FORECASTING THE ECONOMIC STABILITY OF AN ENTERPRISE ACCORDING TO ACCOUNTING DATA

Abstract. The work explores how financial ratios, accounting data, and industry benchmarks can be used to assess the company's financial health and make forecasts for future performance. It provides insights into the methods and tools used to forecast the economic stability of an enterprise, and suggest best practices for using accounting data and financial ratios to improve the financial health of a company.

Keywords: economic stability, accounting data, financial forecasting, limitations, industry benchmarks, financial analysis

Introduction

In recent years, the domestic economy has been marked by significant fluctuations, making it more challenging for businesses to maintain stability and growth. Therefore, businesses must use forecasting methods to anticipate economic changes and develop strategies to mitigate potential risks and maximize opportunities. The purpose of the article is to investigate and analyze the methods and tools used to predict the financial stability of a company. The article would be useful for business owners, financial analysts, and investors who are interested in assessing the financial health of a company and making informed decisions about its future.

The accounting data that is needed to make accurate forecasts of a company's financial performance includes:

1. Historical Financial Statements: It includes the company's income statement, balance sheet, and cash flow statement for at least the past three years.

2. Sales Data: the company's sales revenue and sales volume for the past three years that can be used to forecast future sales growth and revenue.

3. Cost Data: the company's cost of goods sold, operating expenses, and other costs for the past three years to forecast future expenses and profitability.

4. Industry Benchmarks: data on the financial performance of other companies in the same industry as the company being analyzed to compare the company's financial ratios to industry averages.

5. Economic Data: This includes data on economic indicators such as interest rates, inflation, and GDP growth to forecast how the broader economic environment may impact the company's financial performance.

Industry benchmarks can be used to compare a company's financial ratios to those of its competitors in the same industry. This allows financial analysts to identify areas where the company may be underperforming relative to its peers, and make recommendations for improvement.

The first step is to identify industry benchmarks for the financial ratios being analyzed. These benchmarks may be available from industry associations, financial databases, or other sources. Next, the company's financial ratios are compared to the industry benchmarks. If the company's ratios are significantly different from the benchmarks, this may indicate that the company is underperforming relative to its competitors. Once the company's ratios have been compared to the industry benchmarks, financial analysts can identify specific areas where the company may need to improve its performance. For example, if the company's profit margin is lower than the industry average, this may indicate that the company needs to focus on reducing costs or increasing revenue. Finally, financial analysts can develop recommendations for how the company can improve its financial performance based on the areas of improvement. These recommendations may include changes to the company's business strategy, cost-cutting measures, or other actions designed to improve profitability. Industry benchmarks provide a valuable tool for comparing a company's financial ratios to those of its competitors, and identifying areas where the company may be underperforming. By using industry benchmarks in conjunction with other financial analysis tools, financial analysts can make informed recommendations for improving the company's financial performance.

Case studies

There is a manufacturing company based in Kazakhstan that produces and sells consumer goods. In order to assess its economic stability, the company's financial analysts decide to use financial ratios and industry benchmarks to forecast the company's financial performance.

First, the analysts gather relevant accounting data, including the company's balance sheet, income statement, and cash flow statement. They then calculate key financial ratios, such as the current ratio, quick ratio, debt-to-equity ratio, and gross profit margin. These ratios help the analysts to assess the company's liquidity, solvency, and profitability. Next, the analysts compare the company's financial ratios to industry benchmarks for similar companies in Kazakhstan. For example, if Corporation's current ratio is lower than the industry average, this may indicate that the company has insufficient liquidity to cover its short-term obligations.

Based on the financial ratios and industry benchmarks, the analysts then develop a forecast of the company's financial performance for the next year. They take into account factors such as expected changes in consumer demand, commodity prices, and government policies. This forecast allows Corporation to anticipate potential challenges and opportunities, and to develop strategies for maintaining its economic stability and long-term growth.

There are several challenges and limitations of using accounting data and financial ratios according to the previous list:

1. Limitations of Historical Data: Financial ratios are based on historical data, which may not be an accurate predictor of future performance. The economy is constantly changing, and past performance may not be indicative of future trends.

2. Inaccurate Data: Accounting data can be subject to errors or manipulation, which can make it difficult to rely on for accurate forecasts.

3. Changes in Accounting Standards: Changes in accounting standards can make it difficult to compare financial ratios over time or across different companies.

4. Lack of Industry Benchmarks: In some industries, there may be a lack of industry benchmarks or data available for comparison. It would be difficult to assess a company's performance relative to its competitors.

5. External Factors: Economic stability can be impacted by external factors such as changes in government regulations, geopolitical events, and natural disasters. It is important to note that all the data may have limitations and should be used in conjunction with other analysis tools and consideration of external factors.

Recommendations for developing a forecast of a company's financial performance using accounting data and financial ratios:

Collect and organize all relevant accounting data, including historical financial statements, sales data, cost data, and industry benchmarks. Calculate key financial ratios that are relevant to the company's industry and business model. These ratios may include liquidity ratios, profitability ratios, and efficiency ratios. Analyze the financial ratios and identify trends and areas of improvement. Compare the company's financial ratios to industry benchmarks and identify areas where the company may be underperforming. Use the financial ratios and analysis to develop a financial forecast for the company. This forecast should take into account external factors such as changes in the economy or industry trends. Regularly monitor the company's performance against the financial forecast and adjust the forecast as necessary based on actual performance.

Conclusion

In conclusion, forecasting the economic stability of an enterprise according to accounting data is a crucial process for businesses to achieve financial success in modern conditions of the development of the economy. Financial ratios are essential tools for forecasting and can be used to analyze a company's financial performance over time, identify areas of improvement, and benchmark performance against industry standards. However, there are limitations and challenges associated with using accounting data and financial ratios to forecast economic stability, such as historical data limitations, inaccurate data, changes in accounting standards, lack of industry benchmarks, and external factors.

To develop an accurate forecast of a company's financial performance, businesses should gather all relevant accounting data, calculate key financial ratios, analyze the data, and develop a financial forecast based on the analysis. Using this information to improve the company's financial health involves identifying areas of improvement, developing an action plan, implementing changes, and regularly evaluating the company's performance against the forecast and action plan. Forecasting the economic stability of an enterprise according to accounting data is an ongoing process that requires careful attention to detail and a willingness to adapt to changing economic conditions. By using financial ratios and other analysis tools in combination with consideration of external factors, businesses can make informed decisions that help them achieve their financial goals and maintain stability in a rapidly changing economic environment.