First, the comparative advantage of current liabilities
1. Can reduce debt costs and maximize the value of services for enterprises. Enterprise value maximization goals to a large extent by the level of corporate profits, while the cost of debt is a direct impact on corporate profits is one important factor. On the one hand, due to the uncertainty caused by asymmetric information and other reasons, the cost of current liabilities to be less than the long-term liabilities. Liabilities include the cost of acquisition and cost of ownership. The dividend payable and accounts payable for the cost of acquisition and possession of the basic zero. For short-term borrowings and long-term loans is that the former cost of removing the first and the latter made little difference, the subsequent appropriation of the cost of due process reasons, can be ignored, that the two almost equal the cost of obtaining; But the short-term interest on the loans is lower than the long-term borrowings, which occupies the former cost is lower than the latter. On the other hand, according to the requirements of accounting standards, long-term debt for fixed assets, research and development and so on, the cost of debt to capitalization, and as time goes by a certain percentage of amortization. The current liabilities for this area of investment, its costs can be charged directly to costs, reducing the current period taxes and fees, delayed tax time and help enterprises to long-term business, consistent with the long-term goal of maximizing corporate value.
2. Can reduce the creditor control. Relative to current liabilities, as banks and other creditors to provide long-term long-term loans, high risk, therefore, in order to avoid risks, in addition to the basic guarantee of the loan contract terms, the banks and other creditors in the loan contract will usually attach a variety of protection clauses to ensure that enterprises can repay the loan in full and on time. Provisions in the protection of not only the use of funds of enterprises, the investment direction of capital flows to certain restrictions, and in some cases, the operation of enterprises will intervene, especially for high-risk and high return projects, in order to prevent corporate shareholders, abuse of power, passed the crisis, the creditor to make the investment behavior of enterprises restrictions to prevent the company took the opportunity to transfer assets, damage to the interests of creditors, banks and other creditors of its attitude toward the strategic policies are in conflict with the business, is not conducive to business operators their own decisions. Current liabilities is not, except in special circumstances, the creditors have no right to intervene in the operation of enterprises, operating in full control of the autonomy of corporate hands.
3. Can increase the capacity of the company once again for debt. This is mainly from the credit considerations. Many Western banks are now assessing the repayment capacity of enterprises, it is important that business credit points, that is, before the loan business credit. For enterprises, in order to achieve the purpose of long-term use of short-term liabilities, in need of a certain frequency of repeat borrowing, which will increase the objective of the credit points will help the company further debt financing.
4. Risk, consistent with sound principles. Enterprise risk include business risk and financial risk. Operational risks, the main reason that because of information asymmetry, corporate investment in the face of uncertainty of risk, as long-term liabilities to determine interest rate and term, long-term investment in the business process, if errors found in investment projects, investment in the abandoned , it will increase the debt part of the cost of ownership; and current liabilities is different, dividend payable and accounts payable as low cost, short-term borrowing of short-term, making enterprises the possibility of greatly increased risk aversion. For the financial risk, as long-term borrowing rate of the pre-determined, when the market capital of the lending relationship changes, may reduce or increase the liability cost of ownership.
5. Conducive to the balance of cash flow and make full use of funds. On the one hand, accounts payable and dividend payable out of the presence of time delay makes the funds will help the company make full use of the funds. On the other hand, the regular payment of short-term debt makes the company's cash inflows and outflows, it is easier to achieve a balance of funds arrangement for the company easier. The long-term liabilities is a point brought a lot of money on the inflow and outflow. Obtain loans, a large number of instantaneous flow of funds, the company it's hard to be fully utilized, it will inevitably cause some of the idle funds; repay loans, on the one hand, because a lot of money to be prepared, the pressure could easily lead to financial constraints, On the other hand, due to reserve certain amount of capital required on a regular basis, resulting in temporarily idle funds, affecting its value.
Second, negative effects of current liabilities
1. As the cost of short-term liabilities can not be capitalized, for company financial statements of listed companies in particular, the "spectator" to a certain extent. Small shareholders concerned about the short-term investment interests (as reflected in current operating profit on business), the enterprise is concerned about the little long-term business, which could result in a decline in the stock market, reduce capital gains brought the stock down.
2. There is a large number of accounts payable is likely to affect corporate reputation. In accordance with international practice, accounts payable for a maximum period of three months, which limited the company's part of the liquidity of the application deadline. In particular, some important business partner, supplier because of money problems are not sold in time to bring the company's operating loss.
3. To increase the company's financial difficulties. Because of the frequent short-term liabilities, need to finance the cost of their regular staff calculation and management personnel for greater financial, accounting and management of increased workload, thereby increasing costs.
4. There is a large number of dividend payable may shake the confidence of the shareholders of the company. This will lead to dissatisfaction with the major shareholder, minority shareholders, "the stock with their feet", making the company's stock price fell, with the objective of the company.
Third, the choice of practical applications
Long-term use of current liabilities of the company has the following basic requirements:
1. The company's money is working well. First of all, to achieve the financial aspects of computerization, it is a financial information data acquisition and transmission speed requirements; second, demands high-quality financial personnel, to quickly and correctly calculate the costs and benefits of various liabilities, reasonable choice of long-term, means short-term liabilities.
2.'s Reputation. The company's liabilities for a variety of methods have great freedom to choose, can more easily use a variety of debt means that there is no additional non-economic costs.