Analytical possibilities of financial reporting for evaluating business risks

Semenova Kateryna
PhD in Economics, Associate professor of the Department of Economic analysis, Odessa National Economic University, Odessa, E-mail:ka_sta@ukr.net, ORCID ID: https://orcid.org/0000-0002-1613-7218

Cite this article:

Semenova K. (2022) Analytical possibilities of financial reporting for evaluating business risks. Ed.: V.V. Kovalenko (ed.-in-ch.) and others [Analitichni mozhlivosti finansovoyi zvitnosti dlya ocinki pidpriyemnickih rizikiv; za red.: V.V. Kovalenko (gol. red.)], Scientific Bulletin of the Odessa National Economic University (ISSN 2313-4569), Odessa National Economics University, Odessa, No. 8 (297), pp. 32-39.

Abstract

The purpose of the study is to use the analytical capabilities of financial reporting to assess the financial condition of enterprises, the probability of bankruptcy risk, and the development of practical recommendations to ensure the sustainable development of enterprises. Method. The system-analytical method is used during the research; methods of dynamic analysis are used to identify trends in liquidity indicators and financial stability; modeling methods are used to determine the level of risk of bankruptcy of enterprises; tabular and graphic methods are used for visual presentation of information. Results. The article examines the analytical possibilities of financial reporting of the risks of production enterprises. A coefficient analysis of the financial statements of two industrial enterprises of Odessa was carried out for the purpose of comparative assessment of their financial condition and identification of possible risks. It was established that the trends of indicators of solvency and financial stability of the analyzed enterprises are negative: enterprises invest all their own capital in non-current assets, therefore working capital is formed exclusively at the expense of external borrowings, and as a result, the level of financial risk increases and the dependence on borrowed funds increases. A comparative assessment of the bankruptcy risk of the studied enterprises was carried out on the basis of foreign and domestic bankruptcy models. The results showed that the application of different models sometimes gives completely different results: according to one model, the company is recognized as financially stable, and according to another, it is threatened with bankruptcy in the near future. It was concluded that in order to carry out a thorough assessment of the financial state and the probability of bankruptcy of the enterprise, it is necessary to make calculations in the dynamics of years, then it is possible to follow the trends that have formed and develop the correct management decisions. The reliability of the analysis can also be significantly increased in the event that the dynamics of the calculated indicators of a given enterprise are compared with the indicators of similar enterprises that are at the stage of sustainable development, or have gone bankrupt, or, having all the chances of becoming bankrupt, were still able to overcome problems. Practical importance. The results of the conducted analysis revealed the problems of investigated enterprises from the point of view of their solvency and financial stability; based on the conducted assessment of bankruptcy risks, justify the need to make effective management decisions.

Keywords

financial reporting, risks, solvency, financial stability, bankruptcy models, probability of bankruptcy risk.

JEL classification: M410, D810; DOI: 10.32680/2409-9260-2022-8-297-32-39

UD classification: 338.45

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