Equity as a source of long-term financial investments in the context of NP(S)BO and IFRS

Abstract

Investments are an important component of the development of the enterprise, individual industries and the country's economy as a whole. The ability to invest depends on the efficiency of one's own production, the ability to solve social and environmental problems, and the potential dynamism of the financial and human capital of the business entity. Without a reliable basis for investment activities, determining the role of own capital as a source of long-term financial investments, it is difficult to hope for the progress of domestic production, and with it, a corresponding place in the world economy. The sources of formation of the company's financial resources are its own and borrowed funds. Equity characterizes the total value of the company's assets, which are owned by it and used to form part of the assets on an irrevocable and free basis. Financial investments involve the use of one's own capital for the acquisition (purchase) of shares, bonds and other securities issued by an enterprise or the state. Financial investments can be formed and held for various purposes: to receive income, to control the economic activity of the investment object, to place temporarily free funds or property, for further sale, etc. The lack of financial resources in the necessary volume causes a violation of payment discipline and a decrease in the level of financial stability of enterprises, and therefore of the national economy. International practice has determined the limit when it is expedient to finance about 50% of the company's needs in financial resources at the expense of borrowed funds. However, the increase in investments at the expense of own capital contributes to the reduction of the enterprise's dependence on loan sources of financing, which provides conditions for the formation of financial stability and solvency and enables its ability to self-finance. Therefore, the optimal structure of investment financing sources should ensure the highest profitability of funds, taking into account the solvency and financial stability of the business entity. On the part of state bodies, it is expedient to strengthen control over compliance by enterprises with accounting norms and standards and to apply sanctions for their violation.