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SELECTION OF CRITERIA AND DEVELOPMENT OF THE FINANCIAL TRANSPARENCY EVALUATION ALGORITHM
Abstract
In most cases the uncertainty of future business development makes it hard for an investor to opt for the one of many enterprises to invest. In conditions of uncertainty it is recommended to invest in companies with a good reputation, since such investments are regarded as less risky. In such a situation the attention is increasingly turned to the companies which meet the consumersВ’ needs: trade, food production, construction. It is known that the value of business is considered to be the main indicator of the companyВ’s reliability and attractiveness for investors. However, the financial transparency of the enterprise is an equally important factor in the investment attractiveness. The financial transparency is expressed in availability of reporting information on the current state of the enterprise and the companyВ’s operation prospects. The investor wants to be aware of not only the current financial state of the enterprise, but also the dynamics and reasons for its change for a certain period of time, and to identify the prospects for the development of the enterprise as well. Considering both the value of the business and the financial transparency the investor has a more accurate prognosis regarding to the companyВ’s position on the market in the future. Consequently, the decision of the investor concerning investments in a certain enterprise can be defined as more justified, as it is based on the public financial reporting. In the paper the financial transparency evaluation algorithm based on the selected criteria is suggested and tested. This algorithm allows the investor to make a decision in favor of the companies with the high financial transparency, profitable for investment. The paper more specifically focuses on the investment attractiveness of construction companies in Krasnoyarsk, a major industrial center in the south-eastern part of Russia, though it should be mentioned that this algorithm can be used for companies in another manufacturing sector as well.
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