Analysis of financial sustainabilityFinancial stability of the enterprise is a very important characteristic that allows to evaluate the success of the enterprise's production and economic activities, it is its financial independence and the conformity of the assets and liabilities of the company with the tasks of financial and economic activity.
An important indicator that characterizes the financial condition of an enterprise and its stability is the availability of material working capital by its own sources of financing. That is, to ensure financial stability, it is necessary that after covering non-current assets, the constant capital of its own sources and long-term liabilities should be sufficient to cover the reserves, and cash, short-term financial investments and active settlements should be sufficient to cover the organization's short-term debts. To ensure financial stability, an enterprise must have a flexible capital structure, be able to organize its movement in such a way as to ensure solvency and create conditions for self-financing. The financial condition of the enterprise, its stability and stability depend on the results of its production, commercial and financial activities.
Why is financial stability analysis necessary?Financial stability is the most important characteristic of the financial and economic activity of an enterprise in a market economy. If the enterprise is financially stable, then it has an advantage over other enterprises of the same profile and attraction of investments, in obtaining loans, in choosing suppliers and in selecting qualified personnel. Finally, it does not conflict with the state and society, because it pays taxes in time to the budget, contributions to social funds, wages to workers and employees, dividends to shareholders, and banks guarantee repayment of loans and interest payments on them. The definition of the boundaries of financial stability of enterprises is one of the most important problems in a market economy. Insufficient financial stability can lead to insolvency of organizations, to a lack of funds to finance current or investment activity, to bankruptcy, and excessive - will impede development, resulting in the emergence of surplus reserves and reserves, increasing the time of capital turnover, reducing profits. The financial analysis allows to substantiate the parameters of such stability. However, such an analysis not only provides an opportunity to judge the situation of the enterprise at the moment, but also serves as a basis, necessary prerequisite for the development of strategic decisions that determine the prospects for the development of the firm.
The main objective of the analysis of financial sustainability is to quickly identify shortcomings in the financial performance of the enterprise, and also to find reserves to improve the financial condition of the enterprise and increase its solvency.
The financial stability of an enterprise depends on several factors:
- Stability of the economic environment
- Functioning of the enterprise
- Business management efficiency