Abstract
Research background: One of the significant problems of corporate financial management in the international context is the appropriate determination of the total amount of capital as well as the correct composition of financial sources to finance the activities of enterprises. The determination of the optimal capital structure, and thus the minimization of the costs of capital have been of interest to authors worldwide for several decades, as they can significantly influence the level of corporate earnings. Purpose of the article: The main aim of the paper is to find a mathematical formula to determine whether the indebtedness of an enterprise is related to any financial problems or does not affect the financial performance of an enterprise and thus contributes to the profitability, i.e. if the debt management is performed efficiently. Methods: To find the mathematical formula, we used the financial data of enterprises operating in the selected Visegrad group and calculated the financial ratios of indebtedness, which were further used in the multiple discriminant analysis. The final discriminant function and calculated centroids allow dividing the enterprises into two different groups, with and without financial problems. Findings & Value added: The results of this analysis can be used in the international context to determine the appropriate level of indebtedness also in other countries, not only in the Visegrad group, which may be helpful for corporate financial managers or creditors, because optimal indebtedness helps generate revenues.
Highlights
Ayu et al (2020) in their study explained that one of the significant roles of corporate financial management is the correct determination of the total required amount of capital as well as the correct composition of the sources of financing. Virglerova et al (2020) confirmed that financial analysis concerns a specific analysis of data, where the primary sources for the analysis include the financial accounting of the organization
To construct the model, based on the multivariate discriminant analysis (MDA), which should be used to find the appropriate level of corporate indebtedness, several assumptions need to be verified
All considered indebtedness ratios were used as input variables of the multidimensional discriminant analysis (MDA) and their mean values were analysed to prove if these ratios could be used as relevant determinants of optimal indebtedness
Summary
Ayu et al (2020) in their study explained that one of the significant roles of corporate financial management is the correct determination of the total required amount of capital as well as the correct composition of the sources of financing. Virglerova et al (2020) confirmed that financial analysis concerns a specific analysis of data, where the primary sources for the analysis include the financial accounting of the organization. Ayu et al (2020) in their study explained that one of the significant roles of corporate financial management is the correct determination of the total required amount of capital as well as the correct composition of the sources of financing. Virglerova et al (2020) confirmed that financial analysis concerns a specific analysis of data, where the primary sources for the analysis include the financial accounting of the organization. Durana et al (2021) claimed in their publication that financial analysis helps solve various financial difficulties as well as reveal the strengths and weaknesses of enterprises. It draws attention to the correct determination of factors associated with their intensity and shapes the financial stability of enterprises. It is a suitable instrument to predict the financial and economic health of a given company, especially in the context of its debts and earnings
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