№ 8/2017

Fìnansi Ukr. 2017 (8): 116–126

FINANCES OF THE INSTITUTIONAL SECTORS

PADERIN Ivan ¹, LYSENKO Olena ²

¹University of Customs and Finance
²University of Customs and Finance

Mathematical modelling and calculation on a firm’s operating surplus fund amount

The present article investigates the issue of the creation of a firm’s intrinsic surplus fund and an operating surplus fund as its constituent part. Normally, firms tend to give much consideration to generating the reserves stipulated by statutory documents. The amounts of such standby allocations are predetermined by the company rules and should obligatory exceed 5% of the net profit remaining after tax payments to the state budget. At the same time, in world practice, the establishment of a firm’s intrinsic surplus funds is applied as a tool of handling the financial risks. The creation of intrinsic surplus funds to a certain extent might be regarded as a counterpart of such a tool of risk management as hedging, i.e. the elaboration of a set of actions aimed at lessening the negative consequences of risk situations. Presence and employment of the operating surplus fund can abate the extent of a firm’s current liabilities and accrue its reserves. This leads to an increase in the firm’s equity capital. And though the reserving operation produces no additional cash flows, a reduction in current debts would result in accreting the proprietors’ capital. As the amount of balance liabilities remains unchanged, the monetary funds get redistributed according to respective balance items. This would enable the firm to solve independently the issue of cash facilities shortage in operating activities, which is to make for boosting its marketability. The creation of the operating surplus fund would further help increase the firm’s liquidity, solvency and financial soundness. The authors develop a mathematical model of such a fund and propose an approach to calculating its value for each subsequent operational period. The mandatory condition for the formation of the specified fund is formulated. To estimate the size of the operating surplus fund, an analytical approach of «temporary money cost» is applied to the expenditure function analysis. Furthermore, the authors suggest an approach to determine the effect of using the operating surplus fund during one and several production periods.

Keywords:operating surplus fund, exponential function, increase power, continuous accretion rate, cash flow.

JEL: D81, G32, O22.

Paderin I. . Mathematical modelling and calculation on a firm’s operating surplus fund amount / I. Paderin, O. . LYSENKO // Фінанси України. - 2017. - № 8. - C. 116-126.

Article original in Ukrainian (pp. 116 - 126)

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