Content №1 от 2021
Systemic Capitalization of the Companies’ Assets as an Economic Incentive Tool to Increase Performance
The most significant indicator of financial management performance in enterprises is the coefficient of return on all liabilities, measured as the ratio of net profit to the average annual amount of liabilities (from a financial statement for a previous reporting period). At the same time, the calculation is carried out regardless of funding sources. This indicator reflects the efficiency of using financial resources represented in liabilities.
Another important indicator is the efficiency of using equity (or return on equity, ROE), net profit divided by the average annual shareholder’s equity. The ROE value is miscalculated here because, in this case, the definition of efficiency (the ratio of the effect to the costs that provide this effect) of using financial resources is violated. After all, all financial resources in the liabilities, irrespective of where the funds come from, are involved in generating income with certain profitability.
Therefore, all liabilities may be considered as investments that determines the capitalization process. We justify this provision by building an optimization model for enterprise planning. Net profit is attributed to equity (authorized capital, retained earnings, and other indicators), long-term credit, and current liabilities (debt and payables: wages, supplier debt, taxes, social insurance, and others). However, most of the capitalization effect is not accounted for by equity.
A new approach to enterprise management is established based on systemic asset capitalization, i.e. activities to incentivize companies and financial organizations’ performance with economic means as one of the areas for enterprise economy convergence.
