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“Standards for optimizations of Macedonian companies financial


Julijana Siljanoska
Teaching asistant
Faculty of administration and management of information system-Bitola
Republic of Macedonia

Minika Angeloska
Teaching assistant
Faculty of administration and management of information system-Bitola
Republic of Macedonia

Nikolce Marinovski
Master of business administration-Prilep
Republic of Macedonia

Long period of financial politics of economy’s subjects, in current circumstances of
market rules and mechanisms are functioning, must provide conditions for realization
of extended, developed, strategic and ongoing objectives. In the circumstances where
company’s determinations is to reach objectives, as segment Macedonian companies’
current politic, more and more is present the needs of definition of capital assets
structure and sources for their financing, and results are maximizing the final financial
Financial balance is precondition for secure companies functioning. But, achieving
and maintaining is complex problems which has to be completing thorough analyze
and prognosis of the significant factors that generate with different intensity and
Key words: financial structure, financial balance, rules of financing, financing
standards and capital assets, companies.
Long period of financial politics of economy’s subjects, in current circumstances of
market rules and mechanisms are functioning, must provide conditions for realization
of extended, developed, strategic and ongoing objectives. In the circumstances where
company’s determinations is to reach objectives, as segment Macedonian companies’
current politic, more and more is present the needs of definition of capital assets
structure and sources for their financing, and results are maximizing the final financial
effects. It will show the course financial balance, like short-term and long-term
financial balance.
Financial balance is precondition for secure company’s functioning. But, achieving
and maintaining is complex problem which has to be complete thorough analyze and
prognosis of significant factors. These factors generate with different intensity and
direction, when is necessary to complete business and financial decisions, very
important to respect certain principals to maintain financial balance.
The starting basis for financial balanced determination has to present balance
condition, through its relevant indicators for:
- Level of capital assets immobilization
- Capital assets sources, i.e. the financial resources
- Capital assets apportionment use, determinate by cutting the balance of
account’s principals in separate parts (sub balance), as well have to be in
Creativity of company financial politics is not only to identify and make definition
of short-time and long-time financing resources and capital assets immobilisations.
Also, it is important to discover causes and problems in business subjects functioning
that produce certain relationship’s disturbances and difficulties to finalize financial
The idea is necessary to build certain agreement standards and rules of dealing and it
will make harmonious relationships of two mentioned relations:
1. Short-time immobilised capital assets, short-time capital assets resources
2. Long-time immobilised capital assets, long-time capital assets resources

1.The rules of financing as financial standard and mechanism of company

financial politics
In the literature of economics that analyze financial difficulties, company’s financial
relationships and politics, the rules of financing are identified as “golden”, “holy “ or
“optimal”. In the same time they have historical dimension, and very often named as
“classical” or “traditional” rules of financing. The identical attributes of these rules
that they dealing with company’s financial structure, i.e. capital assets and capital
assets’ resources. To understand the rules subject matter, the balance account has to
be present with the following balance scheme.
Table 1-1 “Horizontal rules of financing”
Horizontal Activity Passive
rules of (capital assets) (resources)
1. Fixed capital 1. Self resources
assets 2. Unknown resources
2. Variable short-term
capital assets

Vertical rules of financing

We can notice two groups of rules in this balance scheme:

- Horizontal rules of financing
- Vertical rules of financing
Horizontal rules of financing demonstrate certain relationships between parts that
show the possession, respectively the capital. The results of efforts to develop quality
methods to express financial structure and financial balance, the following deserves
• Horizontal rules of financing [1, p.234]:
 Golden balance account rule
 Golden (bank) rules
 Rule for financing 1:1 and 2:1, and
• Vertical rules of financing 1:1, 2:1 and 3:1
a) Financing’s rules of basic capital assets
In the contest of financing of basic capital assets, very important place has golden
balance account rule, belonging to horizontal rules of financing. This rule refers
basic capital assets to be financed from permanent capital, i.e. of possessed
resources or in the worst circumstances, from unknown, but long-term resources.
The main disagreement in the content of implementation of the rules, some
theoretical scientists (Gerstner, Mellerowiez, Lohman, Antoine) assumed that basic
capital assets has to be finance only. The other group of scientists assumed that
long-term resources can be use for financing of financial capital assets (Sellien,
Leitner). Beside the controversies, we have our opinion that financing of financial
capital assets, there is the rule, to use permanent capital. Financing of financial
capital assets from long-term resources has to be considered only like imperative
retreat of the rule.
Implementation and respecting of the golden rule enable, not only to draw out
parallels between basic capital assets and permanent capital, but to determinate
relations between self capital and borrowed capital. Because there is a fact that this
rule determinate functional priority of self capital in the in financing self capital
assets, point out that it is motivated of request to protect the risk, and these functions
are connected in the vertical rules of financing.
The golden balance account rules sometime influence on the level of liquidness and
financial security, and we have to consider the following acknowledgements:
1. We can not accept as absolute accurate fact that basic capital assets are loaded
with high level of risk. The risk is result of unprofitable working. Also in this
case when profit is weakening, the risk has not to be connected only with basic
capital assets. It is known, that company shows deficit because of no paid
short-term requests, as result of common business activities, political
2. The company paid stability can not be guaranteed only by respecting the
golden rule exclusively. It is determinate from many other factors of internal
and external nature, and there’s influence does not depends of rule’s
3. It can happened part of the capital assets to be financed from short-term loans
and nevertheless state of liquidness to be achieved. It is happened in the
companies where are large amortized deductions and assets can be used
temporarily for obligations’ payment. Obligations’ payments can be achieved
from assets on basis achieved income, but also from not achieve income.
The golden financing balance rule arranges norms and standards in the financing of
working capital assets. Also, and other financing rules indicate of the methods of
financing working capital assets, and it is very important in conception to clarify the
subject matter of these rules in the thesis for financing rules of working capital assets.

b) The rules of financing of working capital assets

The function of working capital assets to accomplish financial equilibrium can be
realized according managing with these assets. Managing includes two complex areas
of decisions:
1. Using the working capital assets respecting the principals of
productivity, economy, rentability and state of liquidness.
2. Financing of working capital assets according the principals of optimal
combination of financing resources.
In the way of using the working capital assets, managing has to be pointed to obtain
sufficient coverage and quality of these assets, and it will be according the coverage
and dynamic of business tusks of every business subject.
Optimal financing of working capital assets signified respecting rules of instrument's
Actually, the most part of rules of financing that are known of theoretical mind
(horizontal and vertical), that will take a word in the future discussion, considering
financing of working capital assets.

2. Horizontal rules of financing of working capital assets

Presenting of financial structure and relations between company's assets and their
sources and in the working capital assets, can be effective through golden rule of
According this rule of financing, capital assets are financed from self sources or from
long-term borrowed resources. Working capital assets, has to be financed form short-
term resources.
In the meantime, the golden balance account rule also can require, not only basic
assets, but and part of working capital assets, in the level of so called "iron" reserves,
to be financing from long-term resources. In according with this, we have two
questions to answer:
1. what is the content of "iron" reserves
2. From which resources it's financing has to be obtain
The iron "reserves" or permanent working capital assets, is the name they are called,
present the part of working capital assets that permanently, in unchanged volume, are
present in the company. They are minimal "iron" reserves of production materials,
small inventory, unfinished production and completed products that provide normal
work and continuously has to be upgraded and maintain on specified level [2, p.67-
Rational financing of these assets is available only when it is carrying out from so
called working capital fund. It is account category that can be count in the following
WCF-working capital fund
LTA-Long-tem capital assets resources
LTIA-Long-term immobilized capital assets (basic assets and long-term distribution)
WCA-Working capital assets altogether with short-term distribution
STCA-Short-term instrument resources (autonomic and time deposits [3, p.45]).

Working capital fund has to be equal with permanent working capital assets. In this
case, with financial equilibrium there are possibilities for payment capacity, or is
lessening the adjusting of flow and outflow of financial assets. This proves that state
of liquidness is possible only when exist equilibrium among permanent working
capital assets and working capital fund, but can be complete only when of flow and
outflow adjustment exists.
The prove of relationship between some property parts, i.e. company assets also
represent golden (bank) financing rule. This rule is unwritten law for credit (bank)
Implementation of this rule generate from of needs to secure state of liquidness. It can
be achieve through balancing of deadlines between active and passive activities.
According this rule, acquired foreign capital must not use disadvantageous in certain
time, than it is achieved. But, this rule from the bank organizations do not respects,
but anyway they secure state of liquidness. They would achieve it because have
ability of existing long-terms bank credits against passive credit works. Through
permanent revolving of short-term capital it can transform to long-term, respectively
make substitution of one short-term to other. In this way, disrespecting of golden bank
rule of financing does not make danger of state of nonisliquidness.
The rules of financing 1:1 and 2;1 have similarities and differentiates. The similarities
consist of they use measuring of state of liquidness by means of the balance account
situation, i.e. through placing of relations between assets and company resources.
According the rule 1:1 balance has to exist between financial assets and demands,
from one side, and short-term resources from other side.
The rule 2:1 is using for measuring of state of liquidness of second degree, on the
basis of request of working capital assets to be twice bigger from short-term
Implementing of rules can be very useful for assessment of company’s state of
liquidness only when can make and additional assessment with mediation of some
other indicators.
The process of financing of working capital assets can be realized on quality way if
business subjects develop rules of behaviour in the financial area and it can be placed
standards of assessment of capital structure. It can be done with implementing of
vertical rules.

3. Vertical rules for financing working capital assets

Depend of categories that are treating the principals of financial politics, the vertical
rules for financing are divided in three groups:
- The rules relating to own and borrowed capital
- The rules that specify the height of own assets necessary for covering
the capital
- The rules with can be standardize relations between short-term and
long-term resources
The rules relating to own and borrowed capital express the defaulter’s obligation to
achieve certain structure of the instrument’s resources, that will be guaranty creditor
to pay up own accounts receivable at validity date and completed sum.
There are two ways of providing accounts receivable:
- To determinate the low limit for financing of defaulter from own
- Placing solid relations between own and borrowed resources
In the case when we have to make assessment of company’s financial situation and
his credit’s creditworthiness, it is necessary minimum, the rule of financing is
implementing, that amount of own and borrowed capital has to be identical. This rule
is known as rule of risk equability. But, for better protection of the creditors, this rule
request own capital to be two, sometime and three times higher then borrowed capital.
Respecting the rule for relations between private and borrowed capital has to provide
implementation, of the principal of security, but also the principal of state of
liquidness in managing the company’s financial politics. Meanwhile, state of
liquidness can not be achieved with participate increasing of personal in total capital.
Specifically, state of liquidness is presented as dynamic category, that is determinate
from large number of factors from internal nature (lost, financing of working capital
investments, investment in the stock, problems in harsh investment in final products e.
t. c.) and from external nature (common state of nonliquidness, harsh conditions in
selling and payment, increasing obligations to the government with taxes and similar).
That why can happen the company to be in state of liquidness, if does not posses
private capital, if realizes financial dynamics that is achievement in harmony in
financial flow and agreed dynamics in the inflow and outflow of financial assets.
Relations between private and borrowed capital are very important for achievement of
bigger profitability.
Profitability start to be bigger when expenses for interests of borrowed capital are
smaller of average done interests achieved with using that capital. As result,
profitability of private capital increased [4, p.35].
Affecting in the capital structure on company’s profitability is illustrated on the
following hypothetic example:

Graphic 1-1: “Example of affecting of the capital on company’s profitability”

Number Variants
Elements I II
1 Private capital 100.000 50.000
2 Borrowed capital / 50.000
3 Total capital (1+2) 100.000 100.000
4 Investment income 20.000 20.000
5 Spending for interests / 5.000
6 The rest of income 20.000 15.000
7 Private capital’s interest sum 20% 30%

From the previously example arise that company is going to achieve financing with
maxima use of possibilities for external loan. But, we have to have the fact to much
loan is latent danger for breaking the principals of independent flexibility, as very
important principal of company’s financial politic.
From the aspect of principal’s confident it is very important relation between short-
term and long-term capital. In the conditions when possibilities for financing of
private resources are restricted, the best alternative is using long-term resources for
financing. Namely, short-term credits are returned in short time period, but the rule is,
interest is higher than interest of long-term credits. But, in the process of creating final
decision for using credits on the basis of two alternatives (short-term and long-term
credits), necessary is to present the following moments:
- What is the difference between form and the contents of the short-term
credits, and
- How to complete pay off long-term credits
Nevertheless, according these short-term credits type, because their prolonged and
permanent upgrading, by the contents they are presented as long-term credits.
From the other side, it can happened the company to use higher sum of long-term
credits, and according the previously conclusions it’s confident is bigger. However, if
the long-term credits appeared for pay off in short future, they are treated as short-
term credits with all characteristics associated with the price of the capital that is
forming while using the following credits.

The fact that basic and working capital assets are engaged in the process of
reproduction that can develop conditions for realization of business activities,
however, after achieving the business objectives, they have different functions. These
assets are not only different by the physical characteristics, but with degree and speed
of the flexibility. The differences in the functions of basic and working capital assets
in the process of realization of the business’ objectives create needs of different
approach in the management.
In the process of managing of assets, that has to determinate their optimal volume and
structure, the very important fact is instrument’s financing.
In he context of the questions connected with the way of basic assets financing has to
point to build concrete rules. These rules HAVE to present common accepted
standards that will be basic criteria for assessment of the optimal resource’s choice for
financing of these assets.
With the help of these rules is enables following up the realization of financial politic
principals. On the other side, implementing of these rules will make conditions for
building the optimal structure of the capital and for permanent control of the
creditworthiness of the business subjects.
1. Д- р Милоје Кањевац (2006): „Пословне финансије“, Економика, Београд,
2. D-r J. Rodič, d-r I. Markovič (2004) : “Poslovne finansije”, Ekonomika, Beograd,
3. D-r Ivan Markovič (3/06): “Racionalno upravljanje obrtnim sredstvima i izvorima
obrtnih sredstava”, Računovodstvo i finansiranje, Savez računovodstvenih I
finansijskih radnika Hrvatske,
4. D-r Jovan M. Rankovič (2002) : “Upravljanje finansijama preduzeča”, šesto
izdanje, Ekonomski fakultet- Beograd.