Assessing the Financial Health of Companies Engaged in Mining and Extraction Using Methods of Complex Evaluation of Enterprises

Abstract

To evaluate the financial health of a company, comprehensive enterprise evaluation methods are very important. These include, in particular, creditworthiness and bankruptcy models and economic value added (EVA). Creditworthiness models effectively evaluate a company’s financial health without using statistical methods, bankruptcy models indicate a threat to the financial health of the business, and are important for many decision-making processes. The aim of this contribution is to evaluate the financial health of an average mining and quarrying enterprise using comprehensive enterprise evaluation methods. Data of companies in this industry is used—specifically, the financial statements for 2012–2016. It is the average enterprise for which these bankruptcy and creditworthiness models are applied: Altman’s analysis in all modifications, indices IN (IN95, IN99, IN01, and IN05), Tafler index, Grunwald index, Kralicek’s quick test in original and modified version, and index of creditworthiness. EVA is further explored in two of its variants—EVA Equity and EVA Entity. Based on the results of these comprehensive enterprise evaluation methods, it can be concluded that the mining and quarrying industry is not financially sound in the Czech Republic. It is possible to correct negative phenomena that characterize the whole industry.