The financial relations of legal entities are based on principles that are related to the foundations of their business.
What are the principles of organizing the finance of an enterprise?
The following principles of organization of the finance of an enterprise exist:
- Self-regulation. It means giving enterprises freedom in carrying out activities on scientific, technical and industrial development based on financial, material and labor resources. A legal entity plans its own activities, income and expenses, independently, depending on the demand for products.
- self-sufficiency. Costs should be paid off by profits and other own financial resources. The company is financed at its own expense, and also contributes the necessary taxes to the state budget.
- Self-financing. It means not just payback, but the formation of our own internal and external financial resources.
- Dividing the sources of the formation of financial assets on borrowed and own. With the seasonal nature of production, the share of borrowed sources increases, and in non-seasonal sectors the basis is composed of own sources. A balance must be maintained between borrowed and own sources.
- The presence of financial reserves. It is used to ensure the stable operation of the organization in case of market fluctuations and in matters of increasing property liability for failure to fulfill obligations to partners.
There are other principles for organizing the finance of an enterprise.
- Planning. It is used to ensure that sales volume and costs, sales needs, investment volume are consistent.
- The financial timing ratio. It is necessary to minimize the period between the receipt of funds and their use.
- Flexibility. If the planned sales volume is not achieved, maneuver opportunities should be provided.
- Minimizing financial costs. That is, financing of investments and other costs should be carried out in the cheapest way.
- Rationality. The highest efficiency of invested capital should be achieved, with minimal risk.
- financial sustainability. The financial independence and solvency of the enterprise must be ensured.
These principles of organizing the finance of an enterprise are not exhaustive.
The principles of organization of finance of commercial enterprises.
- Economic independence. Legal entities independently, regardless of the form of ownership, distribute their funds in order to make a profit. Organizations can acquire securities, form the authorized capital of another legal entity, store their material resources in accounts with commercial banks.
- Self-financing. The costs of production, its development and implementation must pay off in full.
- Material interest. The company is interested in profit from its activities.
- Liability. The company is responsible for the results of its financial and economic activities.
- Securing financial reserves.
Finances and the financial system of the Russian Federation.
The financial system of the Russian Federation consists of the state budget, state credit, extrabudgetary funds, stock market, insurance funds and finances of organizations of various forms of ownership
These financial relations are divided into national finances, which provide macro-level needs for expanded reproduction; finances of business entities that are used to ensure cash reproduction at the micro level.