General

Financial instability is, in simple terms, a complex economic phenomenon

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General InformationThe financial security of any country is characterized by the following factors: The degree of independence in finance (with external financial support from foreign financial institutions, the amount of foreign investment in the national economy, etc., playing a significant role);direction of the financial and credit course (internal and external) chosen by the state;the political situation inside the country;ensuring legislative guarantees in the financial sphere.The growth of a large volume of capital, the rapid movement of which provokes tensions; the high level of centralization of finance (both at the macroeconomic and microeconomic levels); increased competition and disagreements between countries, not only in the economy but also in other areas; the use of economic leverage in dominating the global economic space; the huge attachment of national economies to foreign speculative capital that weakens their financial systems, etc.The role of the state in the stabilization of the economy. It is the state that sets the rules of the game by legal regulation, protects the rights of owners, and regulates most of the processes in the economy.To date, the majority of enterprises in our country are experiencing financial problems.

The main reason is not only the situation in our country in crisis but also the low level of financial management in companies. Lack of experience in correctly assessing their financial condition and illiterate analysis of the results of the steps taken led many businesses to ruin. The external signs of instability of financial activity are considered to be the inability to pay current payments, in the case when the enterprise does not fulfill the requirements of creditors for three months after the deadline. In other words, bankruptcy is the result of poor financial management of an enterprise, untimely and low-quality diagnostics of its state, and, when financial problems appear, the impossibility to take radical measures, which leads to financial instability and then to bankruptcy. To avoid such development of events it is necessary to analyze the financial state of the enterprise and based on received information to search and implement new solutions for its recovery. According to Hyman Minsky, an American economist, the financial surplus resulting from speculative manipulation will inevitably lead to a crisis. The greater the extent of speculation, the more global the crisis will be. The term “Minsky moment” applies to the final stage of a long period of economic prosperity that pushes investors to take huge risks when lending exceeds what borrowers can pay.

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