The deficiencies in the construction of methods of complex evaluation of enterprises

Marek Vochozka and Marie Padrtová

Littera Scripta, 2011, vol. 4, issue 2

Abstract: Experts as well as uninitiated public often call for more simple methods of company evaluation, respectively the assessment of the financial health of the company. Currently, there are many methods that enable to identify the financial situation of the company. It is primarily the assembling of the financial ratios of Schmalenbach’s society (Synek, 2009, 2010), the assembling of so called new indicators that attempt to evaluate the company financial health within the one simple value (added economic value, added market value and others), and assembling of methods of the complex evaluation of an enterprise based on ratio indicators. Financial Analysis by Schmalenbach’s society is built on exact inputs (unfortunately features of the past), but interpretation of the results is very complicated and based on the recommendations and experiences of the evaluator. In relation to the interpretation of results, this financial analysis of financial ratios can be assessed as a benchmarking model. The second group of indicators has a very simple informative value – the result is given as one number, which can be apprised totally objectively by evaluator. The input data are derived from the degree of the risk in most such methods, and therefore distorted by the subjective perspective of the evaluator or of expert view of agencies. The last group (Altman’s index, IN indexes, and others) are built on the mutual relation of ratios indicators and of development of business environment at the time of creation of each method. There is currently no method or system of methods that would give a totally reliable and easily interpretable result. The paper will focus the third group of indicators and will analyse the deficiencies that predispose the selected methods to fail in today’s business environment. Nedostatky v tvorbě metod komplexního hodnocení podniků

Keywords: bankruptcy model; credibility model; assessment; financial health; bankrotní model; bonitní model; hodnocení; finanÄ ní zdraví (search for similar items in EconPapers)
Date: 2011
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