Assessment of the relationship between liquidity and unprofitability of companies in preventing their bankruptcy

In the current conditions of the Ukrainian economy, which is characterized by crisis phenomena and frequent changes in legislation, the insurance organizations are facing a number of difficulties in maintaining their financial sustainability. Moreover, these processes take place under the increased requirements for solvency of insurers. However, a significant part of domestic insurance companies is financially unstable, which is conditioned not only by the lack of funds, but also by the low level of management. This situation hinders the further development of the insurance market in Ukraine and has a negative impact on all areas of the domestic financial system and prevents it from successful integration into the European financial field. In order to address this problem, it is necessary to distinguish the key groups of risks that affect the financial sustainability of insurance organizations, among which there are the following: insurance, strategic, market risk, risk of inefficient capital structure, risk of limiting the insurance company’s liquidity, tax risk, investment risk, operational risk, the risk of ineffective organizational structure of the enterprise, and information risk. It should be noted that under conditions of changing environment, the impact of these risks only increases, and therefore the task of minimizing the impact of these risks on the activities of insurance companies is highly important. Accordingly, the authors of the article proposed a four-stage strategy to manage the financial sustainability of the insurance company, the purpose of which is to identify the risks of limiting the insurer’s financial sustainability, their qualitative and quantitative assessment, as well as the development and implementation of appropriate measures to minimize and eliminate unacceptable consequences.

The creation and growth of new enterprises and, on the other hand, their decline and market exit are crucial factors of business dynamism and economic growth. Thus, business dynamism is an important aspect in the market chain and productivity of an economy, as well as a trigger for market reforms. The aim is to analyze business dynamism using Global Competitiveness Index 4.0 and its variables worldwide and to verify the relationship between business dynamism in the EU states and economic characteristics such as Valued added at factor cost, Enterprise Birth Rate and Enterprise Death Rate. Data were collected from the 2019 Global Competitiveness Report and from the EUROSTAT database, using the most recently updated source for each indicator. The 11th pillar of the Global Competitiveness Index, focused on business dynamics, and a set of indicators were analyzed using PCA to verify if all the variables are effective representatives of the concept. It was found out that the pillar does not effectively represent the concept of business dynamism in case of the EU countries; therefore the new pillar was constructed. A strong and statistically significant correlation between business dynamism and Value Added was confirmed. A relationship between business dynamism and other economic indicators was not proven. From a territorial point of view, Oceania achieved the best overall result in the analyzed field. The process of starting a new business is the most challenging in terms of start-up costs in South America. By contrast, the EU has reached the best result in this process.

This study applied Altman Z-score model to assess the bankruptcy risk of a set of multidisciplinary enterprises of various types, mainly small and medium enterprises, with data taken from official financial reports of 180 enterprises in Soc Trang province. The binary logistic regression was employed to assess the impact of non-financial and financial factors on the bankruptcy risk of enterprises. The research findings showed that both the non-financial factors such as business area, types and size of the business, the educational level of managers and executors and other characteristics, and the financial factors (indicators) such as earnings before tax, net profit/equity ratio, earnings before interest and tax/total assets ratio, equity/total debt ratio, affect the bankruptcy risk of enterprises. Predicting the bankruptcy risk and measuring its determinants play an important role not only as an effective managing tool of the business, but also as evidence for policymakers to support the sustainable development of business.