Evaluation of investment qualities and efficiency of financial investments
After studying the materials in this chapter, the student must:
• what conditions are necessary to recognize assets as financial investments;
• the composition of financial investments;
• from which sources you can get information about the status and dynamics of financial investments of the organization (enterprise)
• the content of the term "financial instrument";
• the main types of financial instruments of the stock market;
• instruments of the credit market;
• in which financial transactions the value of securities is taken into account;
• types of valuation of equity securities;
• Assignment of a provision for impairment of financial investments;
• what factors have a priority impact on the value of equity securities;
• coefficients determining the nature of circulation of shares on the stock exchange;
• terms of placement of securities issued by the issuer;
be able to
• justify the differences between real and financial investment;
• Identify the relationship between real and financial investments;
• Develop and apply the classification of preferred shares;
• Disclose which financial instruments are related to derivatives;
• characterize the differences between the cost and price of an equity security;
• show by what criteria an integral evaluation of the investment qualities of shares is carried out;
• Disclose the main stages of the procedure for issuing shares and corporate bonds;
• a methodology for determining the actual costs of acquiring financial assets acting in the form of financial investments;
• tools for assessing the object of financial investments when it is retired;
• parameters that characterize the investment attractiveness of equity securities;
• calculations of indicators that reflect the financial status of the issuer of shares;
• the mechanisms for determining the coefficients that characterize the primary emission of shares.
Characteristic features of financial investments (investments)
Financial investments (Financial investment ) is an investment of funds in various types of securities of organizations (enterprises) -emittents.
In the United States practice, they take the form of financial investments. For the recognition of assets as financial investments, a one-time fulfillment of the following conditions is required:
• the existence of properly issued documents confirming the right of the organization (enterprise) to invest and receive cash or other assets arising from this right;
• transition to the organization (enterprise) of financial risks associated with financial investments (price risk, insolvency risk of the debtor, liquidity risk, etc.);
• The ability of assets to bring an organization (enterprise) profit (income) in the future in the form of interest, dividends or an increase in the exchange value.
In the latter case, the profit (income) of the investor organization (enterprise) is formed:
• in the form of the difference between the sale price (repayment) of a financial asset and its purchase price;
• as a result of its exchange;
• due to the growth of its current market value;
• at repayment of obligations of the organization (enterprise).
Financial investments are carried out in the form of investments of free cash:
• in state and municipal securities (bonds);
• in the income instruments of the capital market (stocks and corporate bonds);
• in the money market's profitable assets (deposit certificates);
• in the charter (share) capital of other organizations (enterprises)
• in the form of loans provided by other organizations (enterprises)
• in the receivable obtained on the basis of the assignment of the right of claim;
• as contributions of an organization (enterprise) - a comrade under a simple partnership agreement, etc.
The structure of financial investments of an organization (enterprise) does not include:
• Own shares purchased from their owners for resale or cancellation;
• Promissory notes issued by the organization (enterprise) - the owner of the organization (enterprise) - the seller in settlements for goods sold, products, works performed and services rendered;
• investments of the organization (enterprise) into immovable and other property that has material and material form, provided by the organization (enterprise) for a fee for temporary use (temporary possession and use) to receive profit (income);
• precious metals, jewelry, works of art and other similar values, acquired not for ordinary activities.
It should be noted that assets that have a tangible form (fixed assets, intangible assets, inventories, etc.) do not belong to financial investments.Accounting for financial investments is carried out in Account 58, "Financial Investments", which is designed to summarize information on the presence and movement of investments of an organization (enterprise) in government securities, shares, bonds and other financial instruments of third-party issuers, authorized (share) capital other organizations, as well as loans provided by other organizations.
To account 58, "Financial attachments sub-accounts can be opened:
Shares and shares & quot ;;
Loans Provided & quot ;;
Contributions under a simple partnership agreement.
Redemption (redemption) and sale of securities accounted for in Account 58, are reflected in the debit of Account 91, "Other Income and Expenses and credit account 58 "Financial Investments" (other than the organizations that display these transactions on account 90 "Sales"),
The unit of accounting for financial investments is chosen by the organization (enterprise) independently in such a way as to ensure the formation of complete and reliable information about these investments, as well as control over their availability and movement. Based on the nature of financial investments, the order of their acquisition and use of a unit of financial investments may be a series, a party, or another homogeneous set of financial investments.
The organization (enterprise) carries out analytical accounting of financial investments in such a way as to obtain information on accounting units of financial investments and organizations (enterprises) in which these investments are directed (for example, by issuers, borrower organizations, etc.) .
According to the state securities and financial instruments of other issuers accepted for accounting, at least the following information should be formed in the analytical account: the name of the issuer and the name of the security, number, series, nominal purchase price, acquisition costs, total amount , the date of purchase and sale, the storage location.
The organization (enterprise) has the right to form in the analytical account additional information on financial investments, including on their groups (kinds).
In financial statements, financial investments are subdivided on the basis of maturity (term) for short-term (up to one year) and long-term (over one year). The following information is subject to disclosure, subject to owner's requirements:
• Methods for assessing financial investments when they are disposed of by group (species);
• the consequences of changes in the methods of assessing financial investments (upon their retirement);
• the cost of financial investments, according to which their current market value can be established, and the value of financial investments, for which it is not determined;
• the difference between the current market value at the reporting date and the amount of the previous assessment of financial investments for which the current market value was established;
• for debt securities for which the current market value was not fixed, - the difference between the initial value and the nominal value during the period of their circulation;
• the value and types of securities and other financial investments encumbered with collateral;
• provision for impairment of financial investments with indication of the type of these investments, the amount of the reserve formed in the reporting year, the amount of the reserve recognized by the operating income of the reporting period, and the amounts of the reserve used in the reporting year;
• for debt securities and loans granted - their valuation at the present value, the amount of their discounted value, the used methods of discounting (this information is disclosed in the explanations to the balance sheet and the report "On profits and losses").
Financial investment, unlike the real one, does not imply the mandatory creation of new production capacities and control over their operation.
The financial investor does not directly participate in the management of real assets, relying on the experience of specialist managers. Therefore, the external process of financial investment manifests itself in the act of buying and selling securities. In practice, it is often referred to as portfolio investment, associated with the creation of the investor's stock portfolio.
Securities for a number of their characteristics (profitability, profitability, liquidity and risk) represent a more flexible instrument of financing than a traditional bank loan. In addition, through the issuance of financial instruments (stocks and bonds) ensure the optimal structure of the capital of the issuer organization (enterprise), which can not be achieved if one financial source, for example, own funds, bank credit or financial leasing (leasing) is used predominantly. The experience of enterprises (corporations) in countries with developed market economies (USA, Canada, EEC countries, Japan) shows that the optimal structure of capital can be formed only by complex attraction of various sources of financing.
The financial activities of organizations (enterprises) of the real sector of the economy are relatively independent of other activities. However, it performs an auxiliary function in relation to current and investment activities.
Financial investments (as opposed to real ones) provide an organization (enterprise) with a wider range of options for investing capital , including low-risk (government bonds) and high-risk (equity) investment instruments. The organization (enterprise) -investor carries out investment activity in a broader spectrum - from a conservative to an aggressive strategy of behavior in the stock market.From real investments (capital investments), financials are characterized by higher liquidity due to the ability to trade financial instruments on the secondary stock market. A rapid change in the business situation in this market implies the need for more rapid management of the portfolio of financial assets compared to real investment projects. Therefore, the portfolio investor is forced to systematically analyze and timely adjust the composition and structure of the stock portfolio.
In practice, securities of organizations (enterprises) play an important role in the national economy, facilitating the transformation of savings into investments. They are able to bring their owners a certain income (in the form of dividends and interest). The desire to receive such income encourages investors (owners of savings) to invest free cash in equity securities. Mobilized by the issuer in the stock market funds are channeled into the creation and acquisition of real assets to expand the scale of entrepreneurial activity.
As the stock market develops, there is a potential opportunity to attract funds for financing investments in fixed assets, not only from domestic sources, but also from external sources (in the form of share issues). In the event of an increase in the authorized capital of an organization (enterprise), a new shareholding is first issued, followed by real investments.
Thus, financial investments are a necessary condition for the investment process in organizations (enterprises).
Real investment is impossible without financial investment, and the latter receive their completion when making investments. A similar process occurs in all countries with developed market economies.
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