Financial stability is the basis for the economic development of an individual enterprise and the state as a whole

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:55

Security and stability is the basis for the development of society. Constant revolutions and coups leading to a change in political course rarely contribute to raising the economy to a new level. And even if this happens, it is only after years of gradual evolutionary development. Therefore, the internal stability of the state determines what future awaits its citizens in both the short and long term.

Micro and macro level

This rule applies to the individual as well. If you constantly change your hobby, then as a result you can hardly learn something. Achieving goals both at the individual and at the state level always occurs in two stages: choosing the right strategy and urgently executing the agenda for a sufficiently long period of time.

Political stability

ImageThe state is formed under the influence of a number of factors. One of the most important of these is its ability to maintain its political course for a long time and ensure a high level of public confidence in the current government. The legal aspects of doing business in a country largely determine the financial component of sustainability, so it is important to understand what parameters affect it. Among them, the main ones are:

• The effectiveness of the political system.
• Coordination of the actions of public organizations and the desires of the population.
• High level of trust in government.
• Legitimacy and democracy of the regime.
• Clear legal structure.
• Correct distribution of powers.
• Protection of human rights.
• Agreeing formal and informal rules.
• No strong class stratification and conflicts between different groups.

Financial sustainability of the enterprise

Survival in a market economy is associated with a constant desire to improve production efficiency. This is achieved through the introduction of advanced achievements of science and technology, a more rational organization of labor, and motivation of personnel activity. But in order to be able to implement these positive changes, the enterprise must be financially stable. Otherwise, any unsuccessful move or unexpected change in market conditions - and it is on the verge of bankruptcy. Therefore, financial stability is the mainobject of analysis of the current state of the enterprise.

Assessment of the current situation

The financial condition of an enterprise is characterized by the resources that ensure its normal functioning and solvency. It can be crisis, unstable and stable. A number of indicators are used for evaluation:

• Structure of assets and liabilities.
• Efficiency in the use of capital.
• The creditworthiness of the enterprise.
• Solvency.
• Financial stability reserve.

The stability of an enterprise is influenced by a combination of factors: market position, product quality, potential, degree of dependence on investors and creditors, insolvency of debtors, production efficiency and staff productivity.

Building business sustainability

The variety of factors that influence the current situation in the enterprise determines that stability is a combination of three main components. Internal stability is a financial condition in which a constantly high result of functioning is ensured. The overall stability of the system reflects such a cash flow in the enterprise, which provides an excess of income over expenses. Financial stability allows you to maneuver in the market and contributes to the uninterrupted process of production and sale of goods. The coefficients obtained during the assessment are compared with average or normal indicators, which allowsset the current state of the enterprise.

Stability Factors

Financial stability is affected by both the parameters of the internal and external environment. The first group primarily includes the amount of profit, if it is sufficient to cover costs and ensure the modernization of equipment. Profit sufficiency depends on the quality and range of goods, enterprise reserves, stocks, the correctness of the strategy and objectives, the rationality of financial management. The external stability of an enterprise is determined by the economic environment in which it operates. Its components are the level of development of the national economy, the place in the industry, competitive advantages, relationships with local and government agencies, as well as customers, investors and creditors. In addition, financial stability is affected by material, political, non-market, superficial and other factors.

Problems of insufficient resources

The crisis or unstable state of the enterprise is manifested in a decrease in solvency and liquidity, an increase in accounts receivable and expenses. Current and prospective financial stability is an object of analysis for any enterprise. Based on its assessment, strategic plans are built and the agenda is formed. In addition to insufficient stability, sometimes there is excessive stability in the enterprise. This is also bad for functioning, as this state of affairs means that free financialresources are used inefficiently.

Thus, ensuring the objectively necessary level of enterprise stability is the main task of management. It is on its implementation that a cloudless future and business expansion prospects depend.