Life Cycle of a Company and Impact on Financial Structure Choice

Abstract

Purpose of the article: Companies during their existence pass through the phases of their life cycle. Every phase is among others characterized by different availability of financial sources and this fact will significantly influence the financial structure of a company. Previous researches were aimed mostly on availability and usability of external financial sources during the life cycle of a company. The financial structure in context of the life cycle of a company was so far most researched by Marc Reiners. This author viewed the financial structure only in accordance with the legal status of the investors and he did´nt consider other important criterions like origin, usable life and bribability of financial sources. According to all these criterions is the financial structure in context of the life cycle of a company considered in this article. Scientific aim: The companies are classified into three groups into companies that are in phases of growth, stabilisation and decline. The financial structure is separately within these groups under review. Financial sources are divided always according to the criterion, which is selected to consider the financial structure. Methodology/methods: To implementing the research is used the method of analysing the secondary data that are extracted from the financial reports of surveyed firms. Phases of the life cycle of a company are identified on the basis of the growth indicator, developed by Marc Reiners. All the selected companies are from the Czech automotive industry, they are small or middle, and they have some history, because for companies in the phase of foundation isn´t this growth indicator usable. Findings: In the financial structure of all selected companies, regardless of the phase of their life cycle, dominate long-dated and bribable financial sources. The companies in phase of stabilisation are at least indebted and have the highest share of internal sources. Conclusions: (limits, implications etc) It can be said, that the fact, that especially companies in phase of stabilisation have most available external sources and they can most indebt, wasn´t approved oneself on financial structure of these companies. The limitation of this finding is that only few companies are in the phase of stabilisation according to the used growth indicator.