Explain self-financing and mention advantages and disadvantages?

Known as a self-financing: 

The possibility of the institution to finance itself through its activity, and this process does not take place only after obtaining the result of the session, this result is added to two important elements are considered a resource internally to the institution and two Depreciation and Provisions. The amount of net result obtained at the end of the financial cycle and which is a elements of the net cash flow is not a final or at the disposal of the institution's final they will be distributed to the partners, but this Valmkdar which the organization can act which actually after the end of the course consists of the value of the net result of non-distributed, in addition to depreciation and provisioning, permission this value reflects the ability of the institution to finance itself Bnevsha.altdfq net cash profit = + reserves + allocations Depreciation + provisions Almúnat.kdrh self-financing = net result before distribution of profits + depreciation allowances + provisions nature reserves = self-financing capacity of self-financing - dividends 

Self-funding sources: represented in retained earnings - Depreciation - Provisions. 

1 - Retained earnings: These are the portion of the distributable surplus achieved Acharkhmn exercise activity (during the current year or previous years) and did not pay in the form of dividends and that is shown in the balance sheet of the company within the elements of property rights, rather than the distribution of all surplus to shareholders, the Company may allocate part of that surplus in several separate accounts dubbed the "reserves" for the purpose of achieving a specific goal, such as a reserve to repay the loans, or the renewal and replacement of machinery ... the elements retained earnings Fbma follows: 

1-legal provision: a minimum reserve that must be configured from the company (set by law and5% of the net profit that does not exceed10% of the company's capital) and is used to cover the company's losses and an increase in capital. 

2-statutory reserve: This reserve is configured in accordance with the Statute of the company, where the latter is required and should be allocated a certain percentage of annual profits for certain purposes, which is not compulsory. 

3 other precautions: the Companies Act provides that the General Assembly may, after determining the share of net profits in the stock, that you configure other precautions, and to the extent that the company achieves time boom. Or guaranteed fixed dividend to shareholders to the extent possible0.4-profit stage: and we mean the amount remaining after the distribution of annual profits, which the Board of Directors proposes to deport him to the next year, and this surplus is used as a reserve to counter any drop in profits in the coming years, which may lead to the inability of the company to conduct an appropriate dividend to shareholders. 

2 - amortization: 

Defines depreciation as a way to renew investments, that the goal of any of the expense Depreciation is to ensure the renewal of its investments at the end of their useful life, also known as the Date of the accounting loss exposed to investments that deteriorate with time value in order to show in the budget at their net. And plays a depreciation in the enterprise economic role is in the amortization of successive investments, and role financially is in the process of reconfiguring the money invested in fixed assets in order to re-strip at the end of productive life, where they are booked annual amounts, so it remains at the disposal of the institution financing the self-to-day disbursement0.3 -almúnat: know rations as a result of the decline in the financial cycle and customized to meet the burden of potential losses and falling or getting firm. As you know, as a decline in the value of Ir ordinary assets and the institution that seeks to avoid the drop. 

Advantages and disadvantages of self-financing: 

1 Advantages: - self-financing is essential to the operations of borrowing, where it is known that the institution to resort to borrowing to pay according to their means and the size of the self-financing ratio, which shows her Altsudaid.- search for self-financing at a high level is a primary objective for fiscal policy, a guide on independence Ocean Foundation in which it operates. 

-tmthel Depreciation funds the bulk of internal funding, which represents the funds are exempt from tax. 

2 Disadvantages: - the size of the self-financing is usually not enough to cover all the needs of the funding .- may rely on internal financing entirely dependent to a simple expansion, and therefore not to take advantage of opportunities and lucrative because of the lack of internal funding to provide the necessary financial needs may not .- care management study areas use the money saved to the institution, such as those obtained from a third party, which leads to weakening of return

Thanks for the invitation..I agree with you.

Self-financing is defined as flows of funds derived from the operations of the institution (except for external financing) and repurpose Pluses: - Providing financial independence of the institution, also avoids bear the burdens of contractual, and all this by not relying on debt as a source of funding; - Gives a good picture of the institution before the financial intermediaries, it can open the area to borrow money as a source of financing, and this is because of self-financing provides the ability to respond to various financial risks if not completely excluded; - Is one of the most important sources of financing for small and medium enterprises because the latter of difficulties in obtaining funds from external sources Cons: - Can lead to a lack of interest by shareholders institution due to lower dividends;   - Is usually self-financing inadequate to fund the various needs of the organization, leading to slower growth of the organization process, due to lack of exploitation of various lucrative investment opportunities, but could result in investments of weak profitability due to being a source of funding is expensive.