Economic Annals-XXI: Volume 135, Issue 11-12(1), Pages: 58-61
Ishchenko, M. (2013). Mining and beneficiation companies liabilities figures correction. Economic Annals-XXI, 11-12(1), 58-61. http://ea21journal.world/index.php/ea-v135-15/
D.Sc. (Economics) Degree Seeker,
Member of Executive Board,
Director of Mining Division of METINVEST HOLDING LLC
11, XXII Partz’yizdu St., Kryvyi Rih, 50027, Ukraine
Mining and beneficiation companies liabilities figures correction
Abstract. It is important to define accurately enterprise liabilities figures, because they are used in calculation of those financial ratios, based on which conclusions of enterprises financial performance are made. When determining indicators of liabilities of mining and beneficiation enterprises of Ukraine, the following factors shall be considered: company internal indebtedness (that is debt of the company to itself); loan guarantees that are provided to other enterprises of the same vertically integrated structure for which the certain company relates to; enterprise liabilities to affiliates.
Internal indebtedness appears at enterprises because of insufficient financing of obligatory programs. Untimely fulfilment of such programs may lead to future increasing of enterprise’s costs and consequently lower financial and economic results. Thus, an enterprise internal indebtedness has to be considered in the companies liabilities.
Mining and beneficiation enterprises of Ukraine belong to different vertically integrated structures and often act as guarantors for credits that are provided to other enterprises of the same structures. Such liabilities are not shown in the balance of the mining and beneficiation enterprises. But in case of insolvency or bankruptcy of enterprises being credited, the obligations of loans payment will be transferred to enterprises-guarantors (in our case to mining and beneficiation enterprises). Therefore, liability reserve of guarantees shall be created and it shall be considered in long-term liabilities of the enterprises.
Another peculiarity of mining and beneficiation enterprises operating as a part of vertically integrated structures is existence of affiliated liabilities. Two groups of affiliated liabilities shall be distinguished: absolutely affiliated (liabilities of the enterprise to other companies which are fully controlled by the same owners); conditionally affiliated (liabilities of company to other companies which are partially controlled by the owners of the same company). Absolutely affiliated liabilities shall be transferred from current to long-term liabilities; conditionally affiliated liabilities are current by their essence.
Thus, methodology of correcting of mining and beneficiating enterprise liabilities has been developed in the scope of this Article that will allow increasing of preciseness of defining of its financial and economic results and assessment of financial condition.
Keywords: Liabilities; Internal Indebtedness; Affiliate Liabilities; Mining and Beneficiation Companies
JEL Classification: L72; М41; М49
- Van Horne, J. C. (2003). Fundamentals of financial management. Moscow, Russia: Finance and Statistics (in Russ.).
- Walsh, C. (2001). Key management ratios: how to analyze, compare and control the figures that drive company value. Moscow, Russia: Delo (in Russ.).
- Savitskaya, G. V. (2001). Analysis of enterprise economic activity. Minsk, Belarus: Novoe Znanie Ltd (in Russ.).
- Komirnoy, V. А., Kozachenko, S. V., Vilkul, А. Yu., Nusinova, Е. V., & Nusinov, V. Ya. (2001). Economy and management of industrial enterprises, which are functioning in the conditions of crisis. Dnipropetrovsk: Science and Education (in Russ.).
- Kruhla, N. M. (2005). Economic results of mining and beneficiation companies’ activity evaluation (Thesis of dis. to obtain the degree of PhD). Kryvyi Rih, Ukraine (in Ukr.).
- Nysinova, O. V. (2012). Evaluation basics of enterprises economic security: theoretical and practical aspects. Кyiv: PanTot (in Ukr.).
- Turylo, A. M., & Nusinova, Ya. V. (2007). Modern approach to the activity effectiveness evaluation considering the corporate management special aspects. Ekonomika: problemy teorii ta praktyky (Economics: Problems of Theory and Practice), 2(228), 412-423 (in Ukr.).
- The Verkhovna Rada of Ukraine (2008). On Joint Stock Companies (Law of Ukraine).
Retrieved from http://zakon.nau.ua (in Ukr.).
- Zhovna, О. М. (2010). Economic results evaluation of mining and beneficiation companies’ activity considering costs saving (Thesis of dis. to obtain the degree of PhD). Kryvyi Rih, Ukraine (in Ukr.).