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The aim of the article is to create a set of indicators for assessing financial stability and municipality management. Local governments in the Czech Republic are fully financially responsible for their budget and management. Financial stability of municipalities is a crucial condition for long-term sustainable development as disproportionate debt can generate risks for providing public services and their standard functioning. The Ministry of Finance defined a set of financial indicators (SIMU system) which could be used for financial stability evaluation, but only two of them are obligatory (a share of liabilities to total assets in percentage, and the current ratio). Indisputable advantage is its standard form of financial evaluation for all municipalities and relatively simple method of calculation based on delivered data. Main disadvantage can be seen in the fact that the municipality receives feedback only for two indicators …