Proceedings

concerning investment, composition of circulating asset and short-term commitments
have a greater importance than the information about the values of assets and longterm
commitments. A potential investor interest is particularly directed to the
company's ability to generate profit.
The analysis and assessment of financial risk can be based on financial leverage ratio
(CLF). This ratio expresses the sensitivity of the exercise net result to the changes in
operating result:
ΔRnet
/ Rnet
CLF = (1)
Δ Re xer / Re xer
where: Rnet – net result
Rexer – operating result
Financial leverage ratio expresses the percentage change in response to changes in net
operating result by a percentage of operating result and its size is directly proportional
to the degree of financial risk.
For a factorial point of view the financial leverage ratio used to assess financial risk is
determined based on the profit and loss account, in which net result is obtained after
deducting income tax from the gross result:
Rnet = Rbrut × (1 −i)
Rnet = [ Re xer − Chfin + ( Vfin + Re xtr) ] × (1 − i)
(2)
where: Rbrut - the gross result
Chfin - financial charges
Vfin - financial income
Rextr – extraordinary result
i - tax rate
But the financial income and the extraordinary result are not related to the activity that
the enterprise currently has in progress, so the calculation relationship of financial
leverage ratio becomes:
Re xer
CLF =
(3)
Re xer − Chfin
To prevent financial risk firms should calculate and ensure a break even point, set up
as a confidence interval and not as a predetermined reference value. The limits of this
range are determined by the level of uncertainty the company is evolving in. When it
tends to zero, we will certainly be talking about a punctual profitability and not about
an interval in which profitability is attained with a satisfactory profitability. And,
when uncertainty is high, the confidence interval has such high level that it becomes
unusable in decision making.
4. THE EVOLUTION OF THE FINANCIAL LEVERAGE RATIO
To analyze the financial risk we performed a comparative study of the evolution of
the financial leverage ratio value over a period of five years in a number of five
companies, all listed on the Bucharest Stock Exchange. This should be noted because
of the fact that when traded companies needing funding and not wanting to use the
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