Corporate finance
Corporate Finance ( English Corporate finance ) all necessary measures to comply with the planning and execution of the financing of companies involved.
General
Corporate finance is based on a company's financial planning . In the context of corporate financing , a decision must be made as to whether and when equity and debt capital should be raised, in what form equity capital should be provided, which maturities should be preferred for debt capital, whether debt capital should be requested as a blank loan or secured with loan collateral. Even the prolongation of bank loans or the decision for just-in-time production in the context of materials management are a measure of corporate financing . These action parameters depend on the reaction parameters of the shareholders ( expected returns ) and creditors ( creditworthiness of the financing company) and of data parameters like the prevailing interest rate level. Corporate finance has various types of finance, finance instruments and finance sources available to carry out its tasks. Corporate finance requires a given capital requirement.
tasks
Corporate financing takes on financial tasks. In addition to ensuring liquidity at all times, the central tasks of corporate financing include the financial implementation of corporate goals , the determination of future financial requirements and the determination of the type, amount and timing of financing measures through the most cost-effective financing possible. Corporate finance also has to monitor financial risks . Securing liquidity is a tactical task, the other tasks are more of a strategic nature.
Financing types
Internal and external financing is available for corporate financing if the capital requirement is given . In the context of self-financing, self-financing through retained earnings or a capital increase by shareholders come into consideration; in the case of external financing, in addition to the shareholders ( shareholder loans ), the largest groups of creditors are credit institutions with bank loans and suppliers with supplier credits. Since a mixture between internal and external financing usually makes sense, the question of the vertical capital structure , i.e. the optimal level of debt , plays an important role in the context of the leverage effect.
Capital structure
Due to the difference between the cost of equity and debt , the cost of total capital initially decreases when the cheaper debt is raised . In this context, the leverage effect means that the higher the level of debt , the better the return on equity in companies as long as the interest rate on debt is below the return on total capital . This positive leverage effect has a positive effect until the optimal level of indebtedness is reached; however, the optimal level of indebtedness is exceeded if the increase in the total cost of capital exceeds the positive effect of borrowing. From the perspective of financing costs , the optimal capital structure is achieved when quantitative and qualitative financing costs form a minimum.
Financial leverage
Financing costs are considered to be fixed costs , as they arise regardless of employment . In “financial leverage”, they are therefore particularly burdensome for (third-party) capital-intensive companies and worsen the break-even point when the level of employment decreases. The financial leverage describes the influence of the capital structure on the return on equity and expresses the reactivity of the net profits (gross profit minus interest expenses) to a change in gross profits:
Financial instruments
In addition to passive financing instruments ( capital contributions , loans , bonds , retained earnings and provisions ), there are also active financing instruments ( factoring , forfaiting , securitization , unit tranche , direct lending , finetrading , sale-lease-back and cross-border leasing ) and the off-balance sheet instrument of leasing . Their use depends on questions of availability (bond market ready to buy), the existence of corresponding assets ( receivables from factoring, property , plant and equipment for sale-lease-back) and the level of financing costs. From the point of view of financing costs, the mix of different financing instruments that triggers the lowest financing costs is optimal.
As a result of the stricter capital requirements for credit institutions due to, for example, Basel III , new and additional financing instruments are constantly emerging on the European financing market.
Funding sources
In the case of self-financing, your own company (profit retention, formation of provisions) or the shareholders come into question as sources of financing, while external financing draws on the money and capital markets . A distinction is made between whether the source of finance is in-house ( internal financing ) or outside ( external financing ). While the retention of profits and the formation of provisions are internal financing, external financing is provided when capital is injected by shareholders or outside capital.
The availability of funding sources can be limited by bottlenecks. If the company does not have any retained earnings and is making losses , retained earnings are out of the question. The availability of external financing is limited or not available if the shareholders have no assets, the capital market is unwilling to finance due to the poor company rating or if there is a credit crunch .
See also
Web links
- Ingrid Großerl, Peter Stahlecker , Eckhardt Wohlers: Financing behavior in the corporate sector as a macroeconomic risk factor. In: Wirtschaftsdienst, volume 79 (1999), issue 4, pages 252-258. ( Download, PDF, 644 kB )
Individual evidence
- ↑ Bernd Rudolph, Corporate Finance and Capital Markets , 2006, p. 3
- ↑ Hans-Werner G. Grunow / Stefanus Figgener, Handbuch Moderne Unternehmensfinanzierung , 2006, p. 1
- ↑ Gabriele Hildmann / Jörg Fischer, Financing , 2002, p. 49
- ↑ Johannes Frerich, Causes and Effects of the Regional Differentiation of Private Saving Activities in Industrialized Countries , 1969, p. 90