Funding rules

The financing rules (also financial rules ) are standardized rules established by business administration , which deal with the financing (provision of capital ) of companies .

General

These are minimum requirements of a balance apparent capital structure . In view of an optimal capital structure to provide a cost -minimizing and thus shareholder value is maximized interpretation of the financing, some funding rules have pronounced. These aim not only at an optimal level of debt , but also to maintain solvency , i.e. optimal liquidity . When evaluating liquidity, the principle of matching maturities is assumed. Most of the rules listed below often turn out to be unattainable in practice, as they can hardly be implemented or not at all, depending on the industry. In addition, they often reduce profitability in favor of liquidity, but also make it possible, the better the rules are met, to overcome longer economic corporate crises. From this perspective, it is necessary to adapt the rigid rules to each individual company ( company size ) or at least to an economic sector in order to establish a practical relevance. The leverage effect plays a special role, i.e. the leverage effect of debt capital on the return on equity .

Depending on the balance sheet position of the influencing factors used in the balance sheets, the financing rules are divided into horizontal and vertical .

Vertical funding rules

Static leverage

According to this rule, the equity should be at least as high as the debt (one-to-one rule).

${\displaystyle {\frac {\text{Fremdkapital}}{\text{Eigenkapital}}}\leq 1}$ (desirable)

${\displaystyle 1<{\frac {\text{Fremdkapital}}{\text{Eigenkapital}}}\leq 2}$ (healthy)

${\displaystyle 2<{\frac {\text{Fremdkapital}}{\text{Eigenkapital}}}\leq 3}$ (still permitted)

This rule has its origins in avoiding over-indebtedness. In practice, this rule is almost meaningless in Germany, since German companies have an average equity ratio of less than 20 percent, while American companies have a much higher average equity ratio (around 50%). Differences in the capital intensity of different industries are also not taken into account .

Dynamic leverage

${\displaystyle {\frac {{\text{Fremdkapital}}-{\text{Geldwerte}}}{\text{Cashflow}}}\ }$

The dynamic level of indebtedness is a measure of the debt repayment on one's own. It is a theoretical value and assumes constant sizes within the company.

Horizontal funding rules

Just like the vertical funding rules, the horizontal ones that follow are also criticized. Liquidity statements are hardly possible because outflows such as interest are not recorded. In addition, there is no risk of immediate insolvency in the event of insufficient maturity congruence , since only replacement financing has to be secured. The maturity of the capital should correspond to the turnover period of the assets financed with it.

Golden banking rule

It mainly applies to the banking sector: The repayment date / time at which the capital is available should coincide with the time of return (matching maturities):

${\displaystyle {\frac {{\text{kurzfristiges Verm}}\mathrm {{\ddot {o}}gen} }{\text{kurzfristiges Fremdkapital}}}\geq 1}$

${\displaystyle {\frac {\text{EK + langfristiges Fremdkapital}}{{\text{langfristiges Verm}}\mathrm {{\ddot {o}}gen} }}\geq 1}$

The golden rule of banking states that the amount and maturity of from one bank granted loans to the bank made available visibility , scheduling and savings deposits must comply. This means that short term deposits are only allowed to be borrowed for a short term, while long term deposits can be borrowed for short, medium and long term.

In reality, the banks normally do not adhere to the golden banking rule. Instead, provision is only made for sufficient willingness to pay. In fact, banks today even generate income by deliberately breaking the golden rule of banking. They then operate maturity transformation by lending some of the low-interest, short-term deposits long-term and thus at higher interest rates.

The golden rule of banks in economics is also controversial because it does not take into account all of the payments made by a credit institution. Liquidity is only given if the total of the payments that cannot be influenced by the bank does not exceed the total of the corresponding payments in a given period. The requirements for such an approach are summarized in the Liquidity Ordinance .

Golden accounting rule

The golden balance rule (coverage ratio I) requires in its strict form that the fixed assets must be covered by equity and that borrowed capital may be used for the current assets. it is

${\displaystyle {\frac {\text{Eigenkapital}}{\text{Anlagevermögen}}}\geq 1}$

The silver financing rule (coverage ratio II) requires a period match between capital (liabilities) and assets (assets). Applies to the other industries: Financing of fixed assets (AV) through equity capital (EK) in the narrower sense or through EK and long-term debt capital in the broader sense:

${\displaystyle {\frac {{\text{Eigenkapital}}+{\text{langfristiges Fremdkapital}}}{\text{Anlagevermögen}}}\geq 1}$

However, compliance with these rules does not yet guarantee the company's liquidity, because capital commitment periods and capital transfer periods are difficult to define when a balance sheet is related to the reporting date ( balance sheet date ). If these rules are adhered to, there is at least a certain probability that financial equilibrium will also exist in the future.

Golden financial rule

The golden financial rule (coverage ratio III) states that assets tied up in the long term (land, facilities, licenses) should be covered by long-term capital (equity, loans), as otherwise there is a risk of liquidity bottlenecks.

Maximum load theory

The maximum burden theory developed by Wolfgang Stützel in 1959 especially for credit institutions requires that in the event of a bank run, the bank's own funds must be sufficient to absorb the losses resulting from the emergency sale of assets . The emergency sale of entire loan portfolios is necessary in order to be able to satisfy the payment claims of the liabilities ( creditors of bank balances ) with the sales proceeds . It can also be applied analogously to corporate crises at non-banks .

literature

• Heribert Bodenhoff: Introduction to finance and investment accounting. , Vahlen 2002.
• Uni Hagen: Solution tips for the banks and stock exchanges exam (2010) (PDF), pp. 12–15.

Individual evidence

1. ↑ Horst-Thilo Beyer (ed.), Finanzlexikon , 1972, p. 128
2. ↑ Wolfgang Lück (Ed.), Lexikon der Betriebswirtschaft , 1983, p. 614