What If the Enterprise Value Doesn’t Grow? Evidence from Romanian Steelmaking Companies

Title

What If the Enterprise Value Doesn’t Grow? Evidence from Romanian Steelmaking Companies

Author

Viorica Mădălina ION

Classification JEL

G32, G33, G34, D46.

Abstract

The question investigated in this paper’s is what happens to a company that doesn’t grow its value? The analysis focuses on Romanian steelmaking companies in insolvency or incurring losses for many years. The basic methodology used is the analysis of the indicators (working capital, total assets, retained earnings, book value, total liabilities, and net sales) from the corporate income and balance sheet and to measure the Z1-score for predicting bankruptcy and for the financial distress status of privately held manufacturing companies. The major findings include the results for the financial health of a Romanian steelmaking company with tradition such as COS TARGOVISTE S.A., in insolvency, suspended from trading on the Bucharest Stock Exchange in 2013. The key quantitative results show high likelihood of bankruptcy in 2018 and how the company value decreased. The discussion raised is how companies can avoid destroying their value? If the companies fail to increase their value, they should find the ways to avoid destroying it, else they will not be able to resist in the actual competitive environment and go bankrupt. In the conclusion, planning for and acting on emerging technologies and trends is the key for the companies’ survival.

Keywords

capital, assets, earnings, enterprise value, Z1-score.

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Please cite this article as: etimm (2018) What If the Enterprise Value Doesn’t Grow? Evidence from Romanian Steelmaking Companies. Journal of Emerging Trends in Marketing and Management. http://www.etimm.ase.ro/?p=486