Bìznes Inform (May 2023)
A Methodical Instrumentarium for Analyzing the Financial Sustainability of Enterprise
Abstract
The article considers the issue of role of analysis of financial sustainability of enterprise in ensuring its current activity. The article is aimed at generalizing the methodical instruments of financial analysis of enterprise sustainability. The calculation of indicators will enable business executives to determine the degree of dependence of the enterprise on creditors and investors, as well as the level of its financial situation. The article generalizes the theoretical provisions on application of different approaches/methods of analysis/assessment of financial sustainability of organization. It is found that three basic approaches can be used to analyze financial sustainability: traditional, resource, and resource management. Methods involve the calculation of absolute indicators and coefficients. Absolute indicators allow you to determine the type of financial sustainability in terms of opportunities for financing stocks and assets of an enterprise through various sources. Depending on the availability of sources of funding, the following types of financial sustainability can be distinguished: absolute financial sustainability; normal financial sustainability; unstable financial position; crisis financial condition. Coefficients are a useful instrument for summarizing a huge amount of information and are convenient for making intra-company comparisons. The coefficients used in the analysis of financial sustainability are related to: capital structure, financial risk of loss of independence, and growth rate. The coefficient analysis of financial sustainability involves the calculation of a system of indicators, the main of which are the following: concentration coefficient of equity (indicates the financial independence of the enterprise from external creditors); debt concentration coefficient (indicates the dependence of the enterprise on loan capital); financial sustainability coefficient (shows the share of stable liabilities of the enterprise, that is, the share of equity, non-current assets and long-term liabilities in total assets); financial leverage coefficient (shows the dominant type of capital in the total capital of the enterprise). Indicators have normative values. Their calculation is identical both in domestic and in international theory and practice. The calculation of financial leverage involves the use of two conceptions: the European and the American. According to the European conception, financial leverage shows how many percent can increase the return on equity due to debt as a source of investment. According to the American conception, financial leverage is calculated as the coefficient between the growth rate of net profit and the growth rate of operating profit.
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