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liability owners equity, self financing is owners equity
The capacity for self-financing, or cash flow is the accounting activities, indicating its capacity for self-financing (funding growth, paying back debts and paying its shareholders through their own capital.
Definition: Firm or Project that generates its growth capital from its own income, instead of acquiring it from external sources such as investors or lenders..
Self-Financing Capacity is one of the indicator to use the asses of business capacity. It covers the firm ability to generate the resources of financing activity. These resources are required to provide the company's contribution to cover the investment expenses. determine the self-financing capacity, the formula use: Self-financing capacity = Net profit + Depreciation, amortizations and provisions.
Self-financing process requires firstly that, in order to develop an activity, the economic entity makes a series of expenses, and secondly, it obtains receipts from the sales executed simultaneously and from financial incomes (interest, equity, income liquidation of assets, etc.). Costs refer to current tasks of the operation (raw materials, wages, taxes, etc.), as well as financial expenses and exceptional expenses. The difference between revenue and expenses (excluding depreciation) will acquire different destinations (corporation tax, dividends, workers participation to profits). The remaining part will be assigned to the company, i.e. the depreciation and the reserves fund will be created.
