Solvency Evaluation Research Articles

Analysis of the Debt-paying Ability of Listed Companies: A Case Study Using BYD Company as a Sample

This paper gives a complete knowledge of BYD’s financial performance through a thorough examination of its financial statements and related indicators. First, the history and development of BYD company are reviewed, and its main business scope and operating conditions are summarized to provide comprehensive background information for the subsequent solvency analysis. Second, this study uses the theoretical framework of solvency to define the important elements that influence solvency, as well as to introduce the generally used solvency evaluation indicators. Finally, in light of the research findings, a number of improvement solutions are offered, including asset structure adjustments and capital structure optimization, to improve BYD’s solvency. The study’s findings seek to provide investors, management, and researchers with a thorough grasp of BYD’s financial status, as well as practical ideas for future development.

The Impact of War and Pandemic Crises on the Sovereign Creditworthiness and Solvency. The Position, Role and Decisions of International Rating Agencies

Theoretical background: The sovereign creditworthiness and solvency in the context of the pandemic and war crises is one of the biggest challenges that the modern world and the financial market face. It has a key impact on the basic economic indicators, including the price of debt incurred by individual countries and, thus, the profitability of debt securities. The COVID-19 pandemic, which began at the turn of 2019 and 2020, and Russia’s aggression against Ukraine which started on 24 February 2022, have strongly impacted the level of debt of European states and other countries of the world. The energy crisis, which is currently growing, is also taking its toll on the main economic indicators. International credit rating agencies are institutions that have been analysing the sovereign creditworthiness and solvency and individual business entities for many decades. At times, their activities have been the subject of criticism, but their place in the global financial market seems unthreatened and the results of their work still constitute the basic indicator of creditworthiness and solvency evaluation. Purpose of the article: The purpose of this article is to present issues related to the impact of war and pandemic crises on the sovereign creditworthiness and solvency and also the position, role and decisions of international rating agencies. Due to the ongoing war in Ukraine and the COVID-19 pandemic, these are very important issues that have a real impact on the economic condition of individual countries as well as the standard of living of citizens. This article focuses on these elements of the contemporary reality. Research methods: The subject matter and purpose of the article have been illustrated against the background of current theoretical knowledge, historical research and the latest analyses of key economic indicators, such as inflation or bond yields. The study of the impact of wars on sovereign ratings was empirical. To visualise the historical scale of the wars and pandemics destruction, in the analytical part of the study, statistical data has been re-scaled to the current global population. Main findings: The research conducted in this article has indicated that crises related to a pandemic and war have a negative impact on the sovereign creditworthiness and solvency. Historical studies of armed conflicts and pandemics have shown that the former had a significantly greater impact on inflation and bond yields. For example, the level of inflation started to drop within one year after the end of the wars and almost immediately after the end of the pandemic. The same applied to bond yields. Of course, this was directly reflected in the evaluations of international rating agencies. The issues discussed in the article are of practical application, because the on-going war in Ukraine and the COVID-19 pandemic have had a very large impact on the global economy and the financial condition of individual countries. Our research also shows that the war hit the ratings of sovereign countries directly involved in the war, while other countries’ ratings (possibly threatened by aggression from Russia in the future – e.g. EU countries) remain stable.

Solvency Evaluation Model of Insurance Company Based on Stochastic Differential Equation

Solvency assessment is the core content of insurance supervision. In this paper, from the perspective of capital flow, the insurance company’s capital flow is regarded as a dynamic system, the stochastic differential equations model is established to describe its flow characteristics, and the existence of positive equilibrium point of the system is proved, as well as the conditions of stability at equilibrium point, that is, the requirements of the insurance company’s solvency. Furthermore, by using the numerical simulation method, we get the strategy of insurance companies to deal with the solvency shortage when facing the change of external environment, and the strategy of insurance company to deal with solvency shortage is obtained.

Evaluasi Kinerja Keuangan Perusahaan Konstruksi Bumn Perioda 2015-2018

Performance evaluation is one of the human resource management activities that is important for achieving the goals of the construction industry company. This study aims to analyze the financial performance of BUMN industry companies that go public on the Indonesia Stock Exchange. An evaluation of financial performance was carried out on PT WaskitaKarya (Persero) Tbk, PT Wijaya Karya (Persero) Tbk, PT Adhi Karya (Persero) Tbk, and PT Pembangunan Perumahan (Persero) Tbk in the period of 2015-2018. The results showed that the profitability, solvency and liquidity tests stated that the four BUMN were able to produce large profits, with a gross profit margin that was far above the industry average. The gross profit margin value is in the range of 93.522%-101.436%, far above the industry average of 30%. However, the ability of the company to make a large gross profit is burdened by sales costs and a large interest rate, so that the net profit margin decreases, ranging from 2.848%-9.468%. The results of the evaluation of solvency and liquidity show that the four companies are inadequate in using their debts to finance all of their assets, as well as having a low ability to repay their debts.
 Keywords:Construction companies, Evaluation of financial performance, Profitability, Solvency, Liquidity.

Solvency Evaluation, Comparing Traditional Financial Situation Assessment Methods with Information from Cash Flow Statements, Using Data from Insolvent Companies in the Republic of Latvia

Insolvent companies negatively effect on the country's overall social and economic development. In Republic of Latvia between 2011 and 2016, each year an average of 870 companies was being proposed with insolvency. In order to minimize or avoid the company's insolvency it is important to timely evaluate company's business activities and to take appropriate decisions. Company performance analysis can be made with traditional financial analysis ratios, which are calculated by using the balance sheet and profit and loss statement data, but, based on the views of theorists and authors previous study results, it is also important to use the cash flow statement data analysis.In the research were used fifty freely chosen, in the Republic of Latvia registered companies whose insolvency procedure started in the period from November 1, 2014 to December 31, 2016, and which operate in one of the four following sectors: trade sector, transportation, sector of services or production.In order to rapidly assess the company's ability to pay, thereby avoiding the possibility for the company to fall into the insolvent company's status, the authors put forward the objective of the study: explore, compare and assess the solvency indicators, which are calculated using the traditional methods of financial analysis and cash flow statement, developing proposals for solvency prediction.To achieve this goal there were used economic analysis and synthesis method - studying the theoretical aspects and corporate reports, statistical methods - data processing and analysis, as well as the logical constructive methods of interpreting the results of the study, setting conclusions and recommendations. In the research, there were defined conclusions and formulated proposals for company's business analysis in order to timely detect and avoid the corporate insolvency. The most important of them are included in the conclusion part.The article has a theoretical and practical meaning in solvency forecasting through traditional financial situation evaluation ratios and cash flow statements.

Оценка платежеспособности и качества управления финансами муниципальных образований как мера повышения эффективности управления общественными финансами (на примере Нижегородской области)

Оценка платежеспособности и качества управления финансами муниципальных образований как мера повышения эффективности управления общественными финансами (на примере Нижегородской области)

Financial analysis and credit solvency evaluation of a selected enterprise case study of a company 'Aleva Novi Knezevac'

There is a large number of developed methods and indicators of financial analysis i.e. analysis of financial reports. Therefore, it was useful to develop a basic template indicator, that would include all the indicators together and that would have the same meaning for all of its users. However, the requirements of users of financial information determine the level and form of desired information. Today, the favorable characteristics of a company are primarily seen as its solvency. Solvency represents the degree of certainty in making predictions related to its survival and development, as well as a review of its quantitative and qualitative skills, primarily yielding abilities, but also material and financial capacities. Solvency, in the narrow sense of a word, represents a company's credit ability, and the ability to maintain current liquidity, while in the broader sense it represents a company's overall market position. In practice, there are two models of credit solvency evaluation: the traditional model of credit solvency evaluation, and the Altman's 'Z'-model (score). Since these two models differ, in this paper we performed credit solvency evaluation in the case of a joint stock company called 'Aleva' from Novi Kneževac, with the aim of comparing the results of credit solvency evaluation with the company's reliability.

Do Insolvency Evaluation Criteria in Lithuanian Republic Enterprise Bankruptcy Law Ensure that Bankruptcy Procedures would not be Initiated for Companies with Temporary Financial Issues?

Company insolvency and bankruptcy legislation is based on the discipline of economics, under such circumstances the law itself and any act, norms, provisions falling under the law are subject to micro economic problems arising in companies. Under such circumstances law has to serve economy while making reasonable decisions regarding company financial status (solvency). Unfortunately, only recently Lithuanian legal doctrine has given it a thought of using economic analysis of law. In general bankruptcies of companies cause consequences such as – loss of productivity capacity which eventually causes overall loss of national competitiveness, unpaid national taxes to many different government bodies and other institutions, unsatisfied claims of other creditors, also social problems such as growing unemployment, decline in living conditions, unsatisfied and insecure residents about country’s economy, government and their own future. According to Lithuanian Republic Department of Enterprise Bankruptcy Management under the Ministry of Economy conducted study on bankruptcies for the period between January 1st, 1993 and March 31st, 2014 total number of declared bankruptcies for companies is 14 912. Significant 70% of companies that went bankrupt were in business for more than 5 years. All of collected experience in technologies, optimized processes, workplaces etc. is most likely lost with bankruptcies of such developed companies. In the article the economic analysis of law, comparative analysis, systematic analysis, logical analysis, document analysis, analytical-critical analysis, linguistic analysis methods were used to support the answer to legal question of whether insolvency evaluation criteria in Lithuanian Republic Enterprise Bankruptcy Law ensure that bankruptcy procedures would not be initiated for companies with temporary financial issues. Part one of the article states that European Union Law does not regulate company insolvency concept, but does obligate all Union countries to follow principle of universality. Proper evaluation of company’s absolute insolvency and bankruptcy initiation decision are extremely important steps in decision-making process so that bankruptcies would not be initiated to companies, which only have short-term financial difficulties. Although in 2004 Lithuania joined European Union, which does have directly applicable European Council regulation of 2000, May 29th (EB) Nr. 1346/2000 regarding enterprise bankruptcy policy, since then not in any other Act or regulation of the Union have been clearly stated or added regarding regulation (evaluation) of company insolvency, bankruptcy evaluation proceedings, which leaves an open area for each Union country to freely compose their own proceedings within boundaries of principle of universality. Part two of the article is intended to identify the issues of Case law in Lithuanian court system in the area of initiated enterprise bankruptcy proceedings, whereas at bankruptcy initiation proceedings interests of creditors are prioritized and balance of interests of all other involved parties is mostly excluded from bankruptcy initiation evaluation conditions. Even though courts are trying to amend, guide faulty legislation through Case law, but from legislative perspective such actions are not fully legitimate. In part three company insolvency concept in Lithuanian Enterprise bankruptcy law and in Case law is analyzed, compared and evaluated with assistance of economic disciplinary theoretical and practical methods. In Lithuanian Enterprise bankruptcy law there is only a single ratio according to which courts make their verdict regarding proceedings of companies’ insolvency – overdue liabilities to assets ratio. Despite that there is no clear detailed proceeding of solvency evaluation in Lithuanian law whatsoever, in Case law it is stated that case by case basis additional requirements, regulations, proceedings or rules shall be evaluated regardless of current sole indicating company insolvency datum, which is ratio of overdue liabilities to assets. Under such circumstances courts have to look back at Case law which is formulated by subjective opinions of judges from past cases, and that leads to irregular and with discrepancies from economic theories and practices evaluation of companies’ insolvency. As specialists of economic field state that a single ratio of one aspect does not reflect company’s true solvency status, analysis of company insolvency is a complex process of using different financial ratios from company’s financial data. In order to determine company’s financial status economists mostly suggest to use at least ten financial ratio indicators. In order to correct such unsound and unbalanced evaluation of companies’ insolvency, clear regulations have to be stated in Lithuanian Enterprise bankruptcy law for it to have financially and legally correct and just companies’ insolvency evaluation. In the end of the article after all the analysis, in the last part reasoned recommendation is stated to initiate amendment of Lithuanian Enterprise bankruptcy law.

Use of financial indicator for enterprises’ solvency evaluation

One of the evaluation methods of the enterprises’ solvency is the calculation of the financial ratios and the establishment of the ratio mutual coherence..The research of the financial indicator use regarding the evaluation research of the solvency of the enterprises was carried out by the author, and the set of financial indicators was established including the groups of liquidity, solvency, activity and profitableness ratios and was used in the solvency evaluation of Latvian enterprises. The practical research was carried out according to the accounting data of the small enterprises of Latvia. The aim of the research is to appraise the use of the financial indicators in order to evaluate the solvency of the companies. The results of the research point out that there is no essential difference between the financial indicators of a liquidated enterprise and a reorganized enterprise and there is no possibility to foresee precisely the financial position of the enterprises by taking into account only the financial indicators of the enterprises.

REGULATION PROBLEMS AND THEIR POSSIBLE SOLUTIONS IN THE LITHUANIAN EXPRESS CREDIT SECTOR

Abstract. Express credit institutions have started their activities only five years ago when the economic crisis came and increased the borrowing demand. Now, we have the consumer credit law and other legislative acts which aim to ensure this sector regulation. However, there still remain problems that have to be solved. The main of them are inconsistencies in consumers’ solvency evaluation in different companies, the lack of financial knowledge in society and its information, the aggressive lending and advertising policy. The increasing demand for this service shows its importance and proves the necessity to maintain it in the market while at the same time ensuring consumer protection.Key words: express credits, pay-day loans, consumer credit

DEVELOPMENT OF COMPARATIVE-QUANTITATIVE MEASURES OF FINANCIAL STABILITY FOR LATVIAN ENTERPRISES

Financial stability has drawn serious attention of companies operating in the condition of economic recession. Discovery of new approaches in prediction of financial stability should foster improving the financial stability. This article is the development of theoretical model of evaluation of company's financial stability, examined in “Selecting the right tool for evaluation of solvency: case from Latvia” (N. Lace, N. Koleda, 2008). Bankruptcy predictions and solvency measurements have become important research topics after applying of financial ratio methodology in analysis by Beaver (1966) and Altman (1968). As the world’s economy has been facing several challenges during the past decades, more and more companies are addressing the problems of fighting insolvency. Within the current context of dynamic changes in business environment the theory and practice of financial management face a question of what the effective method of evaluation of company’s financial stability is and what theoretical and methodological awareness is necessary for minimizing the risk of bankruptcy of company of the 21 century. The main points examined in this paper are 1) the methods of evaluation of financial stability and prediction of bankruptcy; 2) the assessment of methods; 3) new approach of combined evaluation of financial stability 3) evaluation of financial stability of Latvian companies based on combined approach.

Bank solvency evaluation with a Markov model

This paper provides an empirical model for a probabilistic evaluation of bank solvency that includes heterogeneity and past solvency. Bank solvency positions are obtained from the value of a stochastic recursive profit function. Transition probabilities among bank solvency positions are determined by portfolio decisions, and draw the probabilistic evolution over time of bank solvency. Thus, the bank activity is characterized as a Markov decision process whose transition matrix is obtained from a Markov Chain model with a quadratic conditional variance. The empirical implementation for Spanish banks indicates that both heterogeneity and past solvency are important to evaluate bank solvency.

073080 (E50) - The utilization of the IRIS method in the Solvency evaluation of non-life Insurance companies in Brazil

073080 (E50) - The utilization of the IRIS method in the Solvency evaluation of non-life Insurance companies in Brazil

Evaluation of solvency of different solvents in the crystallization ofn-alkanes

Evaluation of solvency of different solvents in the crystallization ofn-alkanes

Evaluation of solvency of hydrocarbon solvents

Evaluation of solvency of hydrocarbon solvents