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On the Identification of Financial Instruments in the Aspect of Indicators of Financialization of the Economic Life of Economic Entities

  • O. ZhitlukhinaEmail author
  • E. Kiselevskaia
Conference paper
Part of the Smart Innovation, Systems and Technologies book series (SIST, volume 138)

Abstract

The study is to show the problem of financialization of the economic entities as a result of development of the financial sector of economy, basing on using of financial instruments (FI) that have a “virtual” form. This includes financial instruments hold for trade and financial derivatives (PFI) that complicate financial relations based on financial speculation and divorced from the real sector of the economy into a parallel plane filled with abstract categories. Under these conditions entities use FI to generate additional income, which adversely affects the development of the real economy, both in general and at the level of the business unit (the entity). Therefore there are suggestions to classify FI and PFI according to their type, value measurement and their cash flow to assess their impact on financialization in the article. This allows to correct the financial items of the Statement of Financial Position by eliminating “non-financial” items related to cash flow and financial income reflected in the statement of Income Statement by excluding items that are not secured by cash flows (similar to the EBITDA analytical indicator). It also gives the opportunity to distinguish items directly influencing the processes of financialization, which include, first of all, FI that are revalued at fair value through profit and loss. Moreover, there are recommendations in the article about modification of the information base for financial analysis of entities and supplementing it with ratios that take into account the evaluation factor of financialization.

Keywords

Financialization Financial instruments Derivative financial instruments Financial income Fair value 

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Copyright information

© Springer Nature Switzerland AG 2020

Authors and Affiliations

  1. 1.Far Eastern Federal UniversityVladivostokRussia

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