DonNTU   Masters' portal

Veronika Tymoshenko

Faculty of economy

Department of economy of enterprise

Speciality Economy of enterprise

The financial and economic rationale for investment processes

Scientific adviser: Ph.D., Professor Valentina Hobta

Resume Abstract

Abstract

Содержание

• Introduction
• Main content of work
• 1. Theoretical foundations of the financial and economic rationale for investment processes
• 2. Development of regulations and approaches of the financial and economic rationale for investment processes
• 3. Methodical recommendations on of the financial and economic rationale for investment processes
• Conclusion
• References

Introduction

In the introduction the urgency of the theme of master's work, defined goals, objectives, object and subject of study, the theoretical and methodological basis of information base, shows the results of testing.

Topicality

At the present stage of economic development of Ukraine business entities is not effective enough. This is evidenced by the proportion of loss-making enterprises, which in Ukraine as a whole is about 40 %. Depreciation of fixed assets is 74.9 %. This testifies to the physical, economic response majority of fixed assets, as well as their feasibility aging. To solve these problems, as well as to ensure the structural shifts in the economy, accelerate technological progress, improve the innovative art and technology, restore the state of the fixed assets, improving the competitiveness of enterprises, their products and the quality indexes of economic activity on the micro and macro levels is necessary to conduct investment. At the same time the possibility of financing a large funding requirements in the Ukrainian economy are limited, highlighting the need to select the most effective projects based on objective financial and economic feasibility of investment processes.

Goal and tasks of the research

The goal is to deepen the theoretical propositions and practical tools for improving the financial and economic rationale for investment processes.

Main tasks of the research:

1. analyzes of investment processes in Ukraine;
2. performed a review and theoretical generalization issues of financial security of investment processes ;
3. investigated the formation of the optimal capital structure of the enterprise;
4. analyzed the methodological approaches to optimize the capital structure of the enterprise;
5. investigated the features of risk assessment methods in making investment decisions ;
6. proposed guidelines for the financial and economic feasibility of investment processes.

Research object: investment processes in enterprise.

Research subject: theoretical and applied provisions by the financial and economic rationale for investment processes.

Methods of the research

Theoretical and methodological basis of the study of science became the leading domestic and foreign scholars in the field of investment. The study used the following methods: logical generalization and abstraction – to clarify the concepts of capital structure and optimal capital structure and other theoretical generalizations and draw conclusions; theoretical results – to explore scientific problems and learning foreign and domestic scientists; systematic approach, financial analysis; statistical and economic – for the analysis of the current state of investment in Ukraine; graphics – for visualizing the results of assessment of the investment processes in Ukraine; extrapolation methods and economic and mathematical modeling to predict the parameters for evaluation of investment projects; methods for quantifying the degree of investment risk.

Information base of the research are monographs and printed works of Ukrainian and foreign scientists on the theory and practice of investment management companies, legislation, periodicals, scientific collections, materials of scientific conferences, statistics, socio-economic development of Ukraine State Statistics Committee of Ukraine.

Main content of work

1. Theoretical foundations of the financial and economic rationale for investment processes

In the first chapter Theoretical foundations of the financial and economic rationale for investment processes were analyzes of investment processes in Ukraine, performed a review and theoretical generalization issues of financial security of investment processes, investigated the formation of the optimal capital structure of the enterprise.

Given the importance of investment processes was their analysis in Ukraine on the basis of the volume of capital investment, foreign direct investment, the volume of loans. Also investigated the dynamics and trends in the volume of investment in fixed assets of Ukrainian enterprises by financing sources. According to official data of the State Statistics Committee of Ukraine [1] in table 1 were calculated analytical performance indicators for capital investment for the period 1998-2012 years.

Table 1 – Analytical performance indicators for capital investment for the period 1998-2012 years

As seen from the data shown in table 1, for the whole period there was a systematic increase in capital investment. In 2002 the volume of capital investments rose by 2.15 times compared with volumes in 1998 (growth rate of 215.73 %). However, there was a decrease of 79196.00 million UAH. (by 29.11 %) in 2009 compared to 2008 and 3817.00 million UAH. (by 1.98%) in 2010 compared to 2009. But already in 2011 the volume of capital investments increased by 37.49 % compared to 2010. As a result, the dynamics of capital investment for the whole period, it amounted to 2012 1221.87 % of the volume in 1998. On average, for the whole period of capital investment grew by UAH 16142.91 million UAH or 18% annually. Figure 1 graphically reflects the dynamics of capital investment over the period 1998-2012 years and exponential model changes depending on the test indicator in time with the value of the curve fitting.

Expected impact of the investment processes is largely determined by their funding and their optimal combination. In the study of questions on the classification of sources for investment processes in [2; 3, p. 54-56; 4; 5, p. 304; 6] performed their systematization. When implementing the investment processes in the enterprise, it is necessary to take into account the whole range of possible sources of investment resources, which includes three main groups: own, borrowed and borrowed. Systematized also features the use of borrowed sources.

For the formation of an optimal capital structure of enterprises is necessary, first of all, to consider the nature of this feature. Thus, I. A. Blank offers interpret the concept of "capital structure", as the ratio of all forms of debt and equity funds used now in the process of their economic activity to fund assets [7, p. 281]. I. Ivashkovsky [8] believes that the capital structure is characterized by a combination of funding sources used by the enterprise to ensure its activities. O. Fischenko defines formation of funding sources, as a complex process that depends on the capacity of each individual source in a given period of time, the development prospects of companies and their financial condition, as well as the market and the relevance of the investment project in the future. The process of formation of funding sources includes determination of the effective ratio of debt to equity ratio and financial resources allocated to the financing of investment processes in the enterprise [9]. Thus, capital structure characterized by the ratio of equity and debt used now in the process of economic activities and the implementation of investment processes.

2. Development of regulations and approaches of the financial and economic rationale for investment processes

In the second chapter Development of regulations and approaches of the financial and economic rationale for investment processes were analyzed the methodological approaches to optimize the capital structure of the enterprise, especially investigated methods of risk assessment when making investment decisions.

The process of forming the optimal capital structure of the enterprise comprises first selection criterion or criteria of optimality, model selection or optimization method, because they determine the future formation of the optimal capital structure of the enterprise, and the result of the whole process of capital structure optimization. It should be noted that as the optimality criteria may make the cost of capital, return on equity and the level of financial risk. Among the optimization techniques include the following: financial leverage, the weighted average cost of capital and financing differentiation assets. However, the choice of only one of the criteria for determining the structure of capital due to a problem of significant differences of the results when they are used , so it is advisable to focus on the specific optimization and simulation models. The use of classical optimization models (which, for example, can be reduced to a linear programming problem, etc.) may be limited to the problematic simultaneous modeling of structural and dynamic characteristics of the company's capital and its impact on certain optimality criterion within a compact model. Therefore, the most attractive is the use of simulation models exactly.

In theory and in practice, and is turned out different methods of risk assessment when making investment decisions: the sensitivity analysis, scenario analysis method, simulation method and the method of construction of the tree (Fig. 2).

The features of these methods to assess risks when making investment decisions.

3. Methodical recommendations on of the financial and economic rationale for investment processes

In the third chapter Methodical recommendations on the financial and economic rationale for investment processes were planned implementation of the investment project, the assessment of its effectiveness and assessment of investment risk by simulation. Necessary for simulation:

1. create a model capable of predicting values of the respective performance of the project;
2. make a selection key arguments (risk factors) of the project, which are analyzed;
3. determine the set of possible (possible) values of key arguments;
4. determine the distribution of the random values of the key arguments;
5. reveal the attitude of interdependence (correlation) between the key arguments;
6. exercise scenarios according to the random generation of the selected pattern formed on the first step.

Conclusion

On the basis of studies carried out theoretical generalization of financial and economic feasibility of investment processes. When considering the investment processes in Ukraine revealed that for the whole period there was a system of indices of growth units. Only in 2009-2010, a decrease in capital investment and investment in fixed capital, as the post-crisis conditions. Therefore, according to the analytical data it is advisable to draw a conclusion about the future values of indices of capacity while maintaining the positive trend. However, lack of own funds of enterprises for investment, as well as unfavorable conditions for borrowing sources in our country and to attract foreign capital to limit the necessary financial provision for proper efficiency of investment processes. Feasibility study of investment processes keeping in mind the sources of investment, there should be, taking into account regulatory and legislative acts that regulate the advantages and disadvantages of their involvement, as well as specific aspects contained in the peculiarities of their use. Structuring venture capital allows for both qualitative and quantitative estimation of capital, as well as to characterize the efficiency of its use. For the formation of an optimal capital structure appropriate to use optimization and simulation models. In assessing the degree of investment risk is necessary to choose the most appropriate method that will allow more informed decisions on the implementation of the investment processes and reduce the degree of risk in achieving results.

References

1. Государственный комитет статистики Украины. [Электронный ресурс]. – Доступный с http://www.ukrstat.gov.ua
2. Турянська М. М. Інвестиційні джерела / М. М. Турянська // Науковий вісник ДонНУЕТ. – Донецьк : Вид-во Юго-Восток, 2009. – № 8.– 317 с.
3. Бланк И. А. Основы финансового менеджмента. В 2х т. – К.: Ника-Центр: Эльга, 1999. – 592 с.: ил.
4. А. В. Базавлук Теоретичні засади фінансування інвестиційної діяльності підприємств: проблемні аспекти // Вісник Бердянського університету менеджменту і бізнесу № 3 (19). – 2012. – С. 58-62.
5. Формирование хозяйственных решений. / Под общ. ред. В. М. Хобты – Донецк: Каштан, 2003. – 416 с.
6. Н. О. Гунько Аналіз джерел фінансування інвестиційних потреб. [Електронний ресурс]. – Доступний з http://dspace.nuft.edu.ua/jsp...
7. Бланк И. А. Управление формированием капитала / И. А. Бланк. – К. : Ника-Центр, 2000. – 512 с.
8. Ивашковская И. Стуктура капитала: резервы создания стоимости для собственников компании / И. Ивашовская // Управление компанией. – 2005. – №2. – С. 8-10
9. Фіщенко О. М. Формування оптимальної структури джерел фінансування інвестиційних процесів // Збірник наукових праць ДонДУУ: Економіка та соціальна сфера: деякі питання взаємозв’язків: Серія Економіка. – Т. ХІІ, вип.. 209, 2011. – С. 297-305.
10. Активізація і підвищення ефективності інвестиційних процесів на підприємствах / В. М. Хобта, О. Ю. Попова, А. В. Мєшков: Монографія / НАН України. Ін-т економіки пром-сті. МОН України. ДонНТУ. – Донецьк, 2005. – 343 с.

Note!

In writing this essay master's work is not yet complete. Final completion – December 1, 2014. Full text of the work and materials on the topic can be obtained from the author or his manager after that date.