Own Capital of the Enterprise

The capital of an enterprise is a combination of assets that an enterprise can dispose of for the performance of its activities with the practical purpose of making a profit.

According to the source of the formation of assets, its own and borrowed capital is allocated . The main role in this is played by its own part of assets, which ensures the economic independence of the organization.

Own capital of the enterprise reflects the total value of the assets owned by the enterprise on the right of ownership and free for use in the formation of part of the assets. The share of the total capital represents the net assets of the firm or organization.

The company's own capital includes various sources of resources: statutory, reserve, additional capital. In addition, it includes retained earnings, selected special purpose funds and other reserves. In addition to its own funds include all grants and subsidies allocated by the state.

The size of the authorized capital is prescribed in the charter and other constituent documents of the legal entity. Additional - this is all property contributed by the founders in excess of the statutory, as well as the amounts remaining as a result of revaluation of property, and other income. The reserve is allocated from the profit to cover possible losses and losses.

The main source of savings of the enterprise's property is undistributed profit, remaining from gross profit after payment of taxes to the budget and deductions for other claims.

Special purpose funds represent net profit, which is directed to the expansion of the enterprise, industrial development, as well as social activities.

Other reserves are defined as reserves created in connection with the expected large expenses, which are included in the cost price, as well as all costs of circulation.

The company's own capital is divided into two key components: invested and accumulated capital.

The invested part is the funds invested by the founders (owners) in the enterprise. It includes the nominal value of shares (common and preferred) and additional paid-in assets. This includes gratuitously received from various sources of value.

In the balance sheet, a part of the invested funds is reflected as an authorized capital, part as an additional (received share premium), part as an additional (gratuitously received or transferred property) or a social fund.

Accumulated part - funds created over and above originally advanced by the owners. This part is reflected in the articles arising in the distribution of net profit (this is undistributed profits, reserve capital, other similar items).

Own capital of the enterprise has the following positive features:

• Simplicity of attraction (depends on the owners and does not require coordination with other business entities);
• High profit generation capabilities (does not require repayment of loan interest);
• Ensuring the financial stability of the organization in the long run and reducing the risk of bankruptcy).

However, he has inherent drawbacks:

• Limited amount of fundraising;
• High price in comparison with borrowed sources;
• Unused probability of increasing profitability from borrowed funds.

In general, an enterprise that uses solely its own capital is the most financially sustainable, but the pace of its development is hampered by the failure to use the opportunities to increase profits on the funds invested in the company's fixed assets.