Solvency Of Companies Research Articles

Time to Revisit Capital Maintenance on Profits Distribution: Lesson from Carillion and Beyond

This paper aims to reengage the debate about capital maintenance as the regime for restricting the distribution of profits. Two arguments challenging the effectiveness of capital maintenance are made here. The first argument says that fair value accounting applicable to fixed assets creates complications for compliance with capital maintenance in the area of profits distribution. Prior literature has studied the link between fair value accounting and distributability of the revaluation reserve of fixed assets. Little research has been seen, however, relating to the complications this may cause to the compliance of capital maintenance. The second argument says that the effectiveness of capital maintenance as a creditor security mechanism is undermined by the fact that the satisfaction of capital maintenance in relation to profits distribution is not equal to company solvency. To make this argument, I examine the intersection between capital maintenance and accrual accounting principle through both theoretical analysis and a case study of the recent collapse of Carillion plc, and conclude that the intersection gives rise to aggressive accounting, and aggressive accounting creates a situation where capital maintenance is satisfied but company solvency is not. Capital maintenance facilitates aggressive accounting and therefore should be reformed. Capital maitenance, company solvency, carillion, accrual, fair value, aggresive accounting

El estado de flujos de efectivo y la solvencia de las empresas comercializadoras del Perú en el periodo 2010-2015

El objetivo de la investigación fue determinar la relación del estado de flujos de efectivo y la solvencia de las empresas comercializadoras que informan a la Superintendencia de Mercado de Valores (SMV) del Perú durante el periodo 2010 al 2015. El estudio es de tipo, correlacional de diseño no experimental con datos trimestrales. La actividad de operación, inversión y financiamiento se ha utilizado como una medida del estado de flujos de efectivo, mientras que el endeudamiento patrimonial, el endeudamiento del activo total y la cobertura de gastos financieros obtenidos se utilizan como un indicador de la solvencia de una empresa. Los resultados de acuerdo al coeficiente de correlación r de Pearson, revelan que cuanto mayor sea el flujo obtenido del ejercicio anterior, mayor será la confianza de los bancos en la empresa y, consecuentemente, mayor es será la posibilidad de endeudarse frente a terceros y del acceso a la financiación. Así mismo, cuando el endeudamiento patrimonial y el endeudamiento del activo total es menor, mayor serán las actividades de inversión. Se recomienda a las empresas del sector usar como herramienta: el estado de flujo de efectivo como una oportunidad para obtener financiamiento externo y demostrar la solvencia de la empresa, importante estado financiero.

INSURANCE COMPANIES INSOLVENCY PROBABILITY MODELLING

The article is dedicated to problems of developing scientific and methodological foundations as well as creating an dynamic mathematical model of insurance company solvency (bankruptcy probability) considering interest rate and inflation ratio.The study used the general scientific and special methods such as: the method of critical analysis, scientific abstraction and generalization of scientific expertise of recent theoretical studies, system-integrated approach, method of dynamic mathematical modeling.Elaboration of dynamic mathematical model of bankruptcy probability modelling considering inflation (as inflation has negative impact on all aspects of insurance business including insurance reserves) and rate of interest. The peculiarities of insurance companies investment activity have been defined. The estimation of insurance premium that ensures abequate insurance fund value formation, i.e. insurance company solvency formation has been performed. Insurance tariff and supplement value correspondent to defined probability of insurance company bankruptcy have been defined.Methodological approaches of insurance companies solvency (bankruptcy probability) modelling were further developed. The dynamic mathematical model of bankruptcy probability considering inflation and rate of interest has been proposed.Theoretical study was developed to the level of specific techniques and suggestions for improvement of the estimation and prognozing of insurance companies solvency and could be used in strategic, current and operational planning. A comprehensive methodology of supplement estimation allows to respond to the changing market situation by changing the values of insurance tariffs.

COMPARATIVE ANALYSIS OF THE METHODS OF FINANCIAL AND ECONOMIC EXAMINATIONS TO DETERMINE INSOLVENCY

The article describes the methods of financial and economic examinations to determine the insolvency of a company in the Baltic countries, Republic of Armenia, Ukraine, Republic of Belarus, the Russian Federation and Republic of Kazakhstan. The signs of insolvency regulated in legislation of the countries, and international requirements for the validation of expert methods are presented in the article. The authors present the results of a comparative analysis of the considered methods for assessing insolvency and results of testing methods based on data of annual reports of focus group of five Latvian bankrupt companies.
 The research has shown that the expert methods of all eight countries are based on a normative approach — comparing the calculated financial ratios with their normative value. In Ukraine, Republic of Belarus, the Russian Federation and Republic of Kazakhstan, the financial ratios and their normative values are approved in the legislation of the countries. In the Baltic countries and Republic of Armenia, these ratios and their values are developed in approved expert methodologies. The method of «net assets» is also used to assess the solvency of large companies.
 The test results showed that the methods of the countries reviewed are applicable in practice and give a similar assessment of the solvency of companies as a whole. More similar results present the methods of the Baltic countries, Ukraine and Republic of Belarus. The results of the methods of Republic of Armenia, Kazakhstan and the Russian Federation are more similar to each other, but slightly differ from the previously listed group of countries.
 The authors demonstrated the ability to validate the expert methods, which is necessary to use an expert conclusion on the assessment of insolvency as an evidence base in another country.

Ways to Assess and Improve the Financial Sustainability of Russian Organizations Development

In the implementation of production activities, the objective condition for the sustainable development of business entities is a comprehensive approach to the analysis of financial indicators of the organization. The problem of ensuring sustainable growth has been relevant for several decades and is the subject of close attention of Western and domestic scientists. The work clarifies the methodological tools relating to the assessment of competitive positions in the domestic market, provided that solvency is maintained. The essence of sustainable development at the macro and micro levels is revealed. The main focus is on the assessment of financial stability indicators as an information base for making effective management decisions. The paper discusses the theoretical foundations of the analysis of liquidity and solvency of companies. The types of the state of liquidity of the balance sheet of the company are clarified. The essence, as well as the relationship of solvency and liquidity, as one of the main areas of the financial condition of the organization is revealed. An algorithm for determining the potential solvency of an organization is presented; a mechanism for increasing the financial return on assets is considered. On the example of the organization of the building complex, the indicators of financial indicators were evaluated, critical values were determined for the studied indicators. A set of measures to improve financial performance is proposed. The presented material may be interesting for the development of public policy instruments for the implementation of the concept of sustainable development of the regional system.

PERANAN ANALISIS LAPORAN KEUANGAN DALAM MENGEVALUASI KINERJA KEUANGAN PERUSAHAAN PADA PT. BANK JABAR BANTEN Tahun 2007 – 2009

The purpose of this study was to determine the financial performance of PT Bank Jabar Banten in 2007 - 2009 using a comparison and analysis of financial ratio analysis. The results obtained, the conditions seen from the company 's liquidity position : the current ratio in 2009 decreased because although the amount of current assets increased during the year, but the amount of current liabilities for the year also increased, indicating that the measurement is easy and fast to join the new amount of cash and other current assets by current liabilities. This means that when the securities are sold and accounts receivable payments can be received, then the bank can repay its short-term liabilities. Conditions views of the company 's solvency position, although there is a decrease and an increase in the solvency ratio, but the changes are not so significant or can be said to be relatively stable. This could indicate that the company 's financial performance is good enough to settle its debts - debts. Condition when viewed from the position of company activity , fixed asset turnover and working capital turnover continues to increase each year due to an increase in the side that tends to balance income and fixed assets. Keywords : financial performance, liquidity position, solvency, activity position.

Liquidity and Profitability Analysis of Non-Financial Entities Listed on the Macedonian Stock Exchange

Liquidity management has a considerable influence on company performance. By analyzing secondary financial company data, this paper seeks to assess the correlation between liquidity and profitability. Through the use of audited annual report of 76 non-financial entities listed on the Macedonian Stock Exchange for the period 2014-2017, the study looks into the association between two traditional liquidity measures, current ratio and acid-test ratio, and three profitability measures, return on assets, return on equity and return on capital employed. Prior to embarking on the statistical research, literature review was performed to obtain basis for the test of hypotheses. Through the use of SPSS software, the dataset comprised of 304 observations generated descriptive statistics, and was subjected to tests of normality and variable correlation testing. The empirical findings designate that liquidity and profitability depict a positive association and that the correlation between current ratio and quick ratio on one hand and ROA and ROE on the other is statistically significant. Moreover, the empirical work reveals a slow trade receivables collection across several Macedonian industries which may damage the long-term solvency of companies, especially in times of recession and economic hardship when liquid funds are a must. In conclusion, this study suggests that the liquidity-profitability relationship should be subject to further scholarship having in mind the immense importance that liquidity management has on the financial health and stability of firms.

Cash–Flow optimization in ensuring the company's solvency

Cash–Flow optimization in ensuring the company's solvency

The Impact of the Solvency II Directive on the Insurance Sector in Europe // Uticaj direktive solventnost II na sektor osiguranja u Evropi

Solvency of insurance companies, its conservation, regulation and control is the basis for the healthy functioning of the insurance market. Solvency is an indicator of stability and security of the companies, as well as the guarantor of execution of obligations. The Solvency II Directive was adopted on 25th of November 2009. She announced big changes in the insurance and reinsurance law, both EU member countries and non-member countries, when it comes to the solvency of the company. The main reason for the adoption of the new directive is strengthening of the integrated market in insurance and reinsurance law through harmonized legal rules. Solvency II aims at a common market, working permit in one member State allows the company carrying out activities in all other member countries. Also, during the implementation of the new directive the countries should have the same rights of protection of the insured. For both requirements is necessary that the supervision rules are agreed and converged all across Europe. In this paper author analyzes influence of the Solvency II on EU member countries, and to non-EU countries, the state of security in Europe, as well as the extent to which some of the countries harmonized their legislation with the Directive.

PENGARUH SOLVABILITAS, SEGMEN OPERASI, DAN REPUTASI KAP TERHADAP AUDIT DELAY PADA PERUSAHAAN MANUFAKTUR DI INDONESIA

Timeliness is one of the indicators used in the measure how quickly and accurately a company in publish financial reports in the context of decision making for investors. The information presented on time is considered able to provide a description of the condition that the company in a state of healthy both in the financial management internal control and routine operational activities. Audit delay is defined as a shift in the time that caused by delays in the settlement of the annual financial audit reports. This can occur because of a problem that appears not only from internal company but can also occur because of external factors. In this research we examined whether the solvency, operating segment of the company, and reputation Public Accountant (the big four and non-the big four) have an impact on the duration and scope of the work of the auditor. The object of this research is manufacturing companies listed in Indonesia Stock Exchange period 2011-2013. This research uses linear regression to test is whether or not the influence of solvency, operating segment and reputation Public Accountant to audit delay, aided by a software program eviews 6 and PASW Statistics 18. The results of this research are (1) the level of solvency of companies has positive effect on audit delay, (2) the number of business segments and the number of geographical segment has a negative effect on audit delay, (3) the reputation of Public Accountant has positive effect on audit delay.

Possible Solutions to the Question of Insolvency – Empirical Analysis Regarding the Degree of Exposure of the Solvency of Romanian Insurance Companies

Abstract This paper tackles a broad topic by endeavouring to find solutions to avoid insolvency in regard to insurance companies in Romania. The maintenance of the solvency state of insurance companies requires them to have the ability to honour their obligations to policyholders and beneficiaries of the contract. We analysed solvency as a dependent variable - as compared to the degree of the exposure of solvency, since solvency is, in our opinion, a key element in the management of assets and liabilities, and is a topic that is currently preoccupying researchers. The importance of the research is underlined by the fact that this subject is highly relevant in regard to insurance companies who have been subject to increased market demands in a business environment that have become difficult to navigate. Through the study conducted, built on relevant opinions from academic literature, we chose as the objective of the research, the identification of the influence variables and the intensity with which they impact the degree of exposure of the Romanian insurance company's solvency. Our analysis led to the identifications of new elements that can optimize the effects of the insolvency law as applied to insurance companies in Romania.

Značaj gotovine

Cash has the function of providing current, as well as continuous financial solvency of companies. Among the conditions of existence of market CSR, primary condition of the survival of its existence is the continuing payment ability. The use of cash in this way facilitates the appropriate use of other forms of business assets. Therefore, the role of cash is compared to the role of lubricating oil when the engine is running. This comparison illustrates maximizing profitability of the company and the reasons for the minimization of the cash amount, but not at the cost of jeopardizing the solvency of the continuous ongoing companies. This means that, similarly to lubricating engine oil, there should be neither too much, nor not enough of it.

Insights from the failure of the Countrywide Financial Corporation

Purpose – This paper aims to evaluate the business activities, financial reports, and management compensation practices of Countrywide Financial Corporation (Countrywide) in the period preceding the company's financial distress and leading to its eventual takeover by Bank of America in 2008. This analysis provides a number of insights into the risks that Countrywide was exposed to which may guide future research and financial management. Design/methodology/approach – Case study evaluating the failure of Countrywide Financial Corporation. Findings – First, Countrywide was highly reliant upon the securitization of mortgage loans to finance its activities and this was apparent in the financial reports. Second, these securitization transactions exposed Countrywide to significant financial risks, including the risk inherent in the uncertain values of residual interests and warrantees. Problematically, these risks were not transparently reflected in the financial reports, as confirmed by the lag in the timing of stock price responses. This untimely market response suggests the equity market was not aware of Countrywide's risk exposures until shortly before the company's solvency crisis. Third, the compensation practices of Countrywide encouraged and rewarded management for exposing the firm to significant risks. Practical implications – This paper provides insights into financial management that are relevant for researchers and professionals. Originality/value – This paper provides insights for researchers and practitioners relating to the impact of asset securitization on business risk and how these business activities and risks are disclosed in the financial reports.

Uso da teoria rough sets na análise da solvência de empresas

The goal of this article is to determine the declaratory accounting core that makes it possible to find out what is the state of solvency of companies in the textile industry listed in the Stock Exchange of São Paulo (Bovespa). This is done by analyzing the financial statements through indexes and applying the Rough Sets Theory. The methodology used in the study is descriptive, based on documentary research and a predominantly quantitative approach. The survey was done using the indices of financial statements of the 21 companies of the textile industry listed in Bovespa in the period from 2002 to 2006. On the basis of the categorization of four classes, it became clear that the core of the declaratory accounting is made up of the following indices: liquidity drought, debt, financial dependence, stock flow, average collection period, average time of payment, return on equity and return on assets. Therefore, it is not necessary to review the twelve indexes initially used in this study to reach the conclusion that a company is solvent or insolvent; it is necessary to consider only the nine indexes that make up the declaratory accounting core.Key words: financial statements analysis, indices, solvency, declaratory accounting core, Rough Sets Theory.

A Direct Approach to a First-Passage Problem with Applications in Risk Theory

In this article, we consider a risk process which exbihits the key features of companies with steady outflows and sporadic inflows (e.g., discoveries, patents). A risk management policy is further implemented stating that the outflow rate is reduced when no revenue (inflow) is generated within an Erlang-n time period. For the surplus process of interest, a Markovian representation is first given which leads to the form of the solution for the Laplace transform of the time to ruin. A homogeneous linear integro-differential equation for the Laplace transform of the time of ruin is later derived. The boundary conditions of the aforementioned integro-differential equation are used to complete the representation of the Laplace transform of the time to ruin. Finally, numerical applications are considered to illustrate the effectiveness of this risk management policy to lower the company's solvency risk.

Pengaruh Modal Asing Terhadap Kinerja Keuangan (Studi kasus Pada PT. Karya Mandiri Di Bandar Lampung)

The purpose of this study was to determine the effect of increasing foreign equity to the level of liquidity, solvency and profitability of the company and to determine the trend of the use of foreign capital and the development of liquidity, solvency and profitability. Based on the analysis we concluded that the terms of the current ratio is seen to increase liquidity shows that the increase in current liabilities sector followed by an increase in current assets sector, but if dilikat quick ratio is low, it can be said that the company is too much to invest in inventory. Similarly, if viewed from a low cash ratio indicates that the amount of cash money supply too little or small company when compared to the amount of current debt. Where a moment and ask the creditor to collect the debt payments difficult to meet these obligations, from 2004 to 2006 ratio calculations showed that the decrease in security of the rights of creditors. This is indicated by the decline in the company's solvency ratio of total assets to debt ratio, net worth to debt ratio, proprietory ratio and net worth to debt ratio. This means that the company is in a state insolvabel means the company can not immediately meet long-term financial liabilities if the company is liquidated. Therefore the company improve its capital structure so as to increase the solvency and profitability of the terms of the use of foreign capital to increase profitability. This is due to the large amount of foreign capital invested in the company. Then the company will be able to expand its business, until the target profit (profit) is expected to be achieved due to the amount of capital is in the company increases.

International Real Estate Review

Some international standards have proposed that the fair value approach should be used to evaluate real estate assets. The choice to use this method or another approach could influence the quality of the financial reports published in response to information demands by company stakeholders.In this study,we will examine whether fair value evaluation, in the real estate context, improves the utility of construction company financial reports. For this purpose, we have addressed a questionnaire to financial directors that concern the relevance, reliability and viability of this valuation criterion. Based on the opinion of the respondents, our results show that the fair value model would improve the usefulness of financial reports to evaluate company solvency, and would also improve the comparability, timeliness and understandability of such reports.

Monoline Regulations to Control the Systemic Risk Created by Investment Banks and GSEs

Abstract The paper offers a framework and a specific proposal for the re-regulation of key components of the U.S. financial system in the aftermath of the subprime mortgage crisis. It begins with a review of those aspects of the subprime crisis that required the large, observed government interventions, namely the feared bankruptcy of individual banks, insurers, and government sponsored enterprises with the potential to create a meltdown of the entire financial system. The paper then develops legislative responses that would make future systemic failures and bailouts of this magnitude highly unlikely. The paper's key analytic device is to distinguish two financial firm activities: (1) risky investment activities (“hedge fund" division) capable of causing firm bankruptcy, and (2) market-making and related activities (“infrastructure" division), the failure of which would have systemic implications. The goal of the proposed regulatory change is to ensure that the infrastructure division is bankruptcy remote and can operate on a stand-alone basis if necessary even when losses from the hedge fund division threaten the holding company's solvency.

A study of financial insolvency prediction model for life insurers

The objective of insurer supervision is to monitor the financial solvency of companies and to protect the rights of consumers. Improving the related legislation and regulatory policy are also the goals of supervision. The purpose of this study is to evaluate the financial soundness by using the rating systems of the CAMEL and the risk-based capital (RBC) models. Moreover, it is to explore whether insurers exit a significance difference of financial stability or not between domestic and foreign branch life insurers. This study constructed an efficient insolvency prediction model and showed that the artificial neural network was more excellent for classification than the traditional discriminant method since the artificial neural network’s accurate discrimination rate of 95.2% with a lower Type I error of 0.0274 and Type II error of 0.0769.

Inventory control and investment policy

The idea underlying this paper is to consider inventory control as part of a wider class of economic problems, namely financial risk management. Only discrete-time models are investigated here. In the framework of the Cox–Ross–Rubinstein model of a financial market a combined inventory replenishment and investment policy is obtained. Company solvency is studied as well.