Development of Comparative-Quantitative Measures of Financial Stability for Latvian Enterprises

Financial stability has drown serious attention from companies that are operating in the condition of world crises. Finding in approaches of prediction of financial stability level should be good directions in improving the financial stability. This report presents development and practical implementation of theoretical model of evaluation of financial stability of company, described in report “Selecting the right tool for evaluation of solvency: case from Latvia”, by authors N. Koleda and N. Lace in 2008. Bankruptcy predictions and solvency measurements have become important research topics after Beaver (1966) and Altman (1968) used the financial ratio methodology in analysis. 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 recent context of dynamic changes in business environment the theory and practice of financial management has faced an urgent question of what is the most appropriable method of evaluation of financial stability of company and what theoretical and methodological awareness is necessary seeking to minimize the risk of bankruptcy of company of the 21 century. The main points reviewed in this paper are 1) the methods of evaluation of financial stability and prediction of bankruptcy; 2) the grade assessment of the methods analyzed; 3) new approach of complex evaluation of financial stability 3) evaluation of financial stability of Latvian companies based on developed combined approach