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Profitability Evaluation Methods – A Strategy For Romanian Companies To Avoid Insolvency

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  • SABAU CATALIN

    (BABES-BOLYAI UNIVERSITY, CLUJ-NAPOCA, ROMANIA)

Abstract

Addressing economic strategies for determining the stability and financial position of the companies has become a very topical issue in recent years due to the financial crisis manifested worlwide in 2008 and which led to the start of insolvency proceedings for a considerable number of Romanian companies , which often resulted in bankruptcy for the firms concerned. Beside the international macroeconomic context, another issue that we consider essential and which led to the bankruptcy of Romanian companies is the lack of emphasis on financial analysis and diagnostic methods in determining a company's profitability and financial prospects of development in the short, medium and long term. Precisely for this reason a large number of Romanian companies fall prey to unsustainable financial commitments, often have low liquidity and the rate of equity return (ROE) is below the industry average thus denoting a lack of real competitive capabilities. This article seeks to highlight the positive contribution that can be implemented in the awareness of management regarding stability and the financial position of the company wchich is evaluated in order for the managers to make the necessary arrangements in time for the recovery, efficiency and sustainable implementation of a medium and long term business plan by analyzing the concepts of capitalization and upgrading but also but also by analyzing the evaluation method based on determining the beneficiary capacity; cash flow and discounted cash flow method.

Suggested Citation

  • Sabau Catalin, 2015. "Profitability Evaluation Methods – A Strategy For Romanian Companies To Avoid Insolvency," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 142-146, January.
    • Handle: RePEc:cbu:jrnlec:y:2015:v:1i:p:142-146
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    References listed on IDEAS

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    1. Julio Pindado & Luis Rodrigues, 2005. "Determinants of Financial Distress Costs," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 19(4), pages 343-359, December.
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