In order for any company has been steadily developing, it needs well-formed assets. One of the key groups of this type of funds are financial resources.
If to define a term such as assets, that is to say that it is different means that provide cash proceeds in the form of both direct and hidden benefits (increase in value of real estate, shares and the company).
In turn, financial assets is a combination of property values, having the form of cash and monetary instruments. They all, of course, must belong to the enterprise. This asset category should include only those economic resources of an enterprise, which give the complete control of its management.
The essence of such control is to the right of ownership of the resources used by the enterprise. It follows the obvious conclusion: those economic resources that are used by the company cannot be considered assets of the company, if they are not its property.
Why are these assets
The key task of financial resources, which were discussed above, is the process of generating income. It is the ability to produce a steady income in the process of investment or operating activities is a key characteristic of the financial asset.
The profit, the assets must generate primarily as economic resources that have a certain performance. The process of using financial assets inevitably involves some risks.
It is important to understand that the values that are in the process of use of assets, have a direct relationship to the factor of liquidity. We are talking about the principle that assets should be liquid. This means that you can convert them into cash at fair market value. This characteristic is very important because it ensures restructuring of enterprises under adverse conditions.
The role of financial assets in the capital cycle
Such enterprise resources primarily actively participate in the process of starting and completion of the circuit of capital. In particular, the circulation of money determine the production cycle. The point is that the duration of the production-commercial cycle equal to the period of time required for turnover of funds.
The second role, which is assigned to financial assets is the impact on the solvency of the company, as well as on the liquidity of other assets of the company.
Considering the overall liquidity of the company's assets, they are reduced to the organization's ability to timely perform its obligations and promptly release from turnover of other funds, including cash.
Forms and types of financial assets
If you take into account the international financial reporting standards, it can be argued that financial assets are the following resources:
– contractual right of claim of funds or any financial asset from another enterprise
– an equity instrument of another organization
– a contractual right to exchange financial instruments with any company on terms that have potential benefit.
Due to the classification of the financial assets of the type you can intelligently organize and conduct enterprise analysis. This, in turn, ensures a high degree of security, financial stability and solvency of the business.
It is worth noting the fact that financial assets is the result of combining the three components. We are talking about cash, financial investments and claims (receivables).
To better understand what these and other financial assets need to consider each type in more detail.
To Finance such asset as cash is the reason that it is a medium of exchange. This fact makes this resource is the basis on which the valuation of all transactions.
Such a highly liquid asset of an enterprise can be expressed both in cash and in a non-cash form in various accounts maintained by credit institutions.
Most of these assets are investments in securities and other liquid resources.
In General, under the financial investment it is necessary to understand the asset class, which has documentation confirming the right of possession for a specific organization and derived from similar rights acquisition of a stable income.
To this form of assets can be attributed the following sources of profit:
– deposits in credit institutions
– securities of other companies, including debt
– Charter capital and contributions from other organizations
- loans to various companies;
– municipal and government securities etc.
This list can be supplemented depending on the activities of a particular enterprise.
Valuation of financial assets is reduced to the integration of the resources of the company. Under the debt of this form means the amount of debts owed to the company by other companies and organizations, and individual citizens having the status of debtors.
This form of asset is relevant to virtually all settlements with buyers and may lead to accounts payable. As a debtor can be considered a natural or legal person having a duty to a particular company.
This term is understood indicator of the value of the organization's assets, which is calculated annually. This asset, in fact, is the difference between the resources which are on balance of the company and its debt obligations. From this follows the obvious conclusion: if the company's debts become more than the total value of its assets, the net active is defined as negative. In this case, to characterize the state of the company used the term "lack of assets".
In order to calculate net assets, you need to be based on balance sheet data on assets and liabilities. But in the process of this calculation should not be included in the category of assets outstanding capital contributions of the founders and the value of property securities, which were redeemed from the shareholders of the company. At the same time, of the liabilities should exclude capital, reserves and deferred revenue.
Current financial assets
Such assets include the totality of funds that are advanced for the purpose of forming funds treatment and production assets, which provides for continuous circulation of capital.
Current assets include the following enterprise resources:
- means of labor having a service life of not more than 1 year;
If you pay attention to the movement of these assets, we can identify three key stages:
– Monetary. It's about the process of turning financial assets into a form of production stocks.
– Productive. For this stage, it is characteristic to continue advancing the value of the created product, but only in the amount of production stocks that have been used. This period also includes advancing the cost of wages.
– Investing in finished products. After the transformation of the commodity form of the created value into cash, the recovery of the advanced means takes place through the receipt of proceeds from the products that have been sold.
As you can see, financial assets are the foundation of an enterprise, without which its full-fledged existence is not possible.