Evaluating firms’ financial performance in textile industry of Romania

Assessing the financial performance of a firm or sector is an important issue for managers, investors and business partners. The basic information used for financial performance assessment is found in financial statements. The accuracy of the method used for this evaluation depends on the accuracy of financial statements provided by firms that reflect the activity developed. In this paper we propose an aggregated index for evaluation the financial performance, based on 11 selected financial rates. The method was applied on a sample of 82 medium-sized companies acting in the Romanian textile sector. Textile industry is an industry with tradition and an important sector of Romanian economy, both in terms of the contribution to gross domestic product and export growth; it has undergone in the last 20 years a difficult period of transformation and adaptation to a changing market, but has a competitive advantage reported to the European one, mainly due to low-cost labour force. The research results show the hierarchy of the textile firms after financial performance score, 42.68% of firms having a score above sector average. The results are useful, especially to managers, by improving decision making of business funding and development, forecasting the future financial performance, selecting business partners, making profitable investments, and to financial analysts in fulfilment of business objectives