ISSUES IN THE ANALYSIS OF FINANCIAL STABILITY OF AN ENTITY

Аннотация

Ensuring a company's financial stability is a key factor for its future success. Therefore, analyzing financial stability serves as the foundation for decision- making by potential investors, buyers, and suppliers. This article discusses the necessity and methodology of analyzing a company's financial stability. It examines solvency analysis for the near future and financial stability analysis for the long-term perspective. Keywords: sustainable activities, income, expenses, assets, liabilities, balance, solvency, long-term assets, current assets, equity, borrowed capital, long-term loans, long-term credits, short-term loans, short-term credits, own working capital, attracted funds, coverage ratio. One of the most significant indicators of a company's stability is its financial stability. Achieving financial stability is possible if the company's revenues exceed its expenses. A company can be considered financially stable if it can freely manage its funds, use them effectively, and maintain a continuous production and sales cycle. Выпуск журнала №-25 Часть–2_ Май –2025 104 MODERN EDUCATION AND DEVELOPMENT Financial stability is an integral part of a company's overall stability, characterized by balanced financial flows and sufficient resources to support the company's operations over a certain period, including servicing loans and producing goods. The financial condition of a company can be evaluated both in the short-term and long-term. In the short term, the focus is mainly on the company's solvency, while in the long term, financial stability becomes the priority. Companies that do not develop financial stability are at high risk of bankruptcy. Therefore, analyzing financial stability at both macro and micro levels has always been a critical area of focus for economists. Financial analysis places significant emphasis on assessing the financial stability of individual enterprises, firms, and companies, distinguishing between short- term, medium-term, and long-term evaluation practices, and determining specific measures to enhance financial stability. Various systems of indicators are used to assess financial stability, including: Company solvency Dependency ratio on own funds Asset dependency ratio Interest coverage ratio Proper formation, allocation, and efficient use of financial resources are essential factors in ensuring financial stability. In essence, financial stability reflects how skillfully a company manages its financial resources. To ensure financial stability, companies should focus on forming initial capital, organizing production, achieving positive results between income and expenses, ensuring sufficient working capital, maintaining financial independence, and protecting business and market activities. Financial stability is assessed through absolute and relative indicators. Absolute indicators reflect the state of assets, production reserves, and funding sources over a specific period. Funding sources include own funds (such as charter capital, reserve Выпуск журнала №-25 Часть–2_ Май –2025 105 MODERN EDUCATION AND DEVELOPMENT capital, additional capital, retained earnings, and targeted income), long-term and short-term loans, and liabilities. If long-term loans and liabilities dominate asset financing, then short-term loans and liabilities are commonly used for funding production reserves. The following indicators are used to determine financial stability: Long-term assets Production reserves Source of funds Long-term liabilities (loans and debts) Short-term liabilities (loans and debts) Diagnosing a company's financial condition and implementing specific measures for improvement are essential factors in ensuring macroeconomic stability. Therefore, financial well-being must be prioritized to ensure the company's stable growth in the future. A company's financial condition is characterized by the availability of financial resources, their effective allocation and utilization, financial relationships with other legal and physical entities, and indicators of solvency and financial stability. Relative indicators of financial stability describe the maintenance of active (long-term) and reserve financing, financial stability and dependence, and positive outcomes from the involvement of own and borrowed funds. One of the most critical factors in ensuring financial stability is maintaining order based on the golden rule of economic science, which emphasizes achieving positive outcomes from activities. The general formula for this procedure is: NP /NP > SR /SR > OE /OE > A /A > 1 1 0 1 0 1 0 1 0 or NP /NP * 100 > SR /SR * 100 > OE /OE * 100 > A /A * 100 1 0 1 0 1 0 1 0 Where: NP /NP – Growth in net profit; SR /SR – Increase in sales revenue; 1 0 1 0 OE /OE – Growth of Owner’s Equity; A /A – Growth of assets. 1 0 1 0 Выпуск журнала №-25 Часть–2_ Май –2025 106 MODERN EDUCATION AND DEVELOPMENT Asset allocation depends not only on the company's performance but also on its financial condition. The pri