General

Finance degree

ADVERTISEMENT

Analysis of stability of financial condition on one or another date allows answering the question: how well the organization managed financial

resources during the period preceding this date. It is important that the state of financial resources conformed to market requirements and met the

needs of the organization’s development, as insufficient financial stability can lead to insolvency and lack of funds for the development of production,

and excessive – to hinder the development, burdening the organization costs with excessive stocks and reserves. Thus, the essence of financial stability

is defined by effective formation, distribution, and use of financial resources, and solvency is its external manifestation. Assessment of the financial

condition of the organization will be incomplete without assessment of financial stability. Analyzing the liquidity of the balance sheet of the

organization, comparing the state of liabilities and assets, which makes it possible to assess the degree of readiness of the organization to repay its

debts. Determining the financial stability it is necessary to evaluate the size and structure of assets and liabilities. It is necessary to answer the

questions: how independent is the organization from the financial point of view, is this independence increasing or decreasing, and whether the state

of its assets and liabilities meet the objectives of its financial and economic activities. Indicators that characterize independence for each element of

assets and assets as a whole, make it possible to measure whether the analyzed business organization is sufficiently sustainable in financial terms.The

financial sustainability of an organization is related to its overall financial structure and the degree of its dependence on creditors and debtors. For

example, an organization that is financed mainly by cash borrowed, in a situation where several creditors simultaneously demand their loans back,

may go bankrupt. In this case, the organization’s “equity – debt capital” structure has a significant preponderance in favor of the latter.

Next Post