| Biography |
 |
| Dissertation |
|
| Search |
|
| Links |
|
| Library |
|
| Ind. task |
Source: http://pics.aviaport.ru/avias/docs/isaev_mestetsky_balancing.doc
Erygin U.V.
Problem of Financial Planning of Enterprise Investment Activity and Methods of Its Solution
Enterprise financial invigoration, raising of competitive capacity of goods in difficult modern conditions is impossible without wide investment attraction. This, in one’s turn, demands development of financial market infrastructure and perfection of investment planning methods at enterprise.
Among problems of financial planning the most important remain problems of optimal funding sources structure and optimal financing schedule. The first problem is well investigated, the second is investigated less, especially concerning the influence of project risks at the volume and schedule of financing. There is necessity of decreasing losses from project risks, but at the same time it’s necessary to minimize costs, connected with resources attracting. Such is the problem.
For solving this problem such procedure can be used for project financing schedule forming.
According the suggested procedure initially you determine volume of resources to be îñâîåíí³ìè, and the ãðàôèê îñâîåíèÿ ñðåäñòâ. After it you analyze the risks (probability of unfavourable occurences during the financing of the project).
For high-quality risk analysis it’s necessary to reveal the risks, peculiar to concrete project, using one or another classification: classification by the project activity phases, classification by the criterion “possibility/impossibility to influence the threats”; classification by the criteria “possibility of risk protection”. There is a well-known classification, according which typical (most common) risks are revealed, which exceed the limits of one certain classification criterion.
As for risk estimation, one of the methods is an estimation of the possibility of unfavourable occurrences. In the supposed procedure method tree of events derivation was selected. It is a graphical method of sequence of possible incidents tracing with estimation of possibility of every event, which can be used to form the chain of losses. The tree is forming beginning from given starting events called incidents. After if possible ways of progress of consequences of these events are traced according the chain of cause-effect relations.
The consequence of risks is deviation of financing from the planned level. The deviation for every event is determined from the funding sources structure, and after it- total deviation and its possibility. The product of deviation and its possibility gives us deviation taking into account possibility for every branch of the tree of events. Expectation value is the sum of deviations with possibilities for all branches.
Deviation leads to resources deficit appearing. The size of the deficit depends on the fact what capital reserves the enterprise has: deficit is the difference between deviation and the size of reserve. When reserve is zero, deficit is equal to deviation. If we know the size of deficit, we can assess damages.
Determination of dependence between the sizes of losses and deficit is a separate difficult task, because losses depend on different factors: for example, 100% financing obligation, standstill non-admission, standstill time limitation and others. Supposed procedure allows to take them into consideration.
Deviation, deficit and loss calculations are made for every period of planning and respecting amount of financing.
After it optimal capital structure is determined. Cost of funding sources at every period of time proceeds from the problem of optimal structure determination, what theoretically allows to reduce weighted average cost of funding sources and provide necessary level of paying capacity and financial stability of an enterprise.
Minimal value of costs taking into account funding sources costs and expected losses, produced by project risks, are supposed to be used as criterion for optimal financing schedule of the project.
According to the selected criterion dynamic programming problem is defined. At that time separate steps are chosen (as n-th step financing in the n-th period of planning is selected, the state of system S before each step is defined by monetary funds reserve at the beginning of the period c0, and the state of the whole system is defined as monetary fund reserve c, which equals to remaining sum after satisfaction of needs.
Parameters of step control on this problem are financing amounts X1, X2…Xn in each period of planning. The following restrictions are applied to the parameter of step control: amount of financing should be not less than the difference between the needs and the stock at the beginning of the period: X <= dn – cn: maximal amount of financing is determined from this condition: X <= dn - cn + cmax.
Wn(c) – minimal costs of project financing value taking into account funding sources costs and risks of the project.
Accordingly
Wn (c) = min [WACC n (X) + Ó (Ä) + Wn-1 (c - x)],
Where Wn(c) - constrained optimal winning at step n.
WACCn (X) - average weighted funding sources costs at step n.
Ó (Ä) – losses from monetary funds deficit at step n;
Wn-1 (c - x) –optimal winning at all subsequent periods.
The result of solving dynamic programming problem is optimal financing schedule of the project.
As for optimal capital structure determining, during solving of this problem we can use Modillyany-Miller-s theory resume, according to which market value of a company doesn’t depend on capital structure, therefore, there’s no purpose in optimizing it. But many researchers reject these resume, and consider it necessary to solve capital structure optimization problem according to the criterion of financial profitability maximization, or according to the criterion of costs minimization and level of financial risks minimization.
At the same time, during solving of the problem the structure of borrowed and owned capital isn’t taken into account, despite the fact that financial market development at the last 10 years lead to increasing of variants of borrowed financing funds attraction number.
Depending from the size and type of attracting source of financing its cost can fluctuate, because creditor risk level changes, in particular because of client’s level of insolvency changing.
That’s why we offer tree of risks derivation as a possible method of borrower’s credit risks estimation. The most probable are the risk of delay in drawing up and the risk of interest rate change.
Possible losses from alternative financing funds attraction is calculated taking into account these risks. It can be estimated as more expensive source value when attracting it for a delay period or as rise in price of credit because of interest rate change. Estimated losses are considered to be the charge of risk of borrowed financial sources attraction.
Objective function
Wn (c) = min [g n (X) + Wn-1 (c’ - x)], 0<=x<=c
Where Wn(c) - constrained optimal winning at step n.
g n(x) – optimal winning at step n;
Wn-1 (c - x) –optimal winning at all subsequent periods.
The most important advantage of the model is finding optimal capital structure not only using a ratio of owned to borrowed capital, but also within the limits of available funding sources.
From our point of view, supposed procedure allows to regulate project financing activity and guarantee stable financing and satisfactory balance structure.
Source: http://pics.aviaport.ru/avias/docs/isaev_mestetsky_balancing.doc