AD ALTA
JOURNAL OF INTERDISCIPLINARY RESEARCH
long-term equilibrium. Changes in the development of the
economic result are explained by changes in the variables
included in the model, which are in Tab. 1 marked in bold. It can
be said that businesses use different forms of financing in relation
to the profit. Management style and the size of the company,
mostly for micro and small enterprises, have an influence on the
form of financing. For micro and small enterprises the personal
(ties or connections) predominate in the conceptual management
system. Personal management style is not perceived as a threat in
the context of decision-making and financing. Equity is, with
regard to the risk, a credible form of financing. This confirms the
conservatism of Czech entrepreneurs who understand the
development of the company as a monitory value and not as a
way or means for creation and development of the business.
Figure 4: Return on assets by SMEs in year 2016
Source: own research
A comparison of the ROA level achieved and the average interest
rate (discount rate in 2016, at the Czech National Bank (CNB)
was 0.05% (CNB 2016)) shows that all large companies are able
to receive and repay foreign sources, Fig. 4. For micro, small and
medium enterprises a similar trend is shown. If we do not
consider the effect of taxation, we can state that the SMEs would
see only a change in the structure of foreign resources, which
affects the development of ROA. SMEs are financing with
foreign sources less actively, which can be caused by worsening
conditions of availability of foreign resources, but also by the
responsibility for managing the company on a "debt". It confirms
that when reach the level of ROA and average interest rate,
businesses would be able to receive and repay foreign sources.
Adherence to the use of a certain proportion of foreign capital to
finance the assets of a business should always correspond to the
level of the company's liquidity and funding rules as it
significantly affects the profitability of the enterprise. Other
factors which affect the property and capital structure of the
company are: capital costs, inventory, accounts receivable,
interest, taxes, liquidity, dividend policy, risk, etc. The growing
ROA trend shows the positive evaluation of equity, which is one
of the most important indicators of the financial performance of
the company for shareholders and prospective investors. The
development of profitability indicators is similar and equally
volatile in the observed enterprises. Trend indicators are
continuously growing in time, see Fig. 5. The current trend of low
interest rates (repro rate in year 2016, according to CNB was
0.05%) and excess of bank sources has an impact on the growth
indicators of return on equity and can´t be described as a cause of
disproportionate indebtedness of enterprises. The volatile
development of the return on revenue ratio can be attributed to a
well-established company strategy and a sufficient resilience of
foreign sales to market developments. Growing sales and profit
results tell of a healthy business. Companies that want to exist on
the international market for a long time have to be reasonably
profitable and must strive for a structure with minimal cost of
own and foreign capital. However, profitability indicators are not
a measure of the company's success because it does not reflect the
risk of doing business, using foreign capital, liquidity or
insolvency. The low level of funding with long-term resources
and the high level of corporate inter-firm indebtedness is one of
the major problems of managing the company's international
activities.
Figure 5: The development of profitability indicators in year
2016
Source: own research
4 Discussion
Examination of the variables laws and their interrelations
confirmed the economic theory, which defines the
interrelationships between the monitored indicators. Researching
of the laws of variables and their mutual relations confirmed the
economic theory that defines the interaction between monitored
indicators. The development of profitability indicators for micro,
small and medium enterprises is constant. That means that
businesses are actively using the invested capital. The reason for
the constant development of the return on equity is the stagnation
of foreign resources for SMEs due to the cautious approach of
banks, investors and other intermediaries on the basis of the
global economic crisis in 2008-2009 and the historically high
proportion of outstanding loans. The cause is that businesses are
so small that they can´t offer a guarantee in the form of assets
(fixed assets). Another influence is the change in the accounting
methodology or the establishment of micro and small enterprises
due to redundancies during the global economic crisis in the
context of the establishment of new businesses without business
and payment history. It is important to point out that not all
sources of funding can be used by micro, small and medium-sized
enterprises and that limited or no rights are created by the use of
foreign capital by the business owner. Or, part of the production
or business is provided to a foreign partner, which limits powers
and is usually more expensive than a bank loan.
This confirm the well-known claim that micro and small
businesses, from a lack of formation of own resources, which are
wanting to increase the support of foreign resources who have an
insufficient payment history will not gain it. An important role for
companies with international equity ownership of the parent (due
to the guarantee) is to provide financial resources under more
favorable and more affordable terms. The optimal capital
structure arises from the creation of a ratio of own and foreign
capital with the lowest total capital cost. Decision-making on the
way of financing an enterprise confirms the analysis of the impact
of profitability, debt and capital management. Problem areas for
micro and small businesses are to secure financial resources and
their effective use in connection with limited bargaining power,
limited classical and alternative sources of funding in relation to
the duration of the operation on the international market and
unequal access in taxation and tax treatment. The decision on how
to finance the company affects the profitability, debt and capital
management. It can be stated that due to the historical
development of the Eastern economies their instead of is
development status and use of financing through venture capital is
lagging behind. The influence on decision-making and enterprise
management in the context of financing confirmed the
interdependence of accounting, tax and other legislative and
financial aspects in the areas of:
corporate activities (planning and decision-making,
management, financing, etc.),
market system,
the use of financial analysis as part of the evaluation of
corporate success in the domestic and international markets.
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