have evolved over time and currently still vary depending on the user. Working capital surplus expresses permanent capital of the assest mobilized. In other words, he is part of permanent equity financing is affected operating cycle. The revolving fund is part of the permanent capital used to finance current assets imposed by differences between accounts receivable and payable amounts and the gap between the average time for processing of the assets in cash and the average duration of short-term debt are due. It is an expression to achieve long-term financial stability and its contribution to the achievement of equilibrium short-term financing. FLOATING CAPITAL = PERMANENT FUND SOURCES PERMANENT ALLOCATION = (equity + financial liabilities) - net fixed (without depreciation) In conclusion, the working capital is a means of funding and at the same time, an indicator of liquidity. The working capital is greater, the smaller will be short-term debt to finance current assets. The floating capital can be analyzed based on the balance sheet heritage and functional: A) Floating Capital on the balance sheet heritage: Patrimonial revolving fund can be determined in two ways: 1. Based on elements contained in the upper part of the balance sheet where have a low liquidity assets and liabilities of a low chargeability, working capital is in this case the difference between permanent capital and net assets. Floating capital = Permanent equity (CPM) - Net Assets (IMO) This calculation emphasizes the origin of the revolving fund and its determinant variables, representing the so-called external analysis of the revolving fund. In this sense, represents the excess floating capital resources to provide permanent financing current assets. This surplus of permanent resources released from the top of the sheet used to cover the financing needs of the bottom of the balance sheet as current assets for renewal. 2. Based on elements contained in the bottom of the balance sheet, fund working capital is the excess of current assets to short-term debt: Floating capital = Current assets (Action) - Short-term debt (DTS) This method of calculation shows better use of working capital,emphasis on its purpose, which is financing current assets. If assets are lower than short-term debt, working capital is negative, presenting a difficult financial situation of the company, and if assets are in excess of short-term debt, working capital is positive and represents a normal situation of the company. Is considered a negative working capital line means predictable financial difficulties solvency, which requires better financing. Between assets as cash and potential liability for short-term debt, there may be the following situations: Current assets> Short-term debt FRF> 0 Reflect the existence of surplus liquidity in the short term potential to potential liability for the corresponding period (liabilities). Current assets <Short-term debt FRF <0 In terms of solvency, the situation is bad, because it reflects a state of financial imbalance. Solvency analysis involves a detailed analysis of the structure of current assets and short-term debt. Current assets = Short-term debt FRF = 0 Short-term solvency seems to be safe, but the balance is fragile, it can be compromised by any disturbance in the performance claims. Revolving fund, is an alarm and draw attention to the fragility of the financial balance of the company. ISSN: ISBN:

3 B) Floating Capital on the balance sheet functional: The optical functional, achieving financial balance of the enterprise does not imply only the existence of a positive working capital as a safety margin, but a working capital financing needs covering the operating cycle (operating inventories + receivables debt service).sustainable resources in relation to surplus assets values are functional revolving fund or revolving fund Global Net (FRNG) available to fund operations operating cycle. Most reference works, are however in the sense of working capital overall working capital (FRNG) calculated based on functional balance. Resources used to finance assets must remain firm for a period not less than their lifetime. Following this rule, stable resources used to fund assets stable acyclic, while liabilities finances cyclical assets. In this case determining FRNG relationship is: FRNG = Sustainable Resources - Needs stable or FRNG = (sustainable resources - Depreciation) - Net Assets FRNG same value is given by the size and cyclical needs of the remaining unfunded cash resources and cash cycle, determined according to the relationship: FRNG = (cycle + meet cash needs) - (cyclic Resources + cash resources) or FRNG = (ACE + ACAE + D) - (D + APR + CT). The floating capital is a necessity for most businesses. It is a margin of safety for the enterprise and its creditors, a prerequisite to ensure financial independence to third parties. 3. Working capital requirements Mining operations result in the formation of financing needs, but at the same time they allow the establishment of means of financing. Of global confrontation with the means of financing needs encompass a need to finance operating cycle or need working capital. Comparing short-term resources invested in shortterm assets other than cash, the value dimension of obtaining working capital requirements. Thus, working capital requirement is the difference between financing needs and debt service cycle of exploitation. Another definition states that the revolving fund concept expresses the volume revolving fund that provides (for its own and attracted) to ensure assets (stocks, receivables and other assets), established under the normal rotation speed nationwide and comparable with international practices. From a certain balance that must exist between needs and resources cyclical cyclical stock patrimony highlights another indicator called the need for working capital (NFR). NFR = ACR DEX Assets are defined without the availability of money, so only their forms materialized. The operation included both debt generated by the process of mining resources and the resources requested and received as such, temporary resources (excluding cash loans). NFR = (Current assets - cash cash) - (Short-term debt - short term loans) = (Current assets - cash Money) - short-term obligations Or NFR = (Inventory + Receivables) - Short-term debt Financial needs of the operation can be expressed as the difference between money locked up in inventories and training for customers and similar their claims, on the one hand and debt financing built into their similar unpaid suppliers and, on the other hand. Fund needs floating operating cycle varies depending on the specific activity level of activity (turnover), size of enterprise and trade policy. The financial analysis for assessing working capital needs from operations may be used indicator of rotation expressed in number of days or number of turns, as the relationship: NFRz = x 360/CA ISSN: ISBN:

4 Accelerating the speed of rotation of working capital requirements from operations is a positive aspect and effect business availability. Size requirements for working capital from operations is influenced by the nature of business, manufacturing cycle, rotation of inventory and receivables, activity level, etc.. Working capital requirements are usually calculated: - In developing the annual budget; - When formulating their investment plans and their financing, the intervals than one year; - In all cases where the company feels cash difficulties. 4. Net Treasury Users of financial statements of an entity are interested in how the entity generates and folosesşte cash and cash equivalents. This is found regardless of the nature of the entity and even cash can be viewed as a product of the entity, as the case may be a financial institution. Entities need cash for essentially the same reasons, no matter how different their principal revenue-producing activities. They need cash to conduct their operations, to pay obligations and to provide returns to investors. Between the working capital adjustment and the need for working capital due to the following reasons: Working Capital Fund. Revolving fund value depends on long-term decisions on investment policy and financing enterprise policy. The revolving fund is stable. The need for working capital. It arises from the short-term gap between expenditure and revenue and corresponding regulations. Essential component, operating NFR, depends on the level of activity measured by turnover. NFRE may, in particular, vary in a seasonal (and work). Revolving fund and working capital requirements resulting thus in such cases different. If, at any time, exceed the existing working capital requirements of operating working capital, financing surplus is reflected as net cash (TN), realized in cash. Treasury has a key role in a company as cash availability feature size available at this time. Treasury cash is made available for mass payments and receipts of the game and must constantly cope with maturity. Treasury, in an undertaking, the availability of money and image placement, short term, arising from changes in current receipts and payments that the investment of excess cash. In France, in different contexts, scientists have developed several definitions of the Treasury: In a narrow sense, it means total liquidity or the availability of business; One accept more extensive, including debit balances in bank treasury and investment securities which can be turned into cash; In 70 years, net treasury was defined as the difference between working capital and working capital requirements and measured as the difference between cash and cash loans. The literature in our country, the concept of cash concerns all means of financing in the form of cash and short-term loans available to a trader to meet its payments. According to International Accounting Standards (IAS7), the cash flows arising from operating activities is a key indicator of the extent to which the entity's activities have generated sufficient cash flows to repay loans, maintain the operating capability of the entity to pay dividends and make new investments without recourse to external sources of funding. Information on specific components of historical operating cash flows, together with other information useful in forecasting future operating cash flows. Treasury can be calculated in two ways: The difference between working capital and working capital requirements: TN = FR NFR The difference between cash and credit availability of cash: TN = Dpb Crt, The Treasury means the final balance of all flows receipts and payments or surplus / deficit of cash (Dpb) credits to cash (CRT). A free cash surplus and no deficit is difficult to conceive of practical. Providing a perfect balance of cash is, I believe, a hypothetical situation which can be found only if the working capital need to ensure full financing of working capital. It is noted, therefore, dependence need cash to ISSN: ISBN:

5 working capital changes, ie the gap between receipts and payments on outstanding debt. l intreprise avec 15 cas d aplication resolus, Ed. Dunod, Paris Conclusion Company's financial stability analysis aims at reflecting the relationship of equality between funding sources and uses of financial resources of income and expenses for carrying out long-term enterprise, medium and short. Term financial stability is analyzed, by comparing the medium and long term permanent capital assets, short by comparison with current resources and assets by comparing the total balance of the revolving fund working capital requirements. Having the merit of providing a clear picture of the economic functioning of the enterprise, fundamental concepts of balance sheet highlights stocks and resources of each operating cycle. This model assumes a group analysis of the various operations conducted prior to undertaking in the nature, purpose or their function, hence the origin of the expression "functional analysis". Equilibrium concept in economic theory has multiple meanings. A general formula, the economic-financial balance is achieved when the company fully recovers resources consumed, ie when revenues are equal to expenditure, or balance means a situation of stability, harmony between the components of a system which the financial plan involves the harmonization of financial resources to the financial needs of the enterprise. Such understanding is of a reductionist, it highlights the link ansambluluicu components of general equilibrium with its partial states, which constitutes a system of proportionality and relationships References: [1] Erich A.,Helbert, Techniques of Financial Analysis, BMT Publishing House, [2] Eros-Stark L., Pantea I.M., Analysis of the financial situation of the company. Theoretical elements. Case study.ed.economică, Bucureşti, [3] International Financial Reporting Standards including International Accounting Standards and their interpretations [4] Josette Peyrard, Analyse financiere Vuibert gestion, Paris [5] Mailler J., Remilleret, Analyse financiere de ISSN: ISBN: