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In the article, financial policy of an economic entity shall be regarded as a key criterion of the financial condition of the company. And the analysis of financial policy is considered as a tool identifying how well the company manages financial resources within a certain period.
Keywords: financial policy, financial mechanism, indicators of financial policy, financial resources
In the world, the term «policy» nearly always used as solving problems and issues, certain actions related to achievement of goals. Since ancient times «policy» was considered from different sides: social, political, economic, psychological and so on. There is not a single work of great thinkers with the description of the structure, forms and methods of the various policies. Policy-making — identification of desired conditions for the existence and activities of the organization. In addition, the financial policy of the organization is considered as one of the maintenance factors of entity's effective development.
The financial policy of the organization is an integral part of its economic policy. Entity's financial policy is a financial ideology which holds the company in order to achieve its chosen economic goals. It involves the system of ideas, views, target figures which designed to choose methods that provide the implementation of the company's objectives with the greatest economic benefits. The achievement of any task facing the enterprise to any extent necessarily connected with finances: costs, revenues, cash flows. And the implementation of any outcomes firstly requires financial support.
In a concise way, the essence of the financial policy of the organization is represented as the management of economic processes and relations to implement the financial strategy of the company to achieve its goals and objectives, and also qualitative and efficient interaction between internal and external environment of the firm and its further development.
Financial policy is based on a few basic tenets:
‒ the principle of self-sufficiency and self-financing (recoupment of funds of the organization, production costs and costs of goods sold);
‒ the principle of self-government and economic independence (independent determination of the prospects and directions of the enterprise's activity);
‒ the principle of liability;
‒ the principle of interest (interest in performance results);
‒ the principle of control (monitoring of financial and economic activities of the organization);
‒ the principle of financial reserves generation (continuity of business).
Financial policy also has its purpose. There are the main goals of the organization's financial policy:
- profit maximization;
- optimization of the capital structure of the entity and ensure its financial sustainability;
- the provision of investment prospects of business;
- creation of the effective management ways of the organization on the basis of diagnostics of the company's financial standing, consequent choice of the strategic aims and finding ways of achieving them;
- increase the level of capitalization;
- improving competitiveness and building market strength.
The main goal of financial policy is the strengthening of the entity's competitiveness while maintaining a target level of profitability, liquidity and solvency, increase of investment attractiveness.
There is also the list of tasks of the financial policy, which includes: securing of the funding sources, avoidance of losses and increase the mass of profit, optimization of the production structure, the growth of production volumes, improvement of financial state and financial stability of the organization. It is necessary to find the optimal balance between tactical and strategic targets in order to implement the goals of financial policy.
The financial strategy consists of the following steps:
‒ incisive analysis of the former financial strategy;
‒ verification (adjustment) the strategic objectives;
‒ determination of timing of the financial strategy;
‒ specification of strategic goals and execution periods;
‒ liability distribution for achievement of strategic goals.
The financial policy of the enterprise can not be immutable, defined once and for all. On the contrary, it should be flexible and adjust in response to changes in the external and internal factors.
The content of financial policy is comprehensive and usually consists of the following steps:
- The determination of strategic directions of development;
- Planning (strategic, tactical, operational);
- Concept formulation of management (capital, assets, cash flows, prices, costs);
- Control (verification of accomplishment of a plan, benchmarking assessment, audit).
Formation of the financial mechanism is the integral part of financial policy. Financial mechanism of the enterprise is a financial management system intended to interaction of financial relations and funds to optimize their impact on the production outcomes. The structure of the financial mechanism consists of six interacting components: financial relations, financial instruments and levers, legal coverage, regulatory and information provision. Financial mechanism of the enterprises should promote the full and effective implementation of finance functions.
A key indicator of the company's financial position is the availability of funds with reference to which the entity on time settles accounts with suppliers, the budget, the banks, creates the required funds and satisfies other requirements. This reflects the financial control of the enterprise.
The main ways to strengthen the finances are associated with the optimization of their use of cash and the elimination of the deficit. The most important directions of improving financial performance in entities:
- system-based and continuous financial analysis of their activities;
- control of working capital to optimize financial status;
- the entity's cost optimization based on dividing them into variable and fixed, the analysis of the interaction “costs — revenue — profit”;
- optimization of profit distribution and the choice of the most effective dividend policy;
- the adoption of commercial credit and circulation of bills in order to optimize the sources of funds and impact on the banking system;
- the use of leasing activities;
- development and implementation of the company's strategic financial policy.
References:
- Слепов, В.А., Громова, Е.И., Кери, И. Т. Финансовая-политика компании: учеб. пособие / под ред. проф. В. А. Слепова. — М.: Экономисть, 2012.
- Родионова В. М. Финансы: Учебник / В. М. Родионовой.-М., 2013. — 264с.
- Лихачева О. Н., щуров С.А Долгосрочная и краткосрочная финансовая политика предприятия / Учебное пособие под ред. И. Я. Лукасевича; ВЗФЭИ. — М. Вузовский учебник, 2013.
- BerkJ, DeMarzo P. Corporate Finance. — Pearson Education, 2012.
- Myers S. C. Outside Equity. The journal of finance, № 3, 2010.
- John R. Graham and Campbell R. Harvey. The Theory and Practice of Corporate Finance: Evidence from the Field. AFA 2001 New Orleans; Duke University Working Paper, 2011.
