National
University of "Kyiv-Mohyla Academy"
, Ukraine
A Comprehensive Approach to Assessing the Financial Condition of the
Enterprise
Researching financial
conditions of enterprises and improving techniques of financial assessment are very important with market conditions.
It is so largely due to the fact that stable financial situation of individual
economic agents is a prerequisite for the welfare of workers of enterprises,
the timely and full implementation of the budget, stability of the economy as a
whole. A financial condition of the enterprise is characterized by a set of
indicators of evaluation. Based on results of evaluation of the financial state
of a certain enterprise, stakeholders may evaluate past, current and
prospective state of the business, and prepare effective management decisions
in all areas of its activities.
Relevance of the topic. Increased
flexibility and pace of control in the enterprise in a modern economy can be
achieved through the use of mathematical models and tools, which can be used
for optimization of the process of preparation of management decisions.
Adoption of quality management decisions is based primarily on the overall
financial evaluation of the enterprise.
Existing methods of financial analysis
do not fully take into account existence of all possible relationships, which
are present in the system of financial indicators. Additionally, they cannot
evaluate impact of the relationships on each other.
Research in the field of complex
financial analysis carried out by Ukrainian scientists Andrushchak E. M. ,
Znahurenko P. A., Kostyrko L. A., Kostyrko R. A., Hotomlyanskyy A. L. and
others, as well as foreign researchers Barnholts S. , Bakanov M. , Balabanov
I., Brigham J., Van Horn Jun. C, Kovalev A. I., Kovalev V. V., Malych V. A.
Nyedosyekin A. A. and Sheremet A. D.
Purpose of this work is to review
existing methodologies of evaluating financial situations of enterprises.
The object of the study is
methodological and methodical aspects of assessing financial conditions of
enterprise.
Unbiased and full evaluation of
stability of the financial situation of the company can be achieved only after
a sufficiently comprehensive analysis of the set of indicators, because none of
them taken separately are capable of providing a complete picture of the
financial position of the enterprise. It is important to compare information
gathered during a constant period of time during analysis of data taken during
a few years. Comprehensive assessment of economic activity is its
characteristic, which is gathered as a result of comprehensive research (i. e.
coordinated study of indicators that reflect all or most aspects of business
processes performed simultaneously on all levels), it contains generalized
conclusions about the performance of the production facility based on the
detection of qualitative and quantitative differences to data that is used for
comparison.
A comprehensive approach to financial
analysis of the company is based on the unity of static and dynamic approaches.
A static approach involves determining the actual financial condition. Based on
a static approach a rapid analysis of strategic positions and a current and
retrospective analysis of a financial condition and of a form of its
organizational and analytical provision. The dynamic approach shows in the
study of dynamics of financial situation and justification of target vectors of
strategies of sustainable development.
The backbone element of financial
analysis is an objective of the analysis.
Efficiency of a model used in complex financial analysis and reliability
of results of the research depend on how well defined the goal is. In addition,
the validity of the adoption or rejection of administrative decisions about
positioning on the economic environment depends on results obtained from a
comprehensive financial analysis of the company in question.
The main objective of financial
analysis is receiving the most informative parameters that give a comprehensive
and objective description of trends in the current financial situation and
evaluating future potential of sustainable development.
A set of specific procedures connected
together into a logical sequence is called the method of analysis. The main
analytical procedures are [2, p.5 7]:
1. comparison
of an actual performance of financial statements to targeted values in certain
enterprises;
2. comparing
actual performance with projections, certain analysts;
3. researching
results in dynamics;
4. calculation
of relative ratios of the current period and analysis of the dynamics;
5. comparison
with averaged data from the sector of the company;
6. comparison
with non-accounting data (data not included in financial statements).
At the commencement of the
comprehensive analysis of financial situation a shorter analysis is performed.
Results of this analysis are used to prioritize financial analysis.
The procedure of complex benchmarking
can be divided into the following relatively independent stages [1, p.143]:
1. specification
of goals and objectives of a comprehensive evaluation;
2. choosing
of a final set of parameters;
3. organizing
a process of collecting background information;
4. calculation
and estimation of values of individual parameters (places, score estimates,
coefficients for output parameters, etc.);
5. ensuring
comparability of estimated parameters (choosing coefficients of determination
of relative importance);
6. selection
of a specific method, i.e. development of algorithms and programs for
calculation of complex comparative estimates;
7. synthesis
of individual ratings for the final and complex evaluations of its activities;
8. research
of results in dynamics;
9. analysis
and use of complex comparative evaluations.
Note that currently there is no
generally accepted method of universal comprehensive assessment of the
enterprise. Each method is created for a specific situation and is only
effective in solving a specific range of administrative tasks. Obviously, a set
of indicators characterizing activities of a bank would be quite different from
a list of indicators used for manufacturing businesses or nonprofit
organizations. Thus, the current trend is to create models of complex
evaluation of financial situation specialized for particular industries or industry sub-sector, certain firms. They
usually have similar characteristics, a structure of assets, business processes
that makes the method more standardized and improves representation.
Depending on the purpose of analysis
the analyst may use one or another method. However, based on the analysis of
the principles and mechanisms of used in real life methods that have gained
popularity in recent years, researchers were able to conclude that, in fact,
all methods can be divided into five types:
1. The
rating method (it is a modification of the method of coefficients and the
method of distances);
2. The
method of scoring (it is a modification of the method of amounts and method of
the amount of seats);
3. The
method of the dynamic norm;
4. The
method of principal components.
5. The
method of assessment of integrated indicators (modification of the method of
coefficients)
Thus, an integrated approach to
assessing the financial condition of the enterprise is based on building a
system of indicators characterizing all important aspects of the business that
exist in certain relationships with each other and give necessary and
sufficient information for making management decisions. None of the methods is
completely formalized since all methods include subjective elements: weight
coefficients, scoring information, normative values of indicators, the order of
priority of factors. These elements are sensitive to market conditions,
characteristics of legislation phases, features of the economic cycle, industry
characteristics, their validity depends on the qualification of experts.
Determination of weighting coefficients is quite subjective since it is
conducted using both regression and correlation methods, as well as methods of
peer expert reviews. Development of
methods of comprehensive financial analysis separately for each sector
is advisable. Thus the relevance and validity of assessments increases
dramatically. Currently in Ukraine methods of comprehensive evaluation of
financial situation are not sufficiently developed, information and statistical
base for elaboration of national and sectoral methods is inadequate.
Literature:
1.
A. Bakanov M. I., Sheremet A. D.
Theory of economic analysis: Textbook. for students keeper. special. - 4th ed.,
Ext. and rev. - Moscow: Finance and Statistics, 2001. - 288 p.
2.
Hotomlyanskyy O. L.,
Znahurenko P. A. Comprehensive Assessment of
financial situation / / Finance of Ukraine 2007. - ¹ 1. - P.56-60.