What is the Concept of Self-Financing?

BUSINESS TURKMENISTAN
What is the Concept of Self-Financing?
Self-financing is often understood as financing the activities of an enterprise using only the company's own funds.

Self-financing is a system of management of an enterprise, in a centralized economy, based on self-financing and self-governing principles. This method assumes an even distribution of a part of the profit in favor of the public – employees of the enterprise, as well as independent control and financing within the framework of centralized (that is, the government) set prices.

According to the economist Mark Harrison, a centralized economy is an economic system in which material resources are state or public property and are centrally allocated, which obliges individuals and businesses to act in accordance with a centralized economic plan.

Basic principles of self-financing:

  • economic independence of enterprises (self-sufficiency, self-government);
  • the material interest of their teams and each individual employee in the results of their economic activities;
  • material responsibility for these results;
  • money management.

Self-sufficiency is the principle of doing business, which implies full reimbursement of all costs of the production of goods, works and services with proceeds from their sale.

As noted in the book "New Economic Policy" of V. Voloshina and A. Bykova, self-financing is an economic term that characterizes the ability and the need to independently decide on the sources of providing funds for simple and expanded reproduction of an enterprise. Self-financing is often understood as financing the activities of an enterprise using only the company's own funds (amortization and profit).