Anna D.
Kukharuk,
cand. of
econ. sciences, associate professor
of Department
of international economics,
Valentyna
L. Kyi,
assistant
of Department of international economics,
National
technical university of Ukraine "Kyiv polytechnic institute", Ukraine
EVALUATION of company’s
economic
sustainability: APPROACHES AND issues
One of the strategic objectives of
industrial enterprise is to form its own economic sustainability. This problem is particularly important in conditions of
instability, uncertainty, financial and political crisis.
According to [1], “given the importance of SMEs for
the world economy and the sector’s impact on social and environmental issues,
it might seem surprising that SMEs have been relatively marginalised in the
debate on sustainability and corporate social responsibility…”.
The analysis of scientific sources [2 - 4]
showed that for determining the level of economic sustainability of the enterprise there
are different
methods and various indicators may
be used
(integrated, complex etc.). In general we can identify five main approaches to such kind of assessment: system, structural, functional, resource based, and scenario.
The system
approach involves identifying subsystems
of
economic sustainability, evaluates their condition
and interdependence. That approach is prevailing
in the scientific literature. System approach is considered to be difficult
to implement because of large amount of
information that must be analyzed.
For structural approach, economic sustainability of the enterprise
is divided into components of specific rank
(importance), but the relationship is not studied thoroughly.
Such an approach is also common in the scientific literature, but it is easier
to implement because it does not involve the relationships and dependencies
search.
The functional
approach involves determining the ability of the company as an open system
to perform its functions under the conditions of the environment. That
approach separates the economic sustainability for the
components and suggests the possibility of evaluating each component
separately. That reflects the division of functions and
objectives of the company.
The resource based approach is to establish
the level of efficiency of all types of company’s
resources
under influence of negative external and internal
factors. The complexity of this approach is that it is often impossible to
determine “only of the use of
resources” effect. That leads to
inaccurate estimates.
For the scenario approach, the level of economic sustainability is determined
and predicted considering possible alternative conditions of the enterprise.
Recently it is difficult to work out reliable scenarios of development of the
company because of growing instability of the environment, and most of the
processes is impossible to predict.
The choice of approach depends on the
following:
- how do researchers
understand the essence of economic sustainability;
- what are the
sources of information available to researchers, and whether the data complete;
- is economic sustainability static or
dynamic?
- which
form
of evaluation result is convenient for users (figure,
ratio, scenario, equation etc.).
However, implementation of approaches to
the evaluation of economic sustainability is complicated by a number of
conditions as following.
1. Lack of information. One of the most
difficult problems is the lack of information or privacy. This primarily
relates to private enterprises. For example, system, structural and functional
approaches require processing large amounts of data, so lack of data makes assessment incomplete.
2. Inconsistencies
between periods. For the evaluation, researchers often use financial and
accounting reports as a source of information. Since the data in these
documents generated by analyzing the previous period, it
is
inexactly to evaluate the current economic sustainability by
this data. For example, economic sustainability in January 2016 is impractical
to evaluate on the basis of statements for 2015.
3. Universal
methods. Common approach to the evaluation of economic sustainability of industrial enterprise does not exist. But most of the available
methods are not able to provide adequate results of evaluation of specific
companies, which operate under conditions of a crisis. Methods
of evaluating businesses that operate in a crisis, and companies
that work in emerging markets are to be different.
Thus, in order to improve the process and
outcome of evaluation of economic sustainability of
industrial enterprises it is necessary to solve
the above problems and to develop a method of evaluation that allows to compare
different companies and takes into account the factor
of crisis.
References:
1. Embedding sustainability in SMEs [Electronic resource]. – The Association of Chartered Certified Accountants, 2012. – 11 pp. – Available from: http://www.accaglobal.com/content/dam/acca/global/PDF-technical/small-business/pol- tp-esis-v1.pdf.
2. Nakonechna Î. Methodological approaches to the evaluation of industrial enterprises’ economic sustainability / O. Nakonechna // Investments: practice and experience [Investytsiyi: praktyka ta dosvid]. – 2015. – ¹ 6. – Ñ. 47–53.
3. Karachyna N. Theoretical and methodological foundations for sdentifying and assessing the economic stability of enterprises [Electronic resource] / N. Karachyna, L. Soroka // Efficient economy [Efektyvna ekonomika]. – 2015. – ¹ 11. – Available from: http://www.economy.nayka.com.ua/pdf/11_2015/12.pdf.
4. Kobets S. Methodical approach to the evaluation of economic viability of enterprises / S. Kobets // Global and national problems in Economics [Globalni ta natsionalni problemy ekonomiky]. – 2015. – ¹ 3. – pp. 307–311.