The Problem of Thin Capitalization for Financial Security of an Enterprise

Abstract:

The functioning of an enterprise, its essence and, above all, the purpose for which it was established (the profit of its owners) means that in each period of its functioning it is forced to search for sources of financing for its activities. The ba-sic source of financing for any enterprise should be money generated by the enterprise itself. Business entities strive for the largest possible retention of capital in their hands apply tax optimization measures, including thin capitalization. The existing restrictions on thin capitalization introduce a mechanism to limit debt financing costs included in tax costs. This article cha-racterizes the mechanism of insufficient capitalization and the changes that have taken place in it. The purpose of this article is an attempt to assess the importance of this mechanism for the financial security of the enterprise.