Improvement-Based Approach for Control over Solvency of Commercial Organizations in the Context of Prediction of Preferred Capital Structure

Khachatur Baboyan ()

Journal Transition Studies Review, 2022, vol. 29, issue 1, 65-82

Abstract: In line with the current developments and expected new challenges in the world economy, there is an objective need to comprehensively improve commercial organizations’ financial management system and control processes in place. This research aims to establish a direct link between the training model developed by us for forecasting the capital structure of organizations and the process of monitoring solvency by offering new solutions. Methods of statistical and comparative analysis, as well as forecasting methods, are used. To this end, the approach of D. Durant was chosen from among the approaches to classifying the solvency of organizations. Within the scope of this article, this method has been carried out for several Armenian companies, such as “Proshyan Brandy Factory” LLC, «Vedi Alco» CJSC, and «Arge Business» LLC. As a result of the study, the authors identified three main indicators (the value of economic profitability, the values of the current liquidity index and the autonomy index), which were predicted using a new training model. The classification zones according to the D. Durant approach were also defined, as well as the ranges for their determination. The key conclusion of the study is the thesis that the proposed approach helps solve the problems of strategic financial management of commercial organizations and improve the process of monitoring solvency.

Keywords: ROA; capital requirements; financial leverage; prediction of preferred capital structure (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ase:jtsrta:v:29:y:2022:i:1:p:65-82:id:433

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