Management Theory and Studies for Rural Business and Infrastructure Development, Volume 35, Number 4

The assessment of methods for determination of company’s solvency

Inta Kotane

Abstract

There are many methods for assessment of the solvency of companies. One method of the financial analysis is calculation of the financial coefficient and determination of the relationship between the indicators, which is used in the assessment of the solvency of enterprises and in the forecasting of insolvency and bankruptcy. To examine the suitability of offered methodologies for determining solvency to conditions in Latvia, the author conducted a theoretical research and a practical study on methods for determining the solvency, by using data from financial statements from small enterprises in Latvia. The aim of the research is to assess the methods for determining the solvency of enterprises. The result of the research shows that different methods of assessing the solvency of the company give different results, that the data from financial statements do not give complete and objective assessment of the company solvency, and it is not possible to forecast the financial stability of the company by using only financial indicators.

JEL Codes: R11, Z19.

Keyword(s): assessment, financial indicators, solvency


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Management Theory and Studies for Rural Business and Infrastructure Development eISSN 2345-0355

This journal is published under the terms of the Creative Commons Attribution-Noncommercial 3.0 Unported License. Responsible editor: Dr Audrius Gargasas.