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Financial Analytics: Science and Experience
 

The specificity and advantages of using illustrative balance sheet models to analyze corporate financial position

Vol. 8, Iss. 16, APRIL 2015

PDF  Article PDF Version

Available online: 1 May 2015

Subject Heading: ASSESSMENT AND APPRAISAL ACTIVITIES

JEL Classification: 

Pages: 27-44

Sizykh N.V. Moscow State Industrial University, Trapeznikov Institute of Control Sciences, RAS, Moscow, Russian Federation
sizykh_n@mail.ru

Sizykh D.S. Trapeznikov Institute of Control Sciences, RAS, Moscow, Russian Federation
D.Sizykh@gmail.com

Importance Illustrative balance sheet models can be used as an effective tool to analyze indicators of financial position. The models reduce time spent to process information, and scope of such information, with evaluation and assessment results remaining accurate in line with generally accepted methods. Currently, there are methods for an illustrative analysis of financial performance indicators that are based on a matrix balance sheet approach. However, they fail to become widely adopted since they evaluate only dynamic changes in assets and liabilities. To increase analytical potential of a matrix balance sheet, it should be improved, thus generating an illustrative balance sheet model for analyzing the financial position of an entity.
     Objectives The research aims at devising effective and illustrative methods to evaluate various absolute financial indicators of the entity using the entity's matrix balance sheet. As part of its tasks, the research pursues improving and updating a balance sheet model, as well as preparing an illustrative balance sheet model to evaluate absolute financial indicators, corporate capital structure and analyze it respectively.
     Methods Using the corporate matrix balance sheet, method for distribution of assets and liabilities, econometric methods, comparative analysis, we examine and devise illustrative methods for evaluating various absolute indicators of corporate financial position.
     Results Based on an improved variant of the matrix balance sheet, we outline new methods to perform a quick and illustrative evaluation of absolute indicators of liquidity and solvency, net working capital, net assets, evaluation and analysis of capital structure, and present the results of testing the methods.
     Conclusions and Relevance We conclude that the illustrative balance sheet model can be effectively used to carry out a quality, quick and rather accurate analysis of the entity's financial position, asset finance structure. It will help timely identify a critical point of time and take appropriate managerial decisions.

Keywords: matrix balance sheet, company, financial performance evaluation, absolute, liquidity, solvency, indicators, net working capital, evaluation, capital structure

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