Financial Strategy in the Context of Company’s Lifecycle

  • H. О. Аlеksіn Institute for Economics and Forecasting of the NAS of Ukraine
Keywords: lifecycle, capital structure, financing sources, dividend policy, financial strategy, information asymmetry

Abstract

The problem of strategic management’s quality improvement, in particular financial strategy’s formation and implementation, becomes increasingly important in times of recession. A major task is to take into consideration the lifecycle theory’s impact on implementation of financial strategy tasks, especially in the context of decisions on capital structure formation, financing of operation and marketing costs at company level.

The aim of the study is to define the role of the lifecycle concept in the financial strategy at company level.

Analysis of financial indicators of PJSC “Obolon” for 2011–2015 is performed in the context of the lifecycle theory and its impact on the company business performance and financial health. Analysis of the cash flow in PJSC “Obolon” for 2011–2015 shows dangerous tendencies in the company’s financial health and its gradual slide to the decline phase on the lifecycle curve. These trends reveal as the negative cash flows from financing and investing activities in parallel with the declining cash flow from operating activities, the worsening net financial result, the worsening quality of loan capital, and the reduced share of equity in the capital structure.

Numerous studies demonstrate the importance of the lifecycle theory for strategic management tasks at company level, financial strategy implementation in particular. A lifecycle phase is a factor of significant impact on the financial management decisions relating to raising funds, investment and net profit distribution. As a result of analysis of the financial performance of PJSC “Obolon” for 2011–2015, performed in the context of the lifecycle theory, the conclusion is made that in order to overcome the crisis, the company needs to implement a number of anti-crisis measures: stabilize the cash flows, restructure the bank loans, reduce the proportion of short-term loans in the debt financing. Measures relating to the company’s operation are also necessary: increase the sales proceeds, improve the net profit margin through optimizing operation and increasing the share of high-margin products in the company’s portfolio.

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Published
2017-09-20
How to Cite
АlеksіnH. О. (2017). Financial Strategy in the Context of Company’s Lifecycle. Scientific Bulletin of the National Academy of Statistics, Accounting and Audit, (4), 66-73. Retrieved from https://nasoa-journal.com.ua/index.php/journal/article/view/9