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Indicators of financial stability for needs of municipalities

Indikátory finanční stability pro potřeby obcí

Irena Szarowská (), Ingrid Majerová () and Jarmila Šebestová ()

Český finanční a účetní časopis, 2018, vol. 2018, issue 1, 25-45

Abstract: Financial stability of municipalities is an important aspect for long-term sustainable development and disproportionate debt can generate risks for their standard functioning. Although there are many methodologies for assessing the financial stability of municipalities, they are usually based on central government needs and are not used for financial management and planning. The aim of the article is to develop a set of indicators for assessing financial stability for needs of municipalities by using publicly available information. The selected indicators highlight two basic assumptions important for short and long-term budget balance and sustainability of funding. Concretely, the balance of the current budget should always be positive and the maximum debt service should not exceed the surplus of the current budget. The set of indicators includes three groups of indicators: budgetary management (7 indicators), indebtedness (8 indicators) and liquidity (3 indicators). There is a clearly defined and interpretable assessment for each indicator in terms of financial stability and potential risks.

Keywords: Municipality; Budget; Financial stability; Indebtness; Liquidity; Obec; Rozpočet; Finanční stabilita; Zadluženost; Likvidita (search for similar items in EconPapers)
JEL-codes: H7 R5 (search for similar items in EconPapers)
Date: 2018
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Český finanční a účetní časopis, Vysoká škola ekonomická v Praze, nám. W. Churchilla 4, 130 67 Praha 3

DOI: 10.18267/j.cfuc.508

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