Proceedings

The high value of financial expenditure levels may be the result of very high interest
costs. It must therefore be followed the evolution of the risk in the future, to see if the
degree of indebtment continues to be very high.
The year 2008 brings significant changes in the level of the financial risk for the five
companies analyzed. These relatively favorable evolutions of the previous years for
the companies have developed negatively this year, aspect that must be correlated
with the evolution of the banking institutions. It is known that 2008 was a year
marked by adverse evolutions of the credit institutions level because they wanted to
minimize such risks and thus the financing instruments became more expensive.
Therefore, the negative values recorded by the companies A and B were determined
by high levels of financial expenditure, which can be the result of the credit cost rise
by increasing interests that at the company level had the effect of increasing the share
of interest expenditures in total financial expenses and thus caused a negative
financial leverage ratio.
The companies B and D present a tolerable level of financial risk, a minor risk,
succeeding in managing costs to maintain the same levels of the previous years and so
for them the crisis was not that strong.
The C Company recorded a very high financial risk, which results in a high level of
uncertainty with respect to the consequences of the financial situation of the company
and so the financial situation will be followed for a longer period also by using
analytical methods that include more precise and accurate assessment tools.
CLF levels recorded in 2008 were normal for this period of uncertainty in which the
rumors characterized mainly the capital market evolutions.
The year 2009 is characterized by some stability, because the leverage ratio levels for
the five companies have been in amounts similar to the previous year. The situation
has stabilized, a high level of financial risk registering only at company A, where it
was recorded a very high level of financial risk.
The other companies have stabilized their situation and demonstrated lower levels of
values of financial risk with financial leverage ratio in the range of 0.7 to 1.5. The
situation in 2009 is the result of relative reduction in the amount of financial expenses
as a result of enterprise management guidance to reduce the share of interest expense
on one hand and a return to their funding sources, on the other hand.
CONCLUSIONS
In conclusion, the importance of financial leverage ratio of current financial
management and forecasting comes from the fact that the net result is sensitive to
indebtedness and it conditions the size of benefit and dividend per share, of great
interest to shareholders and self-financing business, which enhances equity.
A more precise estimation of the level of financial leverage ratio comes to meet both
businesses and potential investors’ demands as an easy way to assess the degree of
companies risk exposure.
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