key to the success of any company is its financial stability, which allows her to not only cope with the possibility of reducing the economic and operating performance as a result of the deteriorating economic situation in the country, but also to their further development and expansion at the expense of investment income in the total capital of the company.Analysis of financial stability in this respect, allowing to reflect all the economic indicators of the company, as well as by rational management of labor, financial and material resources to create such a balance, in which revenues exceed expenditures in a few times.As a result of this will be made a steady inflow of funds, which will allow the company to provide both current and long-term solvency.In addition, this situation will also allow most fully meet the expectations of the owners of the investment.
In carrying out the analysis, it is important to determine the rationality of the existing ratio of debt and equity, because each type of financing has its advantages and disadvantages, which should be carefully considered.So, financial stability analysis considers two types of financing: at their own expense and at the expense of borrowed capital.
- financed by private profit and the existing capital of the enterprise.It can be implemented both through the reinvestment of profits, and by increasing the equity of the company (issue of securities, stocks, bonds, and so on).It is important to determine how much profit the company can invest in its development, without impairing their economic situation.
- financing from external sources, such as banks, investors, sponsors and so on.It should immediately determine the conditions under which will ensure the financial stability of the company and to assess the existing structure of liabilities.The main thing to remember that the borrowed funds involve not just return them, but also the payment of a certain percentage, which increases the risk of insolvency of the owner.That's why before making a decision on funding must be very careful to analyze the financial stability of the organization and to identify all possible risks.
Thus, in both types of financing has its own advantages and disadvantages.It is noteworthy that the investment company's own funds of the standards of its profits may not always be rational, because the owner did not expect a refund, but the stable income from investments, that is dividends from investments.In this respect, the part of financial institutions (banks, credit unions) could be more attractive, since the claim only to return on investment, with interest.Therefore, all future profits will go exclusively to the shareholders of the company.
In addition, the analysis of financial stability allows for a more stable cash flow planning, as well as shift the break-even point of the enterprise toward greater reliability.It should also be borne in mind that a small business that has a large share of borrowings is much less room for maneuver in the event of unforeseen difficulties (the fall in demand for goods, increased costs, the seasonal decline in sales, etc.).
competent to implement such an analysis should be aware of the main indicators of this process, as a competent analysis of financial soundness indicators allows to adjust the overall strategy of the company to achieve the most effective results.So, to the main indices that characterize the capital structure include the following:
- the coefficient of financial stability;
- the coefficient of independence;
- coefficient depending on the debt capital (long-term);
- rate financing.
to analyze financial stability when using the above factors, the company will be able to qualitatively identify all existing risks, and increase profitability.Currently, in determining the assets and liabilities of the enterprise analysis of economic stability it plays a very important role in helping management to correctly identify the goals and objectives of both short and long-term planning.
