New information technologies use for Latvian stock companies financial health evaluation

Financial health of companies in certain region is the foundation on which the prosperity of region is based. If companies in region are healthy and successful, there are good reasons to believe that all social problems can be solved relatively easy. Regional economic development in Latvia at present time happens inhomogeniously – there is a growing region near Riga where economic and social development is going very good, and there are regions where results are worse. The main purpose of this paper is to describe, apply and provide critical review the existing information technologies based possibilities for Latvian companies' financial health evaluation. We focus on the set of financial ratios necessary for economic health evaluation and homepages parsing based methods for these ratios determination for Latvian companies.


Introduction
The main purpose of this paper is to describe the information technologies based possibilities for Latvian companies' financial health evaluation. There are two steps in company financial health evaluation. The first step is the de-termination of the set of financial ratios used for evaluation and the second step is the ratios comparison with optimal values.
There are several approaches for the set of financial ratios determination. The common feature for all these approaches is that all of them are based on the same groups of financial ratiosprofitability, operating efficiency, solvency and liquidity. The differences are related with the amount of considered ratios, from 7-8 in simple cases up to 20-30 in complicated ones, and with the degree of detalization of consideration. Differences in approaches for company financial health evaluation are related with the goals of evaluation alsousually in theoretical studies and in practical applications sets of financial ratios are slightly different (Belás et al. 2017;Paseková et al. 2017).

The International Journal ENTREPRENEURSHIP AND SUSTAINABILITY ISSUES
ISSN 2345-0282 (online) http://jssidoi.org/jesi/ 2017 Volume 5 Number 2 (December) http://doi.org/10. 9770/jesi.2017.5.2(1) 179 The classical theoretical approach in assessing the financial health of the firm is de-scribed in Analysis for Financial Management (Higgins, 2012). According to this approach main three financial statements of companycash flow, balance sheet and income statement -are considered at first to receive "a set of objective numbers, that provide information about the firm's performance, problems, and prospects" (Higgins, 2012). After that the following profitability, turnover-control, liquidity, leverage ratios are considered their sense for company financial health evaluation is analysed (Table 1): Profitability ratios is the first group of ratios for financial health evaluation and they form the foundation on which all the further evaluation of financial health of company is based. Strategic management theory considers (Hill, Jones, 2013) that the long term profit higher than average in industry is the decisive factor of company competitiveness. Turnover-control ratios (Table 2) is the second group of ratios for financial health evaluation and also should be considered in time perspectivedynamics of sales is often considered as the second important factor after profit for company health evaluation. The positive correlation between sales growth and profit growth is the indicator of the good financial health of company. Unfortunately, for Latvian companies in several cases sales growth is observed simultaneously with profit decreasing which means the existence of certain difficulties in development. Liquidity ratios (Table 3) is the third group of ratios for financial health evaluation and is very important for the evaluation of company ability to cover short-term liabilities. There is opinion that financial health by the origin is the long-term ability to pay in time short-term debts. The considered set of financial ratios is the typical example of so called theoretically oriented approach. As the typical sample of practically oriented approach for financial health evaluation let us consider the "20 Balance Sheet Ratios to Measure a Company's Health" suggested by www.oldschoolvalue.com (Table 4): Comparing ratios of two company financial health evaluation approaches, we can see that they use very similar sets of ratios, but practically oriented system pays more attention to capital structure. Approximately the same sets of financial ratios use other practical oriented approaches for company financial health evaluation.
The second step in financial health of company evaluation after the set of financial ratios determination is the financial ratios comparison with optimal values. In several cases such comparison can be performed relatively easyfor example, for all profitability ratios the recommendation of strategic management theory is that in long term perspective profit should be higher, that average profit in industry. If the average profit in industry is known from statistical datasometimes this is so and later we will consider such casesit is not difficult to compare company data with statistical data and make conclusions about company competitiveness and financial health.
The International Journal ENTREPRENEURSHIP AND SUSTAINABILITY ISSUES ISSN 2345-0282 (online) http://jssidoi.org/jesi/ 2017 Volume 5 Number 2 (December) http://doi.org/10.9770/jesi.2017. 5.2(1) 181 However, in many cases the determination of optimal values of financial ratios is not so simple and it is necessary to consider which financial information is available and which is not.

Information sources and data processing
Speaking about world level sources of companies financial reports it necessary to mention US SEC information system EDGAR at first. There are more than 21 million docu-ments with financial reports of many thousands American stock companies since 1934 in free access there. The serious advantage of EDGAR system comparing with similar European in-formation systems is the use of XBRL standard in financial documents, which makes the au-tomatization of information processing possible. In Europe XBRL is supposed to become a standard for financial reports for stock companies since January 1, 2020. As result, researches have serious differences in possibilities to study American and European companiesfor American stock companies it is possible, for example, to download from http://www.nasdaq.com/screening/company-list.aspx the list of NASDAQ, NYSE and AMEX traded stocks lists, to receive free of charge for all these companies from EDGAR forms 10-K and 10-Q with year and quarter financial reports, containing balance sheets, cash flows and income statements for last 10 years in XML format, using GAAP taxonomy extract from XML documents above mentioned ratios for company financial health evaluation and compare them with average for industry values. These average values can be calculated for industry since we know appropriate data for all stock companies in industry.
Situation is more complicated in Europe. From one side, we have stock exchanges in all European countries, we have access to data from national financial market regulators, Eu-ropean Securities and Market Authority and European Stock Exchanges also provide informa-tion about stock companies year and quarter reports. From another side, it is impossible to repeat for European companies the above described procedure which is possible for American companies. There is no analog of EDGAR in Europe, financial reports are available from Eu-ropean stock exchanges free of charge in pdf format only and it is much more difficult, but sometimes even impossible to organize automatic information receiving and processing for necessary financial ratios calculation. The only known to authors regular way to receive free of charge necessary information is to use methods similar to regular expression analysis. Let us consider at first the simple example of such approach use.
The server of the Register of Latvian companies http://dati.ur.gov.lv contains Latvian companies initial registration data. The manual about the rules of server use in Latvian can be found at http://dati.ur.gov.lv/ur_opendata.pdf and the list of 372590 Latvian companies can be found on the server with the data about company name, address, data of registration and registration code. More detailed information about Latvian companies can be found on the server http:\\company.lursoft.lv of company Lursoft which in addition to Register data contains information about company activities according to NACE classificatory and tax payments. Data about company Lursoft itself can be found on server by two waysor using the link http://company.lursoft.lv/lursoft with company name, or using the link with company code of registration http://company.lursoft.lv/40003053936. It is important, that if we know from the Register server only the names of 372590 Latvian companies, we cannot automatically receive data about them from Lursoft serverthere is no direct relation between the link to data and the name of company. But if we know their registration codes also, the link to company data on Lursoft server can be generated automatically. By this way we can receive information necessary for example for regional studiesif from home pages parsing we know NACE code of company activity, address and taxes payed, we can analyze different sectors contributions in regional economies. By the similar way we have confirmed the existence of pronounced regional localization of ICT sector enterprises in Latvia. Out of the total 311.34 million taxes paid by ICT sector enterprises, 282.14 million, or 90.62%, are paid in Riga. The effect of localization increases with the size of the enterprise that is the tendency to localize for large enterprises is expressed more noticeable than for a small business. If the share of enterprises with tax payments less than 2,500 euros per year is 68.86% in Riga, the share of enterprise with tax payments more than one million euros in Riga increases to 92%. Such kind of results can be used for the strategy of regional economic development creation.  (1) 182 The similar home pages and XML documents parsing for financial data receiving can be used in other cases also and as the second example of above described approach imple-mentation we will consider the Latvian stock companies financial health evaluation.

Latvian stock companies financial health evaluation
Riga Stock Exchange, now Nasdaq Riga, is owned mostly by Nasdaq OMX and together with Vilnius Stock Exchange and Tallinn Stock Exchange is a part of Nasdaq Baltic operating in Baltic countries. This is the reason why Riga Stock Exchange follows to Nasdaq OMX regulations and American company Morning Star on the base of contract with Nasdaq OMX converts Nasdaq Riga financial reports into XML format in the same way as this is done for American companies. By this way reports of such Latvian stock companies as GRD1R (Grindeks) This gives the possibility to evaluate the above described set of financial ratios necessary for company financial health evaluation. Let us consider as the example those ratios for stock company Grindex for last 5 years (Table 5).  jesi.2017.5.2(1) 183 Grindex is one of the pharmaceutical leaders in Baltic countries and one of the best Latvian companies. Grindex Gross Margin, often considered as the foundation of financial health of company, on which other financial health indicators are based, is the third largest among Latvian Stock companies. Operating Margin, EBT Margin and Net Margin are high enough, Liquidity ratios are good enough also. Cash Flow indicators are problematic, buy it is necessary to take into account events around the one of Grindex products meldronium which was forbidden for use in sport. In general the financial health of Grindex can be evaluated as very good.
Situation with others Latvian companies in several cases is not so optimistic. Let us consider the shorted list of financial ratios for 24 Latvian stock companies (Table 6). Considering these data, it is possible to make certain conclusions about financial health of Latvian stock companies.