Internal financing as self-financing

Die Finanzierung durch Mittel, die aus dem Unternehmen selbst stammen, lässt sich unterscheiden in offene und verdeckte Selbstfinanzierung:
the offene Selbstfinanzierung takes place through the non-distribution of reported profits. In the case of partnerships and sole proprietorships, this is done by adding profit shares to the capital accounts.

In corporations, open self-financing takes place through the formation of reserves. These are either prescribed by law until a minimum percentage of the subscribed capital is reached, or they are determined by the articles of association or set by the management body and the decision-making bodies (free reserves). In any case, there is an open disclosure in the balance sheet of the company.
The hidden self-financing mainly results from the formation of hidden reserves in the company's balance sheet. Asset items are undervalued (e.g. due to possible tax depreciation) or liability items are overvalued (e.g. due to excessive provisions). In any case, this valuation prevents excessive profit from being shown, which could normally be taxed or distributed.

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