Financial analysis and credit solvency evaluation of a selected enterprise case study of a company 'Aleva Novi Kneževac'

Abstract

There is a large number of developed methods and indicators of financial analysis i.e. analysis of financial reports. Therefore, it was useful to develop a basic template indicator, that would include all the indicators together and that would have the same meaning for all of its users. However, the requirements of users of financial information determine the level and form of desired information. Today, the favorable characteristics of a company are primarily seen as its solvency. Solvency represents the degree of certainty in making predictions related to its survival and development, as well as a review of its quantitative and qualitative skills, primarily yielding abilities, but also material and financial capacities. Solvency, in the narrow sense of a word, represents a company's credit ability, and the ability to maintain current liquidity, while in the broader sense it represents a company's overall market position. In practice, there are two models of credit solvency evaluation: the traditional model of credit solvency evaluation, and the Altman's 'Z'-model (score). Since these two models differ, in this paper we performed credit solvency evaluation in the case of a joint stock company called 'Aleva' from Novi Kneževac, with the aim of comparing the results of credit solvency evaluation with the company's reliability.

Keywords

• financial reports analysis
• liquidity
• credit solvency evaluation
• Altman's 'Z'-score
• traditional model