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The Analysis of Firm Financial Decisions at Different Stages of Life Cycle

Student: Ekaterina Lunina

Supervisor: Irina Khvostova

Faculty: Faculty of Economics

Educational Programme: Economics (Bachelor)

Year of Graduation: 2018

Companies’ financial decisions are the key issues of the company's financial policy. The choice of a competent financial solution allows companies to conduct his business in the most efficient manner. One of the new directions that determine the company's financial decisions is the life-cycle theory. Life cycle models allow to generalize the development process of most companies and track some features of enterprise development at each stage of the life cycle. As a result, companies can succeed in making decisions about capital structure and dividends, combining the tools that ensure achievement of financial goals. This work is devoted to the analysis of two main financial decisions of the company-capital structures and dividend policy. Based on panel data for the period 2008-2016, financial decisions of Russian companies at different stages of the life cycle were analyzed. The results of the analysis showed that the choice of a financial solution depends on the level of the company's development. At the stage of growth, the company cannot combine long-term financing and payment of dividends, as it is not able to generate the required amount of cash flow. At the maturity stages, the company attracts more borrowed funds and at the same time pays dividends to shareholders at the expense of earned profits. At the stage of decline, the company again loses its ability to combine the payment of dividends and a high financial leverage.

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