Assesment of Financial Health of Regional Capitals in the Czech Republic

Abstract

The aim of this paper is to assess financial health of individual regional capitals of the Czech Republic by means of using two methods: method which was created by the Slovak Institute for Economic and Social Reform (INEKO) and a composite financial health indicator and later compares the results provided by these two methods. The used methods differ in the selection of input indicators. Financial health of individual regional capitals of the Czech Republic is expressed by one indicator into which partial indicators enter under both of the approaches. In case of INEKO methodology this concerns basic budget balance, debt service, total debt and cash position ratio. In the case of the composite financial health indicator, the following five groups of indicators are used to calculate the financial health of regional capitals: indebtedness, liquidity, financial management, tax and financial strength and degree of self-financing. The regional capitals with the lowest score of financial health according to both used methodologies are Olomouc regional capital and Liberec regional capital. These two capitals both have high levels of indebtedness. The weight of this indebtedness is the biggest weight among all other indicators entering into the analysis.