The effectiveness of indicators for assessing the financial stability of enterprises

Abstract

This study aims to present specific criteria for assessing corporate financial stability that influence key strategic decisions, and to examine their relationship with capital market returns, asset conditions, and market trends, as well as to conduct a comprehensive comparison of new models for assessing corporate financial performance.

Financial stability is generally underrepresented in both research and practice in the fields of stability management and reporting.

The actions proposed in the article are important because they are at the crossroads of overall stability management, risk management, and dependence on external sources. The research suggested in the article reduces financing and insolvency risks.

An importance of determining the overall financial stability properly lies in its ability to identify the degree and extent of a company’s dependence on external financing sources and to prevent the company from going bankrupt.

Key findings of the study include an analysis of financial stability indicators divided by period and by profit level, a comparison of common enterprise liquidity and solvency ratios, a comparison of equity-to-debt ratios, and an assessment of sufficiency and risk-return profiles. Specific features of assessing the effectiveness in evaluating the current and absolute liquidity of assets, as well as the company’s equity capital with and without depreciation of fixed assets, are reflected in determining the indicators considered by investors when selecting enterprises and in evaluating the effectiveness of new methods for assessing the volume of raised funds.

Recommendations for proper assessment of financial stability and maintaining liquidity within an enterprise will be aimed at stabilizing cash flow in the enterprise’s operations, improving financial reporting methods, and implementing sustainable financial strategic plans into the enterprise’s operations.

Keywords: corporate financial stability, ratio analysis, cash flow, financial indicators, dependence on external debt sources, EBIT, EBITDA