Property Management Depending on the Sources Difficulty

1
Lecture was elaborated with the help of grant
project of Ministry of Education, Youth and
Sports, FRVŠ n. 2005 Innovation of Subject
Financing of Building Order

• Property Management Depending on the Sources
  Difficulty

2
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. 60 000 CZK)
• Long-term tangible property (lifetime longer then
  1 year, PP min. 40 000 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

3
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)

4
Depreciation of long-term property

• Depreciation
• 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 its necessary this
  depreciation to transform into tax depreciation)
• Tax depreciation
• It expresses maximal amount of depreciation that
  its 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

5
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

6
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
7
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
8
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

9
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
  companys own
• Replacement price in other occasions founded
  according to the special legislation (expert
  price)

10
Sources of the property coverage

• In-house sources (own capital)
• The registered capital
• The capital funds
• The funds created from net (after-tax) profit
• The economic result (the profit or the lost) of
  the past years
• The economic result (the profit or the lost) of
  the current period
• Extraneous sources (liabilities)
• Long-term extraneous sources
• received advance payments
• back long-term commercial papers
• Short-term extraneous sources
• trade liabilities (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
• Bank credits and loans
• long-term bank credits
• short-term bank credits

11
Ways of Property Financing

• Increase of basic capital
• Not divided economic result (profit) from past
  periods
• Credits
• Leasing
• Financial
• Operative
• Backward

12
General principles of companys 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 gt 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 lt 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)