The enterprise's own financial resources include: Own financial resources of the enterprise
1. The concept, essence and functions of enterprise finance.
2. Sources of formation and directions of use of financial resources of the enterprise.
4. Taxes and taxation of the enterprise.
The financial resources of an economic entity are the funds at its disposal. Financial resources are directed to the development of production, maintenance and development of non-production facilities, consumption, and may also remain in reserve. Financial resources used for the development of the production and trade process represent capital in its monetary form.
Sources of financial resources are all cash income and receipts that an enterprise or other economic entity has at its disposal in a certain period (or as of a date) and which are used to make cash expenses and deductions necessary for production and social development:
Repair Fund;
Insurance reserves;
Other own financial resources.
The authorized capital represents the sum of contributions of the founders of an economic entity to ensure its life. The amount of the authorized capital corresponds to the amount recorded in the constituent documents and is unchanged.
Borrowed financial resources include:
Bank loan;
Loan from another financial institution;
Budget loan;
Commercial loan;
Accounts payable that are constantly in circulation;
Other borrowed resources.
Borrowed capital is capital that an enterprise owns only for a certain period of time, after which the capital must be returned to its owner with payment for temporary possession.
In addition to loans taken from the bank, borrowed capital also includes capital raised by the issue of securities (except for shares), and machinery, equipment, and buildings leased by the enterprise.
Recently, in the foreign practice of financing capital investments, a steady trend has emerged in the use of borrowed funds. If in the mid-60s the share of own sources in financing capital investments was 90%, then by the mid-80s it dropped to 60%, and in some countries - to 50%. An increase in debt entails a deterioration in business results. It is also believed that if a company increases its turnover by more than 20%, then it necessarily needs long-term financing.
Attracted financial resources include:
Funds for equity participation in current and investment activities;
Shares and other contributions of members of the workforce, legal entities and individuals;
Insurance compensation;
Funds received from the sale of securities;
Shares and other contributions of legal entities and individuals;
Accounts payable that are constantly at the disposal of the enterprise;
Credit and loans;
funds from the sale of a certificate of collateral, an insurance policy and other cash receipts (donations, charitable contributions, etc.).
Balance sheet profit is the sum of profits from sales of products, from other sales and income from non-sales operations minus expenses on them. The income tax rate in 1993 was 32%, since 1994 - from 35 (38) to 43%. It should be borne in mind that income from equity participation in other business entities and income from securities are taxed at a rate of 15%. Therefore, these incomes must be separated from taxable profit into a separate group. The reserve fund is created by business entities in case of termination of their activities to cover accounts payable.
The formation of a reserve fund is mandatory for a joint-stock company, cooperative, or enterprise with foreign investment. Contributions to the reserve fund and other funds similar in purpose are made until the size of these funds established by the constituent documents is reached, but not more than 25% of the authorized capital, and for a joint-stock company - not less than 10%. In this case, the amount of contributions to these funds should not exceed 50% of taxable profit.
The accumulation fund is a source of funds for an economic entity that accumulates profits and other sources for the creation of new property, the acquisition of fixed assets, working capital, etc. The accumulation fund shows the growth of the property status of an economic entity, the increase in its own funds. At the same time, operations for the acquisition and creation of new property of an economic entity do not affect the accumulation fund.
The consumption fund is a source of funds for an economic entity, reserved for the implementation of measures for social development (except for capital investments) and material incentives for the team.
Depreciation charges are a stable source of financial resources; they are formed as a result of transferring the value of fixed assets to the cost of the product and together constitute the depreciation fund.
By Decree of the President of the Russian Federation dated May 8, 1996 No. 685 “On the main directions of tax reform in the Russian Federation and measures to strengthen tax and payment discipline,” a new depreciation procedure has been in effect since January 1, 1998.
The composition of property subject to depreciation for tax purposes includes property whose value exceeds 100 times the minimum wage established by the legislation of the Russian Federation, the useful life of which is more than one year. Land plots, subsoil plots and forests, as well as financial assets are not classified as property subject to depreciation.
All property subject to depreciation is combined into four categories:
1) buildings, structures and their structural components;
2) passenger vehicles, light freight vehicles, office equipment and furniture, computer equipment, information systems and data processing systems;
3) technological, energy, transport and other equipment and material assets not included in the first or second category;
4) intangible assets.
Annual depreciation rates are: for the first category - 5%, for the second category - 25%, for the third - 15% for all taxpayers, with the exception of small businesses and entrepreneurs, in respect of whom the annual depreciation rates increase and are, respectively, for the first category - 6%, for the second category - 30%, for the third category - 18%.
In relation to intangible assets, depreciation deductions are made in equal shares over the period of use of these assets. If the useful life of an intangible asset cannot be determined, the amortization period is set at ten years.
Calculation of depreciation charges for property classified as the first category is carried out for each unit of property separately.
A sustainable source of financial resources for an economic entity is accounts payable, which are constantly at its disposal. This is primarily wage arrears, contributions to extra-budgetary funds associated with the wage fund, a reserve for upcoming payments, and more. The formation of wage arrears is caused by the fact that between the period for accrual and the day of payment there is a certain number of days for work during which the business entity still must pay employees. The reserve for future payments is formed by accumulating funds intended to pay for the upcoming vacations of employees. These funds do not belong to the business entity or have a designated purpose. However, they are constantly with the business entity, which disposes of them at its own discretion until the debt is repaid.
A share, or share contribution, is the amount of cash contribution paid by a legal entity or individual upon entering into a joint venture.
The investment contribution is a tool for self-financing the activities of an economic entity. An investment contribution is a monetary contribution from an employee to the development of a given business entity, which accrues interest to the investor in the amount and within the time frame specified by the agreement or regulation on the investment contribution.
Among borrowed sources of financial resources, a distinction is made between loan, borrowing and credit.
A loan is the transfer of a thing by one party (the lender) for free temporary use to another party (the borrower), who undertakes to return the same thing in the same condition in which she received it, taking into account normal wear and tear or in the condition stipulated by the contract (Article 689 Civil Code of the Russian Federation).
A loan is the transfer by one party (the lender) into the ownership of the other party (borrower) of money or another thing defined by generic characteristics, and the borrower undertakes to return to the lender the same amount of money (loan amount) or an equal number of other things received by him of the same kind and quality ( Article 807 of the Civil Code of the Russian Federation).
Credit is the provision by a bank or credit organization (lender) of money (loan) to the borrower in the amount under the conditions stipulated by the loan agreement, and the borrower undertakes to return the amount of money received and pay interest on it (Article 819 of the Civil Code of the Russian Federation). Thus, in a loan, the lender is a bank or financial organization, and the subject of the loan is only money.
There are types of loans: financial, commercial, investment tax.
Financial loan is a loan issued by a bank or credit institution on the terms of urgency, repayment, and payment. Depending on the period, they are divided into short-term and long-term: short-term - issued for a period of up to one year, long-term - for a period of more than one year.
A commercial loan is a deferment of payments from one business entity to another. Commercial loans are provided to a business entity by suppliers of products (works, services) in the form of a bill of exchange loan, a company loan or an open account, and by the buyer to the supplier - in the form of an advance.
An investment tax credit is a deferment of tax payment provided by government authorities or tax authorities. The RSFSR Law “On Investment Tax Credit” provides for a deferment of tax payments for two categories of enterprises: for small enterprises when purchasing and putting into operation certain types of equipment and for privatized enterprises (with some restrictions) on a loan for the redemption of the enterprise’s property.
Sources of financial resources also include cash receipts from donations, charitable contributions (patronage), insurance premiums, from the sale of the debtor's pledged property, sponsorship contributions (directed to finance an event).
The enterprise allocates part of its financial resources to special-purpose funds: wage fund, production development fund, material incentive fund, and so on. Of particular importance now is the use of financial resources to fulfill payment obligations to the budget and banks. The pace of economic development, the improvement of the budget system, and the strengthening of enterprise finances largely depend on the nature of the use of financial resources. Another part of the financial resources is used by the enterprise to finance current expenses and investments.
Investments can be risky (venture), direct, portfolio, annuity.
Venture capital is the term used to describe a risky investment. Venture capital is an investment in the form of the issue of new shares made in new areas of activity associated with high risk. Venture capital is invested in unrelated projects with the expectation of a quick return on investment. Capital investments, as a rule, are made by purchasing part of the shares of the client company or providing loans to it, including the right to convert these loans into shares. Risky investment of capital is due to the need to finance small innovative firms in the areas of new technologies. Risk capital combines various forms of capital application: loan, equity, entrepreneurial. He acts as an intermediary in the founding of start-up, knowledge-intensive companies, called ventures.
Direct investments are investments in the authorized capital of an economic entity in order to generate income and obtain the rights to participate in the management of this economic entity.
Portfolio investments are associated with the formation of a portfolio and represent the acquisition of securities and other assets. A portfolio is a collection of various investment values collected together that serve as a tool for achieving a specific investment goal of the investor. The portfolio may include securities of the same type (stocks) or various investment values (stocks, bonds, savings and deposit certificates, certificates of pledge, insurance policy, etc.).
The principles for forming an investment portfolio are the safety and profitability of investments, their growth, and the liquidity of investments. Let's take a closer look at the concept of liquidity. The liquidity of any financial resource is understood as its ability to participate in the immediate purchase of goods (works, services). The liquidity of investment assets is their ability to quickly and without loss in price turn into cash.
When considering creating a portfolio, an investor must determine for himself the parameters that will guide him:
1) choose the optimal type of portfolio. There are two possible types of portfolio: a) a portfolio focused primarily on generating income through interest and dividends; b) a portfolio aimed at primarily increasing the market value of the investment assets included in it;
2) assess the combination of portfolio risk and income that is acceptable to you and, accordingly, determine the share of the portfolio of securities with different levels of growth and income.
ITopic questions:
1. Economic essence and classification of capital.
2. Equity capital of the enterprise: composition and sources of formation.
3. Enterprise reserves.
4. Borrowed capital of an enterprise: composition and sources of formation.
The purpose and objectives of studying the topic : disclosure of the processes of formation and use of financial resources of enterprises, pconsideration of the main sources of financial resources; consideration of equity and debt capital; disclosure of the content of fixed and operational cash funds and financial reserves of enterprises.
After studying the topic, the following knowledge should be acquired: the concept of financial resources of enterprises; the main sources of formation of the authorized capital of enterprises of various organizational and legal forms; content of forms and types of financial resources of enterprises; conditions for the formation and direction of use of fixed and operating funds of enterprises.
When studying the topic, you need to focus on the following concepts: financial resources of enterprises; capital and assets; own and borrowed capital of enterprises; cash funds.
Theoretical material of topic 6
Economic essence and classification of capital.
Financial resources - this is the totality of the enterprise’s funds intended to fulfill financial obligations, finance current costs and costs associated with the development of production.
Based on their origin, financial resources are divided into own and borrowed.
Own - are formed from internal and external sources. Included internal sources, the main place belongs to the profit remaining at the disposal of the enterprise, which is distributed by decision of the management bodies.
An important role also belongs to depreciation charges, which represent the monetary expression of the cost of depreciation of fixed assets and intangible assets and are an internal source of financing for both simple and expanded reproduction.
Included external(attracted) sources of formation of own financial resources, the main role belongs to the additional issue of securities, through which the share capital of the enterprise is increased, it is also possible to attract additional contributions of funds to the authorized capital.
Borrowed – financial resources attracted by enterprises on the basis of temporary ownership require return within a clearly established time frame and payment for their use. These include:
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· bond loans;
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Attracting borrowed funds allows an enterprise to accelerate the turnover of working capital, increase the volume of business transactions, and reduce work in progress. .
Part of the financial resources put into circulation by an enterprise and generating income from this turnover is called capital, which acts as a converted form of financial resources.
Capital - this is part of the financial resources invested in production with the aim of making a profit.
Capital can be classified according to various criteria.
1. According to affiliation, they are distinguished:
· Own – characterizes the total value of the enterprise’s funds owned by it.
· Borrowed capital includes cash or other property assets raised on a repayable basis to finance the development of the enterprise's activities.
2. According to the investment object, they distinguish:
· Main capital represents part of the capital used, which is invested in all types of non-current assets.
· Working capital – This is part of the capital invested in the working capital of the enterprise.
3. Depending on the purpose of use, the following are distinguished:
· Productive – characterizes those funds that are invested in the assets of the enterprise to carry out business activities.
· Loan capital – characterizes the funds that are used in the process of carrying out the investment activities of the enterprise.
· Speculative – used in the process of carrying out speculative financial transactions, i.e. in transactions based on the difference in purchase and sales prices.
4. According to the form of being in the circulation process: capital in monetary, productive, commodity form.
In the process of constant circulation, transformation occurs monetary forms of capital into current and non-current assets, i.e. V productive form, then productive capital takes commodity form in the process of production of products, works or services. As the produced goods are sold, a gradual transition into money capital occurs. Simultaneously with the change in forms, the movement of capital is accompanied by a change in its total value.
The basis of the financial resources of the enterprise is equity . It includes:
· authorized capital;
· Reserve capital;
· Extra capital;
· retained earnings;
Authorized capital represents a set of fixed assets, other property, intangible assets, as well as property rights with a monetary value, which are invested in the enterprise by its founders and participants (legal entities and individuals) in proportion to the shares determined by the constituent documents. The authorized capital determines the minimum amount of the enterprise's property, guaranteeing the interests of its creditors.
It must be emphasized that the authorized capital refers to the most stable part of the equity capital of enterprises. An increase or decrease in the authorized capital in any form is not allowed. All changes are recorded in the charter of the enterprise and are made, as a rule, from the beginning of the reporting year.
The formation of authorized capital is regulated by the provisions of the Civil Code of the Russian Federation, taking into account the features inherent in enterprises of various organizational and legal forms.
Part additional capital include the following elements:
· amounts from the additional valuation of non-current assets;
· share premium of a joint stock company (amounts received in excess of the par value of issued shares, minus the costs of their sale);
· exchange rate differences resulting from the founders making contributions to the authorized capital.
Reserve capital in a joint stock company is formed in the amount provided for by its charter, and must be at least 5% of the authorized capital. Reserve capital is formed through mandatory annual deductions from net profit until the amount stipulated by the charter is reached. The amount of annual contributions is fixed in the charter, but it cannot be lower than 5% of net profit until it reaches its value determined by the company's charter. Reserve capital is intended to cover losses, as well as to repay the company's bonds and repurchase its shares in the absence of other funds.
A decrease in reserve capital as a result of its use for its intended purpose requires additional accrual in subsequent reporting periods.
For business partnerships and limited and additional liability companies, the minimum required amount of reserve capital has not been established. It is formed within the scope determined by the constituent documents.
retained earnings is an important source of formation of the enterprise's own capital. Current legislation provides the rights to business entities to quickly maneuver the net profit at their disposal.
Retained earnings include:
· retained earnings (loss) of previous years;
· retained earnings (loss) of the reporting year.
The use of retained earnings from previous years occurs by directing its amounts for the following purposes:
· replenishment of reserve capital;
· increase the authorized capital;
· payment of income to founders.
It should be noted that it is retained earnings that are the main internal source of formation of own financial resources and financing of capital investments.
Sources of equity capital formation are divided into internal and external. Part internal sources include:
· retained earnings;
· funds added to equity capital as a result of revaluation (revaluation) of fixed assets;
· other internal sources (reserve funds).
Depreciation charges are also an internal source of the formation of own monetary resources, but they do not increase the amount of equity capital, but only serve as a way of reinvesting it.
Part external sources include:
· mobilization of additional share capital (through contributions of founders’ funds to the authorized or share capital);
· attracting additional share capital (through re-issue and sale of shares);
· free financial assistance from legal entities and the state (state unitary enterprises, financial and industrial groups, etc.);
· conversion of borrowed funds into equity (exchange of bonds for preferred shares);
· targeted financing funds received for investment purposes;
· other external sources (share premium generated when shares are sold above their par value).
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Loan capital includes:
· loans and borrowings from banking institutions;
· loans and borrowings from other enterprises (including accounts payable);
· bond loans;
· budgetary allocations on a repayable basis.
Bank loan – these are funds provided by a bank to an enterprise for a specified period at certain interest rates for its intended use.
Principles of lending: principle of repayment, principle of urgency,
the principle of payment, the principle of material security of the loan, the principle of the targeted nature of the loan.
Accounts payable - this is the debt of an enterprise to suppliers of raw materials, materials, semi-finished products and products for sale.
Bond - a debt security that involves regular payments of interest fixed on the face value - coupon payments, and the obligation of the person who issued the bond to repay the face value of the bond on time. It is usually sold at a discount.
In addition, borrowed capital is classified based on the period of use:
· Short-term loans and borrowings.
· Long-term loans and borrowings.
· Accounts payable.
Short term loans and borrowings serve as a source of covering current assets. Prepayment is treated as an interest-free loan to suppliers.
Short-term debt is considered to be debt on received loans and credits, the repayment period of which, according to the terms of the agreement, does not exceed 12 months.
TO long term include debt on received loans and credits, the repayment period of which, according to the terms of the agreement, exceeds 12 months.
Urgent consider the debt on received loans and credits, the repayment period of which, according to the terms of the agreement, has not come or has been extended (prolonged) in the prescribed manner.
Overdue is considered to be debt on received loans and credits for which the contractual period for repayment of the debt has expired.
Guidelines for studying the issues of the topic
When studying the issues on the topic, read the textbook by Kovaleva A.M., Lapusta M.G., Skamai L.G. "Company Finance" pp. 37-46, textbook ed. N.V. Kolchina “Finance of organizations (enterprises)”, pp. 10-22.
Think about the questions:
1. What is the influence of the financial market on the formation of financial resources of domestic enterprises?
2. What type of financial resources is the main one for the enterprise?
3. Is the authorized capital a source of formation of financial resources in the process of operation of the enterprise?
4. Can a bond issue be a source of formation of an enterprise's own capital?
5. For what purposes is it advisable to attract long-term borrowed capital, and for what purposes – short-term?
6. What capital forms the basis of the business of any enterprise?
7. What is the role of fixed and operating funds in the functioning of an enterprise?
Compare the concepts: enterprise capital and financial resources of the enterprise; assets and liabilities; own and borrowed capital of the enterprise.
Own financial resources are formed from internal and external sources. Among internal sources, the main place belongs to profits remaining at the disposal of the enterprise, which is distributed by decision of the constituent body for the purposes of consumption and accumulation. Moreover, profit is the main source of replenishment of the enterprise's equity capital.
Own capital of the enterprise
characterizes the total value of the organization’s funds owned by it and its creditors guaranteeing it. Included equity
the following main elements are distinguished: authorized capital, additional capital, reserve capital, retained earnings and other reserves.
Authorized capital of the enterprise -
this is the initial amount of funds of the founders necessary for its functioning and reflecting the right to conduct business activities. Its value determines the minimum size of the company's property, guaranteeing the interests of its creditors. According to the current legislation, the minimum amounts of authorized capital are established:
for enterprises with foreign investment, open joint-stock companies, state and municipal enterprises - 1000 times the minimum wage per month;
for enterprises of other organizational and legal forms, including closed joint-stock companies - 100 times the minimum wage per month.
Extra capital -
this is, in fact, an addition to the authorized capital and includes the amount of additional valuation of fixed assets, capital construction projects and other tangible assets of the organization with a useful life of more than 12 months, carried out in the prescribed manner, as well as the amount received in excess of the par value of the issued shares (issue income). Including exchange rate differences arising when repaying debt on contributions to the authorized capital and other similar elements.
The use of additional capital takes place in the following cases:
a) repayment of amounts of reduction in the value of non-current assets based on the results of asset revaluation;
b) disposal of fixed assets, when the amount of their revaluation is transferred from additional capital to the organization’s retained earnings;
c) allocation of funds to increase the authorized capital;
d) distribution of amounts between the founders of the organization.
Reserve capital (reserve fund)
This is part of the capital intended to cover losses, repay the company’s bonds, and repurchase its own shares in the absence of other funds. The reserve fund cannot be used for other purposes. The amount of reserve capital is used to judge the financial strength of an enterprise. Its absence or insufficient value is considered as an additional risk factor for investing capital in an enterprise. The legislation of the Russian Federation provides for the mandatory creation of reserve funds in organizations, depending on their organizational and legal form.
retained earnings
These are the profits of the organization remaining after paying taxes and paying dividends, used for reinvestment purposes for development needs.
An important role in the composition own internal sources
Depreciation charges also play a role, which represent the monetary expression of the cost of depreciation of fixed assets and intangible assets. They do not increase the amount of equity, but are a means of reinvestment.
Among external sources
In the formation of own financial resources, the main role belongs to the additional issue of shares, through which the share capital of the enterprise is increased, as well as the attraction of additional share capital (mutual fund) through additional contributions of funds (share contributions).
As part of external own financial resources, it is necessary to highlight some funds of enterprises, which previously in Russia belonged to sustainable liabilities
The financial resources of an economic entity are the funds at its disposal. Financial resources are directed to the development of production (production and trade process), maintenance and development of non-production facilities, consumption, and may also remain in reserve. Financial resources used for the development of the production and trade process (purchase of raw materials, goods and other items of labor, tools, labor, and other elements of production) represent capital in its monetary form. Thus, capital is part of financial resources.
Capital is value that produces surplus value. Only the investment of capital in economic activity and its investment create profit. General capital formula:
where D is funds advanced by the investor;
T - goods (purchased means of production, labor and other elements of production);
D* - funds received by the investor from the sale of products and including realized surplus product (surplus value);
D*- D - surplus product (investor income);
D*- T - revenue from sales of products;
D - T - the investor's costs for the purchase of goods.
In the above operation D - T - D*, the funds (D) invested in the production and trading process are not completely spent, but are only advanced, and after completion of the circuit they are returned to the depositor (investor) with additional income (D*). Capital must constantly circulate; the more capital turnover is completed in a year, the greater the investor’s annual profit.
The capital structure includes funds invested in fixed assets, intangible assets, working capital, and circulation funds.
Fixed assets are means of labor (building, equipment, transport, etc.) that are repeatedly used in the economic process without changing their physical form. Fixed assets include labor instruments costing more than 1 thousand minimum wages per unit and with a service life of more than one year.
The exception is agricultural machinery and tools, mechanized construction tools, working and productive livestock, which are considered fixed assets regardless of cost. An annual adjustment of the specified limit as of January 1 by the annual inflation index is allowed. Fixed assets do not include labor tools costing less than 1 thousand min. ok per unit and/or service life less than a year; tools - regardless of cost and service life; equipment - regardless of cost; workwear and special footwear - regardless of cost and service life, etc. The cost of fixed assets, with the exception of land, is transferred in parts as they wear out to the cost of the product (service) and is returned in the process of its sale. This process is called depreciation. Amounts of money corresponding to the wear and tear of fixed assets are accumulated in the depreciation fund. The sinking fund, or monetary compensation fund, is in constant motion.
Cash advanced for the purchase of fixed assets is called fixed assets (fixed capital). It should be noted that investments in funds are made in advance, therefore the concept of invested funds is adequate to the concept of advanced funds.
Intangible assets represent the investment of an enterprise's funds (its costs) in intangible objects that are used over a long period of time in business activities and generate income. Thus, intangible assets are the value of industrial and intellectual property and other property rights. Intangible assets include rights to use land, natural resources, patents, licenses, know-how, software, copyrights, monopoly rights and privileges (including rights to inventions, patents, licenses for certain types of activities, industrial designs, models, use artistic and design solutions), organizational expenses (including fees for state registration of an enterprise, brokerage space, etc.), trademarks, trademarks and brand names, company price. Intangible assets are similar in nature to fixed assets. They are used for a long time, make a profit, and over time, most of them lose their value. A feature of intangible assets is the lack of a tangible structure, the difficulty of determining value, and the ambiguity in determining the profit from their use.
Working capital in terms of material content represents stocks of raw materials, semi-finished products, fuel, packaging, deferred expenses, low-value and wear-out items. Low-value and wear-out items are labor tools worth up to 1 thousand. min.ok. per piece of equipment with a service life of less than one year.
Business entities are given the right to set the cost of labor instruments themselves, classified as low-value and wearable items, i.e. the lower limit is at the discretion of the business entity, the upper limit is 1 thousand min. ok Low-value and wear-out items, regardless of service life and cost, also include fishing gear, gas-powered saws, loppers, floatable cable, seasonal roads, mustaches and temporary branches of logging roads, temporary buildings in the forest, overalls and safety shoes, bedding, and special equipment. Working production assets take a one-time participation in the production and trading process. while changing its material-natural form. Their cost is completely transferred to the newly produced product. The main purpose of working capital is to ensure the continuity and rhythm of production.
Circulation funds are associated with servicing the process of circulation of goods. They include produced but unsold products, inventories of goods, cash in the cash register and in settlements, etc. By the nature of their participation in the production and trading process, working capital and circulation funds are closely interrelated and constantly move from the sphere of production to the sphere of circulation and vice versa, i.e. e. from one fund to another. Therefore, they are accounted for as unified current assets. Cash invested in current production assets and circulation funds constitute working capital (working capital).
The circulation of working capital occurs according to the following scheme:
D - T... P... T1 - D1,
where D is funds advanced by the business entity;
T - means of production;
P - production;
T1 - finished products;
D1 - funds received from the sale of products and including realized surplus product.
Dots (...) mean that the circulation of funds is interrupted, but the process of their circulation continues in the sphere of production. The authorized capital represents the sum of contributions of the founders of an economic entity to ensure its life. The amount of the authorized capital corresponds to the amount recorded in the constituent documents and is unchanged. An increase or decrease in the authorized capital can be carried out in the prescribed manner (for example, by decision of the general meeting) only after the re-registration of the business entity. The following can be made as contributions to the authorized capital: buildings, structures, equipment, other material assets, securities, rights to use land, water and other natural resources, buildings, structures, equipment, other property rights (including intellectual property: know-how, the right to use inventions, etc.), funds in rubles and foreign currency. The cost of deposits is assessed in rubles by a joint decision of participants of economic entities and constitutes their shares in the authorized capital.
In the financial activities of a business entity, assets and liabilities are distinguished. The assets of a business entity are the totality of property rights belonging to it. The assets of a business entity include fixed assets, intangible assets, and working capital. Assets less debts (settlements with creditors, borrowed funds, deferred income) represent net assets. The liabilities of a business entity are the totality of its debts and obligations, consisting of borrowed and raised funds, including accounts payable. Liabilities do not include subsidies, subventions, own funds and other sources.
Subvention is a type of monetary benefit from the state from extra-budgetary funds. A subvention, unlike a subsidy, is provided to finance a specific event and is subject to return in case of violation of its intended use.
Sources of financial resources
Financial resources are generated from a number of sources. According to the form of ownership, two groups of sources are distinguished: own funds and others. Sources of financial resources are: profit; depreciation deductions; funds received from the sale of securities; shares and other contributions of legal entities and individuals; credit and loans; funds from the sale of a certificate of collateral, an insurance policy and other cash receipts (donations, charitable contributions, etc.).
The system of profits and income consists of profit from sales of products, profit from other sales, income from non-sales operations (minus income from these operations), balance sheet (gross) profit, and net profit. In addition, profits are divided into taxable and non-taxable. Profit from sales of products (goods, works, services) is the difference between revenue from sales of products without value added tax, excise taxes, export tariffs (for export earnings) and production and sales costs included in the cost of production. Product cost
(works, services) - valuation of natural resources, raw materials, materials, fuel, energy, fixed assets, labor resources used in the production process of products, as well as other costs for its production and sale. The costs included in the cost can be grouped according to their economic content into the following elements:
- material costs (minus the cost of returnable waste);
- labor costs;
- contributions for social needs;
- depreciation of fixed assets;
- other costs.
Profit from other sales is profit received from the sale of fixed assets and other property of an economic entity, waste, intangible assets, etc. Profit from other sales is defined as the difference between the proceeds from sales and the costs of this sale.
Income from non-operating operations includes:
- income received from equity participation in the activities of other business entities, dividends on shares, income from bonds and other securities owned by the business entity; income from the rental of property;
- income from additional valuation of inventories and finished products;
- fines, penalties, penalties, and other types of sanctions awarded or recognized by the debtor for violation of the terms of business contracts, as well as income from compensation for losses caused;
- positive exchange rate differences on foreign currency accounts, as well as transactions in foreign currencies;
- other income from operations not directly related to the production and sale of products.
Expenses for non-operating operations include:
- costs of canceled production orders, as well as costs of production that did not produce products;
- expenses for the maintenance of mothballed production capacities and facilities (except for costs reimbursed from other sources);
- losses from markdown of inventories and finished products;
- losses on operations with containers;
- losses from writing off receivables for which the statute of limitations has expired, and other debts that are unrealistic for collection;
- uncompensated losses from natural disasters;
- losses from theft, the perpetrators of which have not been identified by a court decision;
- negative exchange rate differences on foreign currency accounts, as well as transactions in foreign currency and some other expenses.
Balance sheet profit is the sum of profits from sales of products, from other sales and income from non-sales operations minus expenses on them. Income tax rate in 1998 ranged from 35 to 43%. It should be borne in mind that income from equity participation in other business entities and income from securities are taxed at a rate of 15%, income from video broadcasting - 70%, etc. Therefore, these incomes must be separated from taxable profit into a separate group. Business entities, including those who received a loss, have an excess of actual expenses for remuneration of workers employed in the main activity as part of the cost of products (works, services) in comparison with their standardized value, pay a tax to the budget on the amount of excess of these expenses. An economic entity independently determines the directions for using profits, unless otherwise provided by the charter.
The reserve fund is created by business entities in case of termination of their activities to cover accounts payable. The formation of a reserve fund is mandatory for a joint-stock company, cooperative, or enterprise with foreign investment. Contributions to the reserve fund and other funds similar in purpose are made until the size of these funds established by the constituent documents is reached, but not more than 25% of the authorized capital, and for a joint-stock company - not less than 10%. In this case, the amount of contributions to these funds should not exceed 50% of taxable profit.
The accumulation fund is a source of funds for an economic entity, accumulating profits and other sources for the creation of new property, acquisition of fixed assets, working capital, etc. The accumulation fund shows the growth of the property status of the economic entity, the increase in its own funds. At the same time, operations for the acquisition and creation of new property of an economic entity do not affect the accumulation fund. The consumption fund is a source of funds for an economic entity, reserved for the implementation of measures for social development (except for capital investments) and material incentives for the team.
Depreciation charges are a sustainable source of financial resources. Depreciation deductions are made only until the book value of the assets is completely transferred to the cost of products (works, services) and distribution costs. Depreciation charges can be calculated using the straight-line or accelerated methods. In the Russian Federation, the straight-line depreciation method is mainly used. Depreciation of fixed assets is accrued for all groups of fixed assets, including construction in progress (with the exception of land plots, productive livestock, library collections, etc.). With the straight-line method, depreciation is calculated according to uniform depreciation rates established as a percentage of the original cost of fixed assets. Depreciation rates may be adjusted depending on deviations from the standard conditions for the use of fixed assets. The values of these coefficients are given in collections of depreciation standards. For rolling stock of road transport (cars, trucks, buses), depreciation rates are determined as a percentage of the original cost per thousand kilometers.
Depreciation of intangible assets is accrued monthly according to amortization rates to the original cost of intangible assets. Depreciation rates for intangible assets are determined based on their useful life, but not longer than the life of the business entity. For intangible assets for which it is impossible to determine the useful life, depreciation rates are established for ten years, but not longer than the life of the business entity.
Share contribution. A share or share contribution is the amount of cash contribution paid by a legal entity or individual upon entering into a joint venture. A share contribution is required to join a limited liability partnership, a mixed enterprise, or a Russian-foreign joint venture. A share contribution is often made upon joining a cooperative. The share contribution can be made in cash; by transferring property and other material assets into the ownership of an economic entity; rights to use land, water and other natural resources; property rights (including the use of inventions, know-how); by deductions from employees' wages for a certain period of time.
Know-how (English: Know - how) is a complex of technical knowledge and trade secrets. Technical know-how includes: experimental unregistered samples of products, machines and apparatus, individual parts, tools, processing devices, etc.; technical documentation; instructions; production experience, description of technologies; knowledge and skills in the field of accounting, statistical and financial reporting, legal and economic work; knowledge of customs and trade regulations, etc. Commercial know-how means: address data banks; client files; supplier files; data on the organization and efficiency of production, volume of production; data on the organization of sales and distribution of products; methods and forms of advertising; data on personnel training, etc. Unlike production secrets, know-how is not patented, since a significant part consists of certain techniques, skills, etc.
When drawing up an agreement for the transfer of know-how, the parties must determine its content and usefulness (comparing, if possible, with analogues), obligations for transfer and operation, and guarantees for achieving the effect. Here, it is more profitable for the owner to describe all cases of application of the know-how, and for the user to “narrow” its content, so as not to pay the owner a fee in the future for possible further refinement of the know-how. When determining the price of know-how, it must be remembered that it will be repaid by the future profit that the user will receive by applying the know-how, otherwise he will receive less profit or not receive it at all. The task will be simplified if the owner performs a feasibility study for the project: using know-how and without know-how.
In world practice, the price of know-how is 5% of future profits, but there are cases when the price of know-how reaches 20%. When determining the price, the owner determines what costs the user can incur when independently developing know-how, as well as the minimum acceptable price below which sale is inappropriate.
Investment of capital and its types
Financial resources are used by the enterprise to finance current expenses and investments. Investments are the use of financial resources in the form of long-term capital investments (capital investments). Investments are made by legal entities or individuals, who, in relation to the degree of commercial risk, are divided into investors, entrepreneurs, speculators, and players. An investor is someone who, when investing capital, mostly someone else's, thinks primarily about minimizing risk, an intermediary in financing capital investments. An entrepreneur is someone who invests his own capital at a certain risk. A speculator is someone who is willing to take a certain, pre-calculated risk. A gambler is someone who is willing to take any risk. Investments can be risky (venture), direct, portfolio, annuity.
Venture capital is the term used to describe a risky investment. Venture capital is an investment in the form of issuing new shares made in new areas of activity associated with high risk. Venture capital is invested in unrelated projects with the expectation of a quick return on investment. Capital investments, as a rule, are made by purchasing part of the shares of the client company or providing loans to it, including the right to convert these loans into shares. Risky investment of capital is due to the need to finance small innovative firms in the areas of new technologies. Risk capital combines various forms of capital application: loan, equity, entrepreneurial. He acts as an intermediary in the founding of start-up, knowledge-intensive companies, called ventures.
Direct investments are investments in the authorized capital of an economic entity in order to generate income and obtain the rights to participate in the management of this economic entity.
Portfolio investments are associated with the formation of a portfolio and represent the acquisition of securities and other assets. A portfolio is a collection of various investment values collected together that serve as a tool for achieving a specific investment goal of the investor. The portfolio may include securities of the same type (stocks) or various investment values (stocks, bonds, savings and deposit certificates, certificates of pledge, insurance policy, etc.).
The financial resources of an enterprise are its own and borrowed funds, which are formed in the process of distribution and redistribution of national wealth and are intended to fulfill the financial obligations of the enterprise, the costs of expanding production, economic stimulation of workers and increasing the size of property of the owners of the enterprise.
The main sources of formation of an enterprise's property are its own funds and borrowed capital.
Own funds- these are funds of enterprises that are constantly in circulation and the final period of use of which is not established. They are formed at the expense of contributions from the owners of the enterprise and the financial results of its economic activities, that is, that part of the enterprise’s assets that remains after the fulfillment of its obligations.
Borrowed funds- these are the funds that an enterprise receives for a certain period, for a fee and on the basis of subsequent return. Borrowed funds can be the main financial resource of an enterprise. They are formed through bank loans, loans from other organizations, as well as through all types of accounts payable.
Sources of own funds are:
· authorized capital (funds from the sale of shares and share contributions of participants);
· reserves accumulated by the enterprise;
· other contributions from legal entities and individuals (targeted financing, donations, charitable contributions, etc.).
The main sources of funds raised include:
· bank loans;
· borrowed funds;
· funds from the sale of bonds and other securities;
· accounts payable.
Authorized capital represents the amount of funds provided by the owners to ensure the statutory activities of the enterprise. The content of the category “authorized capital” depends on the organizational and legal form of the enterprise:
- for a state enterprise - the valuation of property assigned by the state to the enterprise with the right of full economic management; for a limited liability partnership - the sum of the owners' shares;
- for a joint stock company - the total par value of shares of all types;
- for a production cooperative - valuation of property provided by participants for conducting activities;
- for a rental enterprise - the amount of contributions of its employees;
- for an enterprise of a different form, allocated to an independent balance sheet, - the valuation of the property assigned by its owner to the enterprise with the right of full economic management.
When creating an enterprise, contributions to its authorized capital can be cash, tangible and intangible assets. At the moment of transfer of assets in the form of a contribution to the authorized capital, ownership of them passes to the economic entity, i.e. investors lose proprietary rights to these objects. Thus, in the event of liquidation of an enterprise or withdrawal of a participant from a company or partnership, he has the right only to compensation for his share within the residual property, but not to the return of objects transferred to him at one time in the form of a contribution to the authorized capital. The authorized capital, therefore, reflects the amount of the enterprise's obligations to investors.
The authorized capital is formed during the initial investment of funds. Its value is announced upon registration of the enterprise, and any adjustments to the size of the authorized capital (additional issue of shares, reduction of their par value, making additional contributions, admitting a new participant, joining part of the profit, etc.) are allowed only in cases and in the manner provided for by the current legislation and constituent documents documents.
The formation of the authorized capital may be accompanied by the formation of an additional source of funds - premiums on shares. This source arises when, during the initial issue, shares are sold at a price above their par value. Upon receipt of these amounts, they are credited to additional capital.
Profit is the main source of funds for a dynamically developing enterprise. It is present in the balance sheet explicitly as “profit of the reporting year” and “unused profit of previous years,” and also in a veiled form as funds and reserves created from profits. In a market economy, the amount of profit depends on many factors, the main one of which is the ratio of income and expenses. At the same time, the current regulatory documents provide for the possibility of certain regulation of profits by the management of the enterprise. These regulatory procedures include:
- varying the boundaries for classifying assets as fixed assets;
- accelerated depreciation of fixed assets;
- the applied method of depreciation of low-value and rapidly wearing items;
- procedure for valuation and amortization of intangible assets;
- the procedure for assessing participants' contributions to the authorized capital;
- choosing a method for estimating inventories;
- the procedure for accounting for interest on bank loans used to finance capital investments;
- the procedure for creating a reserve for doubtful debts;
- the procedure for assigning certain types of expenses to the cost of goods sold;
- composition of overhead costs and method of their distribution.
Profit - the main source of formation of reserve capital (fund). This capital is intended to compensate for unexpected losses and possible losses from business activities, i.e. it is insurance in nature. The procedure for the formation of reserve capital is determined by regulatory documents regulating the activities of an enterprise of this type, as well as its charter documents.
Extra capital as a source of funds for an enterprise, it is formed, as a rule, as a result of the revaluation of fixed assets and other material assets. Regulatory documents prohibit its use for consumption purposes.
A specific source of funds are funds for special purposes and targeted financing: gratuitously received values, as well as non-refundable and repayable government allocations to finance non-productive activities related to the maintenance of social, cultural and public utility facilities, to finance the costs of restoring the solvency of enterprises that are fully funded by the budget, etc.
All sources of debt capital financing fall into two categories: financing through loans (short-term and long-term) and issues.
Commercial loan. A commercial loan is formalized by a bill of exchange, its object is commodity capital. It serves the circulation of industrial capital, the movement of goods from the sphere of production to the sphere of consumption.
A special feature of a commercial loan is that loan capital is combined with industrial capital. The purpose of a commercial loan is to speed up the sale of goods and profit. The size of this loan is limited by the amount of reserve loans of industrial and commercial capital.
An enterprise can obtain a commercial loan when releasing goods or creating inventory from suppliers. For many small businesses it is the most important source of financing.
Bank loan. The limitations of commercial credit are overcome by a bank loan (credit). Commercial banks are most often used by businesses as sources of short-term and long-term credit.
When taking borrowed funds from a bank, an enterprise enters into a loan agreement with it, which defines the terms of the loan (the term of the loan, the conditions for its repayment), however, even before concluding the agreement, the enterprise must determine the possibilities of repaying the loan, i.e., evaluate the sources from which it will be repaid. Sources can be both own funds available when taking out a loan, and proceeds from the sale of products.
There are the following forms of bank loans:
- current (limited) loans are used when the borrowers' need for capital is not constant (aimed at financing inventory, finished goods inventory);
- loan under a simple loan account: the entire loan amount is issued in full. Used to finance elements of fixed capital.
Factoring. The basic principle is the purchase by a factor firm (bank) from its client-supplier of requirements for its customers. In fact, the factor bank buys receivables. Within two to three days, he pays 70 to 80% of the claims in advance. The remaining portion is paid to the bank's client upon receipt of funds, i.e., the bank actually finances the client. Factoring provides the following benefits:
- provides financing to the client immediately, before the payment is due;
- provides a 100% guarantee of receiving all payments, reducing the financial risk of the enterprise;
- the enterprise reduces its costs by reducing accounting personnel, since the factor firm assumes obligations to maintain accounts receivable;
- factor firms (banks) can regularly inform their clients about the solvency of buyers, since the banks are interconnected and through a computer system can receive sales and financial information from buyers around the clock.
The cost of factoring services consists of two elements:
commissions, which depend on the size of turnover and solvency of buyers; range from 0.5 to 2% of the invoice amount;
The normal market interest rate for loans because the bank pays the customer's money before the customer pays his or her bills.
Investment tax credit. An investment tax credit is understood as a deferment of tax payment, which is provided to small and privatized enterprises (Law of December 20, 1991 No. 2071-1 “On Tax Investment Credit”) to finance the replacement of equipment, R&D, environmental protection, production automation, creation jobs for disabled people, etc. In this case, the amount of the benefit cannot exceed 50% of the total amount of income tax (benefits = 10% discount on payment) for the calendar year. The repayment period is five years, but repayment begins two years after the benefit is granted.
Mortgage. Having received a certain amount at the beginning of the transaction, the borrower then pays it back in equal, usually monthly, installments. The debt must be paid by the end of the term. The mortgage term can be up to 30 years. As a guarantee of loan repayment, a mortgage is drawn up on the property of the borrowing company.
Leasing. This indirect form of financing activities (long-term lease of movable and immovable property) is used in cases where an enterprise does not want to purchase this type of fixed assets or does not have the financial capacity to do so. At the end of the lease term, ownership of the property passes to the tenant.
There are two known forms of leasing - operational and financial. They differ in the goals of the subjects of the leasing operation (lessor, equipment supplier, lessee), the scope of their responsibilities, and the period of use of the property.
Franchising. This operation is not essentially a direct financing operation of the enterprise. This is the issuance by a company of a license (franchise) to produce or sell goods or services under the brand name of this company and/or using its technology. However, indirect financing is provided here, due to market contraction, etc. The contract stipulates the study period, form of payment, and license area.
Interest rate swaps. A swap (exchange) is an agreement between two entities to exchange obligations or assets in order to improve their structure, reduce risks and costs. The most common swaps are interest rate and currency.
The essence of an interest rate swap is that the parties transfer to each other the difference in interest rates from an agreed amount, called the principal. This occurs when several loans with different payment interest rates are combined to reduce the costs of each of them.
International sources. The necessary resources for organizing international economic activity can be obtained with the help of international monetary organizations, large banks, and stock exchanges.
The main ways to obtain foreign long-term investments are: direct foreign exchange investment, the creation of joint ventures, the issue of Euroshares and Eurobonds, the opening of a credit line, interest rate and currency swaps, and options.
Insurance. It allows not only to provide the enterprise with the necessary working capital, but also to a certain extent to reduce the risk of financial and economic activities. In financial transactions, risk is taken into account in the rate of return - the higher the degree of risk, the higher the rate of return.
Forward and futures contracts. In other words, these are agreements for the purchase and sale of goods or financial instruments with delivery and settlement in the future. This type of short-term financing involves paying interest on the use of funds as a guarantee of the fulfillment of the agreement. Typically it is 18-20% of the contract amount.
REPO operations. They represent an agreement to repurchase securities. The agreement provides for two opposing obligations for its participants - the obligation to sell and the obligation to purchase. A direct repo transaction involves one party selling a block of securities to the other with an obligation to buy it back at a pre-agreed price. There is also a reverse repo operation. Repurchase is carried out at a price higher than the original price. The difference between prices, reflecting the profitability of the transaction, is usually expressed as a percentage per annum and is called the repo rate.
The purpose of a direct repo operation is to attract the necessary financial resources. In a certain sense, a repurchase agreement can be considered as a secured loan.
A rational borrowing policy can give an enterprise a “financial leverage effect” that is unexpected for most managers and accountants, which provides an additional increase in the profitability of equity obtained through the use of a loan, despite the payment of the latter.
It is worth highlighting a number of main sources that make up the financial resources of an enterprise:
- working capital;
- depreciation deductions;
- budget allocations;
- receipts from trust funds;
- receipts from centralized corporate funds;
- loans.
Profit is the monetary expression of financial resources that are created by enterprises of any form of ownership and form their property as a result of the distribution of income from economic activities. Profit is the main financial category at the level of business structures, which reflects the positive financial result of the economic activity of the enterprise. The volume of profit characterizes production efficiency and ultimately indicates the volume and quality of goods and services produced, the level of labor productivity, the level of production costs, etc.
Depreciation charges are a type of targeted financial resources that reflect the transfer of part of the cost of used fixed assets to finished products. Thus, depreciation charges represent the financial resources of the enterprise aimed at recreating fixed assets spent in the production process.
Working capital is part of the financial resources that are constantly in economic circulation and are completely consumed within a year or one production cycle. The working capital of an enterprise is formed from inventories (raw materials, supplies), work in progress, inventories of finished products, accounts receivable, cash in the enterprise's cash register, etc.
Budget allocations always have a certain order of use and can be provided to the enterprise in the form of:
budget investments - allocation of funds in the form of capital investments for the development of production in priority areas that determine the efficiency of the country's economy;
budget loans - provided to enterprises in the public sector of the economy for temporary needs in case of financial difficulties; may be interest-free or with a low interest rate;
government subsidies - the allocation of funds to compensate for losses of enterprises when unprofitability is a consequence of market conditions or state policy;
state subsidies - allocation of budget funds to business entities to solve specific problems within the framework of state programs.
Receipts from centralized corporate funds represent the intracorporate redistribution of the enterprise's financial resources between industries and divisions on the basis of the balance of relationships.
Loans are financial resources that are temporarily placed at the disposal of an enterprise to cover temporary and seasonal production needs.
Credit exists in two forms:
commercial (commodity) loan - purchase of goods or services with deferred payment;
bank loan - a loan from a bank or other institutions in cash at a certain interest rate.
Enterprise income
The income of an enterprise is recognized as an increase in economic benefits as a result of the receipt of assets (cash, other property) and (or) repayment of liabilities, leading to an increase in the capital of this organization, with the exception of contributions from participants (owners of property).
Receipts from other legal entities and individuals are not recognized as income of the enterprise:
- in the form of amounts of value added tax, excise taxes, export duties and other similar mandatory payments;
- under commission agreements, agency and other similar agreements in favor of the principal, principal, etc.;
- in advance payment for products, goods, works, services;
- advances to pay for products, goods, works, services; deposit;
- the amount of the pledge, if the agreement provides for the transfer of the pledged property to the pledgee;
- repayment of a loan granted to a borrower.
The income of an enterprise, depending on its nature, conditions of receipt and areas of activity of the company, is divided into:
- income from ordinary activities;
- operating income;
- non-operating income.
Income other than income from ordinary activities is considered other income. Other income also includes extraordinary income.
For accounting purposes, an enterprise independently recognizes receipts as income from ordinary activities or other income based on the requirements of the Accounting Regulations “Income of the Organization” (PBU 9/99), the nature of its activities, the type of income and the conditions for their receipt.
Income from ordinary activities. Income from ordinary activities is revenue from the sale of products and goods, receipts associated with the performance of work, provision of services (hereinafter referred to as revenue).
Income received by an organization from provision for a fee for temporary use (temporary possession and use) of its assets, rights arising from patents for inventions, industrial designs and other types of intellectual property, and from participation in the authorized capital of other organizations, when this is not the subject of activities of the organization are classified as operating income.
Operating income is:
- receipts associated with the provision for a fee for temporary use (temporary possession and use) of the organization’s assets;
- receipts related to the provision for a fee of rights arising from patents for inventions, industrial designs and other types of intellectual property;
- proceeds related to participation in the authorized capitals of other organizations (including interest and other income on securities);
- profit received by the organization as a result of joint activities (under a simple partnership agreement);
- proceeds from the sale of fixed assets and other assets other than cash (except foreign currency), products, goods;
- interest received for the provision of an organization's funds for use, as well as interest for the bank's use of funds held in the organization's account with this bank.
Non-operating income is:
- fines, penalties, penalties for violation of contract terms;
- assets received free of charge, including under a gift agreement;
- proceeds to compensate for losses caused to the organization;
- profit of previous years identified in the reporting year;
- amounts of accounts payable and depositors for which the statute of limitations has expired;
- exchange differences;
- the amount of revaluation of assets (except for non-current assets);
- other non-operating income.
Extraordinary income is considered to be income arising as a consequence of extraordinary circumstances of economic activity (natural disaster, fire, accident, nationalization, etc.): insurance compensation, the cost of material assets remaining from the write-off of assets unsuitable for restoration and further use, etc. .