FACTORS ENSURING ENTERPRISE FINANCIAL STABILITY IN TIMES OF CRISIS

Iryna M. Miahkykh, Mariana S. Shkoda, Andrii О. Radchenko

Abstract


The insufficiency or lack of available diagnostic instruments to predict the probability of a company bankruptcy is associated with the absence of practices to capture downturn trends in financial and business performances which translates into a dangerous process of latent transition from the company temporary local inability into the total failure to meet its obligations, that is, to a loss of financial stability. The fundamental premises of this study is to identify the factors that ensure financial stability of an enterprise. To attain the research objectives, the method of statistical analysis and logical generalization has been employed to consider a pull of enterprises that are losing their solvency and are on the verge of bankruptcy; a substrate approach was implemented to justify and group a range of internal and external factors affecting the enterprise financial stability. This article argues that a critical indicator in evaluation of a company performance is assessing its financial position which affects its competitiveness, and guarantees to all parties and business participants (both the enterprise and partners) that the realization of common economic interests will be effective. The company financial and economic position when its solvency remains constant over time together with an optimal ratio of equity to debt capital is a certain indicator of a company financial stability. Most analytical studies on enterprise financial stability view the amount, allocation and use of working capital as the most significant indicators, their accounting provides further opportunities to evaluate financial stability and financial position of an enterprise, as well as to identify potential problems and concerns that will lay the basis for choosing a relevant crisis management strategy aimed at designing and implementing effective pathways to respond to crisis. Undoubtedly, it is advisable to obtain an aggregated index that takes into account all the enterprise activities. Such index should include the following indicators: working capital availability; return on capital; independence on external financing. Thus, the essential factors in enhancing the enterprise financial management in a market environment are continuous planned analysis and timely diagnosis of changes and trends in the enterprise external and internal environment, as well as timely and maximum effective response to such changes to ensure financial stability and solvency of the enterprise. In the current business realia, characterized by a high level of economic uncertainty, achieving strategic financial goals and ensuring long-term financial stability of an enterprise is impossible without building an effective strategic financial management framework, the integral elements of which are the mechanisms and systems of risk management to prevent a drop in financial stability and mitigate shocks from external and internal environment negative effects on enterprise activity, as well as creating favourable environment for efficient decision making and planned actions to promote enterprise development.


Keywords


financial stability; bankruptcy; crisis; finances; impact factors

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DOI: https://doi.org/10.30857/2413-0117.2019.5.11

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