Compliance with Golden Rules of Fiscal Policy in Construction Companies

Abstract

The present-day situation is associated with less optimistic economic development. At the turn of 2019/2020, the world was struck by a coronavirus pandemic that affected both the economy of the entire country represented mainly by industries and the social level of the population. More than ever, corporate management adhered to the established business rules which include certain fiscal policy rules. These fiscal rules are theoretically referred to as the Golden Rules of Fiscal Policy [1] [2] [3]. These Golden Rules of Fiscal Policy include 4 rules related to assets, sources of asset coverage, their longevity and the investment growth rate. The Golden Rules of Fiscal Policy apply in general to any business subject. However, this paper focuses solely on the construction industry. The aim of the paper is to find out, on a sample of construction companies operating in the Czech Republic, whether they comply with the Golden Rules of Fiscal Policy within their operation and compare these values to the national average. The sample of construction companies was chosen on the basis of carrying out the same activities, the same size in terms of the number of employees, amount of turnover and amount of assets, and operating in the same region of the Czech Republic. The national average of values under the Golden Rules of Fiscal Policy was determined from the statistical data published by the Ministry of Industry and Trade of the Czech Republic (MIT) on its website [4]. Methods of both vertical and horizontal analyses, which represent the basic methods of financial analysis, were used to determine the values of individual Golden Rules of Fiscal Policy for construction companies.The present-day situation is associated with less optimistic economic development. At the turn of 2019/2020, the world was struck by a coronavirus pandemic that affected both the economy of the entire country represented mainly by industries and the social level of the population. More than ever, corporate management adhered to the established business rules which include certain fiscal policy rules. These fiscal rules are theoretically referred to as the Golden Rules of Fiscal Policy [1] [2] [3]. These Golden Rules of Fiscal Policy include 4 rules related to assets, sources of asset coverage, their longevity and the investment growth rate. The Golden Rules of Fiscal Policy apply in general to any business subject. However, this paper focuses solely on the construction industry. The aim of the paper is to find out, on a sample of construction companies operating in the Czech Republic, whether they comply with the Golden Rules of Fiscal Policy within their operation and compare these values to the national average. The sample of construction companies was chosen on the basis of carrying out the same activities, the same size in terms of the number of employees, amount of turnover and amount of assets, and operating in the same region of the Czech Republic. The national average of values under the Golden Rules of Fiscal Policy was determined from the statistical data published by the Ministry of Industry and Trade of the Czech Republic (MIT) on its website [4]. Methods of both vertical and horizontal analyses, which represent the basic methods of financial analysis, were used to determine the values of individual Golden Rules of Fiscal Policy for construction companies.