The impact of total capital on the financial stability and solvency of agricultural enterprises

Background. The study provides definitions of “capital”, “total capital”, “financial stability”, “solvency”, and analyzes the influence of the composition and structure of total capital on the financial stability and solvency of agricultural formations. The study was based on general scientific methods of cognition. The study examined the history of the development of the definition of “capital” and its components, systematized the risks that have a negative impact on the solvency and financial stability of agricultural enterprises. The article defines the components of the total capital of agricultural enterprises, examines their relationship, as well as the relationship between financial stability and solvency, selects indicators that most fully characterize the level of financial stability and solvency of economic entities, analyzes the impact of total capital on the financial stability and solvency of agricultural enterprises. The study formulates the main problems that have a negative impact on the composition and structure of total capital and, as a consequence, on the financial stability and solvency of agricultural enterprises, and suggests directions for optimizing the composition and structure of total capital that can have a positive impact on the level of financial stability and solvency of agricultural businesses.

Purpose. The purpose of this study is to examine the impact of total capital on the financial stability and solvency of agricultural enterprises.

Materials and methods. The study was based on the following methods of knowledge: static, dialectical, logical, comparative, and also used the methods of modeling, formalization, synthesis, induction, deduction, analysis, grouping, observation, absolute, relative, average values.

The empirical basis of the study was the main forms of accounting statements of agricultural businesses operating in the southern regions of the Rostov region, as well as official statistics.

The scientific and methodological basis of the study was the legislatively enshrined principles of drawing up accounting and statistical reports, methods of analyzing financial stability and solvency, articles of domestic and foreign accounting in scientific publications, materials of scientific and practical conferences, monographs.

Results. Optimal interaction of the components of the total capital ensures effective management of an agricultural enterprise in modern business conditions and has a direct impact on its financial stability and solvency.

The study showed that all enterprises where equity capital occupies a predominant share in the financial capital are more financially stable than those that carry out statutory activities at the expense of borrowed sources of financing.

The share of debt coverage of agricultural enterprises depends to a greater extent on the amount of financial capital in the structure of total capital, that is, the larger the share of equity capital in the total capital, the greater the likelihood of timely coverage of debt obligations to counterparties. The probability of repaying current debt is higher for those enterprises that have a large share of borrowed capital in the total.

The lowest level of total solvency is observed at an enterprise with a large share of borrowed capital.

Thus, the ratio of financial capital components in the total capital affects the level of financial stability and solvency of agricultural enterprises. Physical capital as part of total capital has an indirect impact on the financial stability and solvency of agricultural enterprises.

Conclusion. Different forms of ownership and sizes of the enterprises under study do not have a significant impact on the composition and structure of their total capital. This fact has a negative impact on the level of their financial stability and solvency, which suggests the need to develop measures to optimize the composition and structure of the capital of enterprises, taking into account the conditions for implementing their statutory activities.