RELEVANCE OF FINANCIAL BALANCE INDICATORS FOR DIAGNOSING AN ENTITY'S FINANCIAL POSITION

Gadoiu Mihaela and Banuta Mariana
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Gadoiu Mihaela: FACULTY OF ECONOMIC SCIENCES AND LAW, NATIONAL UNIVERSITY OF SCIENCE AND TECHNOLOGY POLITEHNICA BUCHAREST, PITESTI UNIVERSITY CENTER, ROMANIA
Banuta Mariana: FACULTY OF ECONOMIC SCIENCES AND LAW, NATIONAL UNIVERSITY OF SCIENCE AND TECHNOLOGY POLITEHNICA BUCHAREST, PITESTI UNIVERSITY CENTER, ROMANIA

Annals - Economy Series, 2023, vol. 4, 124-131

Abstract: This paper is focused on identifying the economic-financial indicators necessary for the correct and complete diagnosis of the financial position of an entity. Specifically, it highlights the need to use financial balance indicators in knowing how the entity's management succeeds or fails to achieve its major objective, namely maximizing the entity's value. The consistent achievement of the major objective of an entity can only take place under the conditions of a profitable activity and maintenance of financial balance. So, starting from this aspect, the importance of analyzing the financial balance can be seen, as well as the correlation with the entity's performance. The analysis of the financial balance is obtained by means of indicators determined with the help of information from the balance sheet, namely the net position, the working capital, the need for working capital and the net treasury. Achieving financial balance can be achieved by adjusting the imbalances that manifest in the entity's current activity, more precisely between its financial sources and its resource needs. In order to ensure a state of perfect equilibrium, all the due dates of the payments or receipts should be perfectly correlated, which is very difficult to achieve in the practical activity of the entity because most of the time, the receipts precede the payments and thus are released a profitable activity.

Keywords: financial analysis; financial diagnosis; financial position; financial balance; economic and financial indicators (search for similar items in EconPapers)
Date: 2023
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