Financial Management of Construction Companies

Abstract

The objective of financial management of construction companies is to generate profit and provide financial stability. Financial stability is provided by managing the amount of both fixed and current assets, the amount of equity and external capital. Therefore, in order to reach the objective of financial management, it is necessary to comply with the basic financial rules. In the framework of nationwide analyses of economic indicators for different industries, there is data published on the website of the Ministry of Industry and Trade, which, however, apply to all construction companies. For this reason, the authors of the article focused on individual subcategories of construction companies (small, medium and large), which are defined by turnover, assets and number of employees. The research studied whether these subcategories fulfil all or part of the basic financial rules, including the following rules: golden rule of risk equalization: the ratio of own and external resources should be in the ratio of 1:1, golden balance rule: fixed assets should be covered by long-term resources; golden "pari" rule: fixed assets should be covered by equity. The research also monitored the structure of assets, i.e. the ratio between fixed and current assets and was based on elementary methods of financial analysis (vertical and horizontal methods). The outputs of the paper will be further used for the next step of the research, which will focus on tax optimization of individual categories of construction companies in relation to financial management of fixed assets.

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