Management of financial stability of a small business entrepreneurship

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Annotation: The article investigates and analyzes the financial condition of a small enterprise, its indicators and analysis of development in Ukraine. Also taken into account the main indicators to improve the overall performance.

Bibliographic description of the article for the citation:

. Management of financial stability of a small business entrepreneurship//Science online: International Scientific e-zine - 2018. - №12. - https://nauka-online.com/en/publications/ekonomika/2018/12/upravlenie-finansovoj-ustojchivostyu-malogo-subekta-hozyajstvovaniya/

The article was published in: Science online No12 декабрь 2018

Економічні науки

УДК 658.14

Boyko Evelina

Kyiv National University of Technologies and Design

MANAGEMENT OF FINANCIAL STABILITY OF A SMALL BUSINESS ENTREPRENEURSHIP

Summary. The article investigates and analyzes the financial condition of a small enterprise, its indicators and analysis of development in Ukraine. Also taken into account the main indicators to improve the overall performance.

Key words: financial stability, solvency, enterprise, liquidity.

Formulation of the problem. The modern development of the domestic economy is accompanied by a new stage of reforms, increased economic globalization, increasing uncertainty and variability of economic conditions, requiring businesses to respond quickly and flexibly to changes in environmental factors. All this implies the introduction of effective management mechanisms that will make it possible to perceive changes, identify them and ensure appropriate adaptation of economic, financial and investment activities. Adequate to these requirements is a strategic approach to the organization of financial stability management.

One of the most important characteristics of the financial condition of the enterprise is its financial stability (stability).

Analysis of recent research and publications. The financial analysis, namely financial stability analysis engaged in by such scholars as I. V. Alekseev, T. D. Kostenko, E. A. Podgora, V. S. Ryzhikov, N. I. Bakanova, I. T. Balabanov, I. V. Sadovnikova, T. Karlin, V. V. Kovalev, A. G. Mendrul, A. S. Frost, Is. V. Negasheva, Tarasenko N., E.M. Romanov, V. M. Rodionova, A. D. Sheremet.

Purpose of article. The main purpose of the study is to determine the directions of improving the financial stability of the enterprise on the basis of the study of theoretical and practical aspects of the assessment of the problems.

Presentation of the main material. In modern conditions financial stability is one of the main conditions of stable activity and dynamic development of the enterprise. If the company is financially stable, it has significant advantages over other companies in the selection of suppliers, in obtaining loans, attracting investment and the selection of qualified personnel.

Financial stability of the enterprise is a state of its financial resources, their distribution and use, which ensures the preservation of the niche of the international market, the development of the enterprise due to the growth of profits and capital while maintaining solvency and creditworthiness in conditions of acceptable risk of foreign economic activity [1].

The level of financial stability affects the company’s development opportunities. Determining the limits of financial stability is one of the most important economic problems, because insufficient financial stability can lead to bankruptcy, and the excess will hinder development, forming excessive reserves and reserves in the enterprise.

The main, the most effective ways to improve the financial stability of the enterprise is:

  • improving the efficiency of use of fixed assets of the enterprise;
  • increasing the intensity of the use of current assets of the enterprise;
  • increase of labor productivity;
  • further increase in sales of goods;
  • reduction of material operating expenses;
  • expansion of the market for products (goods);
  • increase of the company’s equity capital;
  • attraction of investments (loans), etc. [2].

The analytical study of financial stability is carried out in several stages.

Fig. 1. Stages of financial stability management [3]

Financial stability of a small enterprise is characterized by the strength of financial and economic positions and the degree of independence from external sources of enterprise resources. It depends on the state of the small enterprise’s own funds and their availability in circulation. Sustainability can be ensured only if the stable sale of products (works, services), timely payment and receipt of revenue, sufficient in volume to fulfill the obligations of a small enterprise to the budget, suppliers, creditors, employees and the like.

Consequently, the financial stability of a small enterprise implies a movement of its cash flows, which would ensure a constant excess of income over expenses. Thus, the financial stability of a small enterprise is the state of its financial resources and their use, in which the enterprise, freely maneuvering funds, will provide a continuous process of development of its economic activity [4].

Each business entity seeks to achieve and maintain a stable financial condition, liquidity and solvency. One of the main problems of the successful operation of enterprises in Ukraine today is the lack of a comprehensive assessment of financial stability, which would provide management with the opportunity to timely identify weaknesses and make the right decisions regarding the financial development of the enterprise. The most effective and relevant to modern business conditions is an approach to a detailed analysis of private indicators, as they can be used to fully analyze the results of the company, to identify the causes of changes in specific indicators and with proper management of financial managers to eliminate the negative consequences.

Small and medium – sized enterprises-the name of a group of enterprises that do not exceed certain indicators. Otherwise, they are classified as large enterprises. Classification is carried out mainly regardless of the legal form of the enterprise.

In Ukraine, the SME sector covers 99.9% of the total number (1.97 million) of enterprises and individual entrepreneurs registered as of 2015.

Table 1

Number of business entities with distribution by their size [5]

Together Large Medium Small

(without micro)

Micro
2010 2183928 586 21338 68316 2093688
2011 1701620 659 21059 71083 1608819
2012 1600127 698 20550 68103 1510776
2013 1722070 659 19210 65021 1637180
2014 1932161 497 16618 55159 1859887
2015 1974318 423 15510 47555 1910830

By types of economic activity in the structure of small and medium-sized enterprises, the largest share (27%) was engaged in wholesale and retail trade and repair of vehicles, 14% – agriculture, forestry or fisheries, 12% – industrial production, 9.5% – real estate operations, 9% – construction, 8.5% – professional and scientific and technical activities, 4.5% – transport, warehousing, 4.5% – administrative services, 4% – information and telecommunications, we, 2% – temporary accommodation and catering, 1% – education, 1% health, 1% – arts, sports, entertainment, 1% – providing other services.

Analyzing the financial results of the activities of enterprises, it should be noted that over 44% of large enterprises, small and medium – sized enterprises-respectively 26 and 29 percent-received a loss by types of economic activity. Among industrial enterprises 52% of large enterprises, 33% of medium and 26% of small ones were unprofitable.

Fig. 2. Number of unprofitable enterprises [6]

The analysis of the status and problems of development of the financial state of small business in Ukraine shows that further development of the situation without the active and positive intervention of the state can lead to a reduction (primarily through further tentatio) this sector of the economy with the corresponding aggravation of the economic problems and increasing social pressure. Therefore, there is a need for an effective state policy to support small businesses.

Summary. Analysis and evaluation of financial stability is an important step in assessing the financial condition of the enterprise. Internal and external users of information are interested in the results of the research, as this information provides us with opportunities to implement effective management decisions in order to improve and ensure sustainable development, prevent bankruptcy and improve competitiveness in a market environment. Therefore, the main task in ensuring financial stability should be the creation of such a state of financial resources of the enterprise and ensure a high degree of their use, in which it is freely maneuvering cash, will be able to ensure the smooth process of production and sales.

References

  1. Dahno I. Foreign economic management – 200. – P. 232-233.
  2. Priymak I. Strategy of ensuring financial stability of economic entities in the economy of Ukraine / thesis for the degree of candidate of economic Sciences. Lviv-2007.
  3. Tarasenko N. Economic analysis: Practicing. Textbook. – Lviv: “New World-2000” 2006. – 280 p.
  4. Vasiliev T. G., O. L. Elyash, Hard N.G. , Saving small businesses. – P. 315-319.
  5. The Ministry of economic development of Ukraine together with the EU project FORBIZ prepared a draft Strategy for the development of small and medium-sized businesses. Aiteu: Analytics, news it-business and the state. 17 November 2016.
  6. [Electronic resource]. – Access mode: http://platforma-msb.org/analiz-statystychnyh-pokaznykiv-rozvytku-pidpryyemnytstva-v-ukrayini-u-2015-rotsi/

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