Diagnosis of the Viability of Industrial Companies with Treasury Sensitivity Coefficient

• Author: Bogdan Andronic - Vadim Dumitrascu
• Position: Professor, PhD, 'Danubius' University of Galati
• Pages: 193-199

Performance and Risks in the European Economy

193

Diagnosis of the Viability of Industrial Companies with Treasury

Sensitivity Coefficient

Bogdan Andronic

1, Vadim Dumitraşcu2

Abstract: Generally, the firm viability can be defined as the ability to ensure a profitable activity in terms of

financial equilibrium. Therefore, estimation of viability can be achieved by determining specific profitability

and equilibrium indicators to determine the extent to which the economic surplus released by the compan y's

activity, manages, depending on the particularities of the economic and financial structures set up, to turn into

cash. This happens because profitability alone is not sufficient to ensure the financial soundness of the

company.

Key words: cash flow; assets; elasticity; self-financing; equity

1. Introduction

The treasury sensitivity coefficient relevance for assessing the financial viability, is given by the fact

that its main elements can be decomposed into rates of return, of financial structure, of leverage ratio

and assets and liabilities rates, that, within the diagnosis, may provide clearly indices on the financial

situation of the firm. The relationship between financial viability and value of the company can be

highlighted by incorporating the treasury sensitivity coefficient in assessment calculations.

2. Body of Paper

A profitable company can encounter great difficulties in terms of liquidity and, generally, in the

capacity of payment. However, any company that registers a positive variation of treasury (cash flow)

is, at the same time, profitable. (Thauvron, 2007) The indicators of profitability and equilibrium allow

only an overall estimation of viability, without shading the subtle effects of specific influence factors.

An more expressive indicator could be the treasury sensitivity global coefficient (

):

where: iNT - net treasury growth index;

iGOS - gross operating surplus growth index

1 Professor, PhD, “Danubius” University of Galati, Address: 3 Galati Boulevard, 800654 Galati, Romania, Tel.:

+40.372.361.102, Fax: +40.372.361.290, Corresponding author: bogdanandronic@univ-danubius.ro.

2 Associate Profesor, PhD, “Dimitrie Cantemir” University o f Bucharest, Romania, Address: 176 Splaiul Unirii, Bucharest

030134, Tel.: +4021 330 8931, E-mail: vadimdu@yahoo.com.