A New Approach to the Capital Adequacy Assessment of Companies

Sa？etak The author proposes a new model for assessing a company‘s insolvency risk. The model is based on financial statement data available from companies‘ annual reports, meaning that the results can be obtained for investors, banks and other interested parties. It is an excellent tool for performing a fast analysis of business partners and their financial stability. Three main indicators are formulated; these are also mathematically connected. They therefore enable the analyst to obtain more than 19 quantified statements about a company‘s financial balance. Indicators are based on a theoretical background of net working capital, which is compared with long term liability requirements. They are suitable for analyzing a particular industry as a whole. Indicators are empirically tested on the sample of 1,856 companies in Slovenia over three years