Indicator analysis in the assessment of financial condition selected municipal companies in Krakow

Abstract

Purpose of the study: The aim of the paper was to assess the financial efficiency of Krakow's municipal companies operating in the water supply and sewage, heating, purification and public transport. The analysis was intended to draw conclusions on the profitability, efficiency and financial liquidity of selected municipal enterprises. The assessment was made on the basis of their capital and property structure and indicator analysis.

Methodology: To assess the surveyed Companies, four groups of financial indicators were used: liquidity, debt, turnover and profitability. The analysis covered the years 2017-2021 and was of a comparative nature. The results were compared with generally accepted standards, over time and between the Companies.

Main findings: The surveyed companies are characterized by the predominance of fixed assets over current assets, which results from the peculiarity of the municipal sector. The level of immobilization of assets in fixed assets ranges from 80 to 93%. Current assets are mostly short-term dues resulting from the supply of products and services and short-term investments securing the financial liquidity of the Companies. The level of indebtedness of the surveyed Companies is within the accepted standards; the highest share of foreign capital in liabilities occurs in the Transport Company – 71%. The surveyed companies are characterized by a relatively constant, rather low productivity of assets, as well as a similar, relatively constant rotation of dues and inventories. Despite the differences in the size of their assets and the generated revenues and profits, Krakow's municipal companies are profitable and mostly have no problems with excessive debt or financial liquidity.

Applications of the study: The analysis contained in the paper may be useful for financial managers in municipal companies and for local authorities.

Originality/Novelty of the study: The peculiarity of the functioning of municipal companies means that the analysis of their effectiveness is not simple and unambiguous. Due to the goal set for municipal entities – satisfying the needs of residents, assessing their profitability or productivity of fixed assets must be careful. The paper analyzes the current data of four municipal Companies, the results of the analysis may inspire a deeper analysis that would cover a larger group of enterprises and subsequent years of operation.