Corporate Financing Strategies and Financial Systems

Financing of Enterprises

Self-financing resources are stable company funds that do not require repayment or interest payments.

A) Contributions from Owners

When individuals buy shares, the company receives resources to finance its activities. In exchange, shareholders obtain the right to participate in business management and share in variable profits (dividends).

B) Reserves

These are undistributed profits that remain in the company as a form of self-financing. These funds allow for new investments and promote company growth.

External Financing

Companies often require resources beyond what self-financing provides.

A) Commercial Credit

This is automatic financing obtained when a company delays payment to its suppliers, providing time to sell products before settling debts.

B) Loans

Companies request funds from financial intermediaries. These must be repaid with interest and can be short-term or long-term.

C) Bonds

When companies require large amounts of capital that standard loans cannot cover, they issue credit titles. The total amount is divided into many titles offered for sale to various savers. After a set period, the company returns the money plus interest according to the agreed conditions. Only large companies can utilize this method.

D) Spontaneous Funds

These are resources that the company has not yet used for their intended purpose.

The Financial System

A set of intermediaries that create money or financial resources. These products or titles represent a means of holding wealth while acting as an obligation to the issuer.

Key Financial Concepts

• Liquidity: Measuring the ease and certainty of converting assets into cash in the short term without significant losses.
• Risk: The probability that the debtor will not fulfill their agreements.
• Profitability: The ability to produce financial returns.

Financial Intermediaries

Specialized institutions that act between savers and investors:

• Banks: Offer financial products accepted as a means of payment.
• Non-bank intermediaries: Cannot offer financial products that function as money or means of payment.