KNOWLEDGE ABOUT FINANCIAL STABILITY IN THE CONTEXT OF THE ENTERPRISE’S FINANCIAL EQUILIBRIUM
Journal Title: Knowledge International Journal - Year 2018, Vol 26, Issue 1
Abstract
The issue of enterprise’s financial stability remains topical at all phases and stages of its development. Attaining and maintaining financial stability is a prerequisite for the establishment of enterprise’s financial equilibrium and for successful development of its business under the conditions of market competition both in operational and in strategic aspect. Financial stability reflects important and crucial economic links that objectively exist and are manifested in the course of operation of any enterprise. These links are described by means of the respective parameters that vary continuously under the effect of the economic operations and the economic processes performed by the enterprise. Therefore, the financial stability of the enterprise may be analyzed and assessed based on its financial statement data. Knowledge about the financial stability of the enterprise is useful both for the internal and external users of the information in the enterprise’s financial statements. This knowledge is of specific importance for the financial management, and for the management of any enterprise in general, in order to make proper and justified decisions for the structure of equity, for financing the acquisition of the resources necessary for the normal course of the operations, for the generation of positive cash flows and their allocation in time, for attaining positive financial performance for as many subsequent reporting periods as possible, for establishment of positive image of the enterprise on the competitive market. This knowledge is also useful for the external users of information in the financial statements with view of the performance of business relations with the enterprise. The objective of this publication is to clarify the nature of the financial stability of an enterprise and on this base to established a system of indicators for its analysis and assessment. In order to attain this objective, the publication highlights specific tasks to be solved. It underlines that the financial stability is an important economic category by stating a number of objective facts to this effect. Financial stability is defined as an element of the system for financial equilibrium or disequilibrium of an enterprise, respectively. The system of absolute and relative indicators for analysis and assessment of the level of financial stability of the enterprise is determined. Based on these indicators we establish the respective conditions that give objective possibility for analysis and assessment by defining the different levels of financial stability. We propose a complex methodology for analysis and assessment of the financial stability or instability of the enterprise, respectively. This publication makes a review of the specialized references tackling the issue of financial stability of the enterprise. Based on them the author makes her opinion about the nature of the financial stability and about the analysis methodology represented by the positions of the systematic and complex approaches.
Authors and Affiliations
Rositsa Ivanova
Keywords
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