1. Finances in the Building Company

2. Revenues in a building company
In monetary units expressed outputs of a company
Classification of revenues
According to the kinds:
Revenues from the sale of goods
Revenues from the sale of own production
Financial revenues
For needs of enumerating of economic result:
Operational
Financial
Extra
Financing

3. Costs in a building company
In monetary units expressed consumption of property and work in order to achieve outputs
Classification of costs
According to the kinds
Consumption of material
Wage costs
Consumption of services
Depreciation and amortization
Financial costs
According to the purpose, for that they were consumed
Production
Administrative
Costs for research and development
Calculation classification
Direct costs
Overhead costs
Financing

4. Property structure in a company
Basic classification of property in a company
Long-term property
Long-term intangible property (lifetime longer then 1 year, PP min CZK)
Long-term tangible property (lifetime longer then 1 year, PP min CZK)
Long-term financial property (lifetime longer then 1 year)
Short-term property
Supplies (stocks)
Bought (material, goods)
Own production (unfinished production, intermediate products of own production, products)
Accounts receivable (receivables)
From a business contact
Tax receivables (advance tax payments are higher then real tax – tax overpaid)
In face of institutions of social and health insurance
Financial property
Money
Bank accounts
Short-term financial property
Financing

5. Ways of property assessing in a company
Property can be assessed by:
Purchase prices
Including buying price and costs connected with purchasing (transport, manipulation with property)
Own costs
Aggregate of own costs connected with production
Used in the case of assessing of property of own production
Replacement price
Price, for that the property could be purchased (price estimate realized by expert in the case, when the property was purchased without charge)
Nominal value
In the case of ready money or valuables (post stamps)
Financing

6. Depreciation of long-term property
It concerns about cost expressing annual decreasing of long-term property value owing to its attrition
According to the purpose of depreciation assignment it is possible to define:
Accounting depreciation
It expresses real decreasing of a property value in connection with its real lifetime (for purpose of the income tax calculation it’s necessary this depreciation to transform into tax depreciation)
Tax depreciation
It expresses maximal amount of depreciation that it’s possible to include into costs used for the income tax calculation (described by law n. 586/1992 Sb., about income taxes)
Calculation depreciation
It serves for projection of costs connected with the property attrition into the unit price of a product
Financing

7. Calculation of depreciation
Methods of a depreciation assignment
Linear (equal) depreciation
Depreciation is equally distributed on the whole property lifetime
Digressive (accelerated) depreciation
Amount of annual depreciation is decreasing in time
Progressive depreciation
Amount of annual depreciation is increasing in time
Financing

8. Tax depreciation
Identification of depreciation group of the long-term property after the purchase of the property. Depreciation groups and property included into these groups are defined in the Income tax law, annex 1
Choice of linear or digressive way of depreciation that will be next used for the whole time of the property lifetime
Depreciation group
Time of depreciation 1
3 years 2
5 years 3
10 years 4
20 years 5
30 years 6
50 years
Financing

9. Linear (equal) depreciation
In the case of linear depreciation there are defined maximal annual depreciation rates for each depreciation group:
Depreciation is calculated as a multiplication of input price of a property and annual depreciation rate for certain depreciation group
Depreciation group
First year of depreciation
Next years of depreciation 1 20 40 2 11
22,25 3
5,5
10,5 4
2,15
5,15 5
1,4
3,4 6
1,02
2,02
Financing

10. Digressive (accelerated) depreciation
Calculation of the depreciation for the first year
Calculation of depreciation for next years of depreciation
Where
IP … input price
DP… depreciated price
k … number of whole years of depreciation (the number of years of a property lifetime)
n … number of years, for that the property has been depreciated
Financing

11. Input price assignment
Input price of a long-term property for purpose
of the depreciation calculation can be in the
form of:
Purchase price
Own costs, if the property is produced on the company’s own
Replacement price in other occasions founded according to the special legislation (expert price)
Financing

12. Sources of the property coverage
Equity (own capital)
Equity has the long-term character. These can be in the form of:
The registered capital
Capital invested by the businessman into the company
In the case of capital commercial companies (Limited Company and Corporation) the minimal amount of the basic capital there is assigned with the Business Code.
The capital funds
the capital funds serves to cover the property that was obtained without charge.
The funds created from net (after-tax) profit
Formed compulsorily according to the Business Code (reserve fund)
The economic result (the profit or the lost) of the past years and the current period
Financing

13. Sources of the property coverage
Extraneous sources (liabilities)
Long-term extraneous sources
Back long-term commercial papers
e.g. released bear accounts, bonds, obligations, etc.
Long-term bank credits
credits, those time of maturity is longer than 1 year
Dotations
Irrecoverable provided sources (provided for certain activity and it is not possible to use it for another purpose)
Short-term extraneous sources:
Short-term liabilities: present the debenture relation among the firm and another subject.
trade liabilities: it means the liabilities towards the suppliers
liabilities towards the state budget (required, but still unpaid taxes)
liabilities towards the employees (still unpaid wages or another remuneration)
liabilities towards the institutions of the social and health insurance
Short-term bank credits
operational credits, the time of their maturity is shorter than 1 year
Financing

14. General principles of company’s property financing
Basic principle of financing:
Long-term property should be financed by own sources and long-term extraneous sources
These sources should partly finance also short-term property
Net working capital:
Short-term property financed by long-term sources
Net Working capital (WC) = short-term property – short-term sources
WC > 0 … from the aspect of working capital the financial stability of a company is ensured
WC = 0 … effective, but from the aspect of working capital risk, position of a company
WC < 0 … long-term property financed by short-term sources, threat of a financial stability
(Remark: Financial stability expresses abilities of a company to comply its debts with own
payables from a long-time aspect)
Financing

15. Financial management and decision making
It deals with the move of money and company’s capital
It follows the whole technical and economic strategy of a company
Objectives of financial management
Long-term objectives
Maximization of a market value of a company
Assurance of an optimal balance between risk and profit
Short-term objectives
Continuous assurance of a company’s payment ability
Payment ability expresses ability of a company to cover own liabilities in required time and amount
Payment ability should be managed so that in the company will not be held excessive amount of money
Financing

16. Financial management and decision making
Basic areas of a financial management:
Assurance of financial sources at the company’s foundation
Choice of optimal capital structure
Financing and management of short-term property and choice of optimal way of short-term financing
Investing of finances into the fixed (long-term) property and valuation of investment variants
Dividing of a company’s profit
Financial planning of creation and use of internal and external financial sources from the short-term and long-term aspect
Financial management in the case of association, reorganization, sanitation or downfall of a company
Financing