Zhu Pingfang
From a development point of view, the capital of each enterprise is scarce resources, and the production and operation of enterprises, capital management and long-term development from the moment and can not be separated from the funds. Therefore, how to effectively make financing is a very important basic activity in the financial management department of the enterprise.
Although the basic purpose of enterprise financing is to maintain and develop its own production and capital operation, it is usually driven by a specific motivation for each specific financing activity. For example, enterprises in order to normal production and operation of capital turnover and the need for temporary financing; enterprise in order to acquire equipment, expand the scale, the introduction of new technologies and the development of new products for financing; enterprises to foreign investment, mergers and other business financing; enterprise in order to pay debts and capital structure adjustment of financing and so on. No matter what motivated by the financing activities of enterprises, enterprise financial personnel must be careful analysis and evaluation of various kinds of factors which affect the financing, and strive to achieve the highest efficiency and the best comprehensive economic benefit in the ability for their financing activities.
We know that corporate finance activity comes from investment demand. Of course, the investment here includes liquid assets investment, fixed assets investment and indirect investment in the capital market. Whether to conduct financing activities, mainly through the comparison of investment income and the cost of capital to decide. For example, the average annual rate of return on investment projects (or the average annual profit rate) is how much? What is the cost (or capital cost rate) of the funds being occupied by the financing activities? This is the most concerned about the enterprise management decision-making. Therefore, corporate financial officers before financing activities must for the future investment income as a more reliable prediction, only when the return on investment is far greater than the cost of capital under the premise, can determine the financing activities is reasonable and meaningful.
When the investment direction is determined, the next thing to do is to estimate the number of investment, because the number of investment decisions financing. How to estimate the number of investment, although there are a variety of calculation methods, but not in this paper to explain. As a corporate finance officer, no matter what channel, the use of the way of financing, it is necessary to carefully estimate the amount of capital required. Only in this way can we balance the quantity of financing and the quantity of investment, and avoid the problem of financing, which will affect the efficiency of investment and the efficiency of the fund.
Once the funds need to be determined, the enterprise should take full advantage of internal sources of funds, and then consider the issue of external financing. The source of internal capital of the enterprise, the source of the fund which is formed by the depreciation of the depreciation and the increase of the retained profits. This part of the funds is "internal" natural formation, they occupied while the cost of capital (which is actually non cash), but do not pay the financing costs. And external financing is refers to the enterprise internal financing can't meet the need, from the outside into the formation of sources of funding, including bank loans, the issuance of bonds, financing lease and business credit, etc. financing in the form of liabilities and absorption of direct investment, issuing stock and equity financing. The use of external integration of funds will not only cost, but also to pay the cost of financing. Therefore, the cost of the use of external financing is relatively high. The real financing activities of enterprises is to integrate into the funds from the outside, the real amount of financing is the total amount of funds to the outside of the department.
As corporate finance can be used in a variety of channels and ways, different financing channels and ways of the difficulty of financing, the cost of capital and financial risk is also different. Since from the outside into the capital, the enterprise must consider financing in the future should maintain a good, sound financial structure and capital structure and the financial risk in a safe level, also comprehensive capital cost is decreased. In this general financing strategy, the design of a number of financing options, the pros and cons of these programs to sort the pros and cons in order to implement dynamic selection of the specific financing practices.
Of course, the overall financing strategy must be combined with the specific financing practices. For example, in accordance with the general financial theory, the cost of equity financing is higher than the cost of debt financing. Therefore, the developed countries in the financial risk of enterprises in the range of fluctuations, the total cost of debt to consider reducing the cost of debt financing as the focus. But in our country's capital market, at present and in the future for some time, the situation is different. Because most of our enterprise benefit is generally not high, so investors are expected to return is relatively low. Moreover, the domestic and foreign empirical research has not yet proved that the financing cost of equity capital of Chinese enterprises should be higher than the cost of debt financing. In fact, as long as we pay attention to the majority of enterprises in China are generally not high efficiency, high debt ratio, financial risk and pressure of the larger reality, enterprises should know how to do.