Financial assets, their valuation and avoidance of risks on acquisition
Financial assets are any type of asset that can be represented:
- in cash;
- equity participation in the statutory fund of another company;
- the right under an agreement to receive anya financial asset of a firm or cash, as well as the exchange of a financial asset or the obligation of another enterprise on conditions that are theoretically favorable to that company;
- a contract, the calculation of which maymade by own equity participation instrument that is non-derivative in the event that a company has a duty to receive a variable number of its own shares or a derivative where the settlement can be made in any other way except for the exchange of a certain amount of money or another financial asset by an equivalent amount of its own share in the company . That is why contracts for the provision or receipt of its own equity instruments of the firm in the future are not included in the company's share documents.
Own financial assets - their valuation is made according to the following division into four categories:
1) financial assets at fair value through profit or loss;
2) financial assets that are available and ready for sale;
3) accounts receivable;
4) investments that are held until full repayment.
Like any economic category, financialassets have certain properties, the main one of which is the ability to increase the profitability of the company. So, any enterprise will never invest its money in the acquisition of property that does not have this property.
Risk and return on financial assetsare considered as interrelated categories. So, the risk is the potential probability of losing a certain amount of invested cash or not receiving income in the predicted or planned amounts. From the generally accepted practice, there is a risk assessment using the concept of leverage.
The activity of any enterprise is constantis associated with production or financial risk, which must be taken into account, depending on the position of the company. So, the company can be characterized both from the position of available assets (production risk) and the source of funds (financial risk).
Production risk is always determinedpeculiarities of the company's functioning within a particular industry. This is precisely what determines the structure of the assets into which the company plans to invest its own capital. This type of risk is determined by such factors as regional characteristics, national traditions, market situation, and infrastructure.
Financial risk is due to the structure of sourcesmeans, which implies ways of investing money and sources of their formation. An important issue remains the ratio between debt and equity.
Financial assets: The assessment of risks and factors that determine them is carried out using the analysis of the yield. The relationship of profit with the cost estimate of costs associated with the acquisition of assets or other fixed assets that are necessary to obtain this profit are characterized using an indicator such as leverage. This indicator can be characterized by the relationship between variables and constant costs.
The financial assets of any enterprise reflectgeneral well-being, prospects for increasing profits and characterize the readiness of the organization for further development and expansion of production activities.