. It is necessary to differentiate the solvency of the enterprise, i.e. the expected ability to eventually repay the debt, and liquidity of the enterprise, i.e. sufficiency of available cash and other funds to pay debts at the current moment. However, in practice, the concepts of solvency and liquidity usually act as synonyms.
An important indicator characterizing the solvency and liquidity of an enterprise is own working capital, which is defined as the difference between current assets and current liabilities. An enterprise has its own working capital as long as current assets exceed short-term liabilities. This figure is also called net current assets.
In most cases, the main reason for changes in the amount of own working capital is the profit (or loss) received by the organization.
The growth of own working capital, caused by an increase in current assets faster than short-term liabilities, is usually accompanied by an outflow of cash. The decrease in own working capital, observed if the growth of current assets lags behind the increase in short-term liabilities, is usually caused by the receipt of loans and borrowings.
Own working capital should be easily transformed into cash. If in current assets the proportion of their types that are difficult to sell is large, this can reduce the solvency of the enterprise.
Decisions made in accordance with the considered system of criteria for declaring organizations insolvent serve as the basis for preparing proposals for financial support for insolvent organizations, their reorganization or liquidation.
In addition, if an organization is unable to repay its short-term obligations, creditors may apply to arbitration to declare the debtor organization insolvent (bankrupt).
Consequently, bankruptcy as a certain state of insolvency is established in court.
There are two types of bankruptcy:Simple bankruptcy applies to a debtor guilty of frivolity, inconsistency and poor business management (speculative transactions, gambling, excessive household needs, disorderly issuance of bills, deficiencies in accounting, etc.).
Fraudulent bankruptcy is caused by the commission of illegal actions with the aim of misleading creditors (concealment of documents and a certain part of the organization’s liabilities, as well as deliberate overestimation of the sources of formation of the organization’s property).
In addition to the considered signs that make it possible to classify a given enterprise as insolvent, there are also criteria that make it possible to predict the likelihood of a potential bankruptcy of an enterprise.
When analyzing, it is necessary to promptly identify and eliminate these negative trends in the activities of the enterprise.
It must be kept in mind that current solvency businesses can only be identified from the data once a month or quarter. However, the company makes payments to creditors on a daily basis. That's why for operational analysis current solvency, for daily monitoring of the receipt of funds from the sale of products (works, services), from the repayment of other receivables and other cash receipts, as well as for monitoring the fulfillment of payment obligations to suppliers and other creditors it is necessary to create a payment calendar, which, on the one hand, shows available funds, expected cash receipts, that is, accounts receivable and, on the other hand, reflects payment obligations for the same period. Operational payment calendar is compiled on the basis of data on the shipment and sale of products, on purchased means of production, documents on payroll calculations, on the issuance of advances to employees, bank account statements, etc.
To assess the solvency prospects of an enterprise, they calculate liquidity indicators.
The company is cleared of liquidity, if it can pay off its short-term accounts payable through the sale of current (current) assets.
An enterprise can be liquid to a greater or lesser extent, since current assets include different types of them, where there are easily sold and hard to sell assets.
By degree of liquidity, current assets can be divided into several groups.
The system of financial ratios expressing the liquidity of the enterprise is used:
It is calculated as the ratio of cash and marketable short-term securities to short-term accounts payable. This indicator gives an idea of how much of this debt can be repaid at the balance sheet date. The values of this coefficient are considered acceptable within 0.2 - 0.3.
It is calculated as the ratio of cash, marketable short-term securities and short-term accounts payable. This indicator reflects that part of short-term liabilities that can be repaid not only from existing cash and securities, but also from expected receipts for products shipped, work performed or services rendered (i.e., from accounts receivable). The recommended value of this indicator is the value - 1:1 . It should be borne in mind that the validity of conclusions regarding this ratio largely depends on the “quality” of receivables, that is, on the timing of their occurrence and on the financial condition of the debtors. A large share of doubtful accounts receivable worsens the financial condition of the organization.
General liquidity ratio, or the coverage ratio characterizes the overall security of the organization. This is the ratio of the actual value of all current assets (assets) to short-term obligations (liabilities). When calculating this indicator, it is recommended to subtract from the total amount of current assets the amount of value added tax on acquired assets, as well as the amount of future expenses. At the same time, short-term obligations (liabilities) should be reduced by the amount of future income, consumption funds, as well as reserves for future expenses and payments.
This indicator allows you to determine the proportion of current assets to cover short-term obligations (liabilities). The value of this indicator must be at least two.
An indicator characterizing the organization's provision of its own working capital. It can be defined in one of the following two ways.
Method I Sources of own funds minus (total of the third section of the liabilities side of the balance sheet) (total of the first section of the assets of the balance sheet) divided by (total of the second section of the assets of the balance sheet).
II method. Current assets - Short-term liabilities (total of the V liability section of the balance sheet) (total of the II asset section of the balance sheet) divided by current assets (total of the II asset section of the balance sheet).
This coefficient should have a value not less than 0.1.
If the current liquidity ratio at the end of the reporting period is less than two, and the ratio of the organization's own working capital at the end of the reporting period is less than 0.1, then the structure of the organization's balance sheet is recognized as unsatisfactory, and the organization itself is insolvent.
If one of these conditions is met and the other is not, then the possibility of restoring the solvency of the enterprise is assessed. To make a decision about the real possibility of its restoration, it is necessary that the ratio of the calculated current liquidity ratio to its established value of two is greater than one.
The current solvency of an enterprise is directly influenced by its liquidity (the ability to convert them into cash or use them to reduce liabilities).
Assessing the composition and quality of current assets from the point of view of their liquidity is called liquidity analysis. When analyzing balance sheet liquidity, a comparison is made of assets grouped by the degree of their liquidity with liabilities grouped by their maturity dates. The calculation of liquidity ratios allows us to determine the degree to which current liabilities are covered by liquid funds.
Balance sheet liquidity- this is the degree to which an enterprise’s obligations are covered by its assets, the rate of conversion of which into money corresponds to the maturity of the obligations.
Changes in the level of liquidity can also be assessed by the dynamics of the company’s own working capital. Since this value represents the balance of funds after repayment of all short-term obligations, its growth corresponds to an increase in the level of liquidity.
To assess liquidity, assets are grouped into 4 groups according to the degree of liquidity, and liabilities are grouped according to the degree of urgency of repayment of obligations (Table 4.2)
Grouping asset and liability items to analyze balance sheet liquidity| Assets | Liabilities | ||
| Index | Components (lines of form No. 1) | Index | Components (lines of form No. 1 - ) |
| A1 - the most liquid assets | Cash and short-term financial investments (line 260 + line 250) | P1 - the most urgent obligations | Accounts payable and other short-term liabilities (line 620 + line 670) |
| A2 - quickly realizable assets | Accounts receivable and other assets (line 240 + line 270) | P2 - short-term liabilities | Borrowed funds and other items of section 6 "Short-term liabilities" (line 610 + line 630 + line 640 + line 650 + line 660) |
| A3 - slowly selling assets | Articles in section 2 “Current assets” (p. 210 + p. 220) and long-term financial investments (p. 140) | P3 - long-term liabilities | Long-term loans and borrowed funds (line 510 + line 520) |
| A4 - hard-to-sell assets | Non-current assets (line 110 + line 120 - line 140 + line 130) | P4 - permanent liabilities | Articles section 4 "Capital and reserves" (p. 490) |
The balance is absolutely liquid if all four inequalities are satisfied:
A 1 > P 1
A 2 > P 2
A 3 > P 3
A 4 < P 4(is of a regular nature);
The second stage of enterprise liquidity analysis is the calculation of liquidity ratios
1)Absolute liquidity ratio- shows what part of the company’s short-term obligations can be repaid immediately with cash and short-term financial investments:
To absolute.= DS + KFV / KO = (p.250 + p.260) / (p.610 + p.620 + p.630 + p. 650 + p.660) > 0,2-0,5
2) Intermediate coverage ratio(critical liquidity) - shows what part of the company’s short-term obligations can repay by mobilizing short-term debt and short-term financial investments (SFI):
To crit. liquid= DZ + DS + KFV / KO = (p.240 + p.250 + p.260) / (p.610 + p.620 + p.630 + p.650 + p.660) > 0,7 — 1
3) (current ratio), or working capital ratio - shows the excess of current assets over short-term liabilities.
To current update= OA / KO = (p.290 - p.220 - p.216) / (p.610 + p.620 + p.630 + p.650 + p.660) > 2
Current ratio shows how many times short-term liabilities are covered by the company, i.e. how many times a company can satisfy the claims of creditors if it converts all the assets currently at its disposal into cash.
If a company experiences certain financial difficulties, of course, it pays off its debt much more slowly; additional resources are sought (short-term bank loans), trade payments are postponed, etc. If short-term liabilities increase faster than current assets, the current ratio decreases, which means (in unchanged conditions) the enterprise has liquidity problems. According to standards, it is believed that this coefficient should be between 1 and 2 (sometimes 3). The lower limit is due to the fact that current assets must be at least sufficient to pay off short-term obligations, otherwise the company may become insolvent on this type of loan. An excess of current assets over short-term liabilities by more than twice is also considered undesirable, since it indicates an irrational investment by the company of its funds and ineffective use of them.
Liquidity– the ability of assets to be quickly sold at a price close to the market. Liquidity is the ability to convert into money.
Current liquidity
The current (total) liquidity ratio (coverage ratio; English current ratio, CR) is a financial ratio equal to the ratio of current (current) assets to short-term liabilities (current liabilities).
Ktl = (OA - DZd) / KO, where: Ktl – current ratio; OA – current assets; DZd – long-term receivables; KO – short-term liabilities.
The ratio reflects the company's ability to pay off current (short-term) obligations using only current assets. The higher the indicator, the better the solvency of the enterprise.
A coefficient value of 2 or more is considered normal (this value is most often used in Russian regulations; in world practice, 1.5 to 2.5 is considered normal, depending on the industry). A value below 1 indicates a high financial risk associated with the fact that the company is not able to reliably pay current bills. A value greater than 3 may indicate an irrational capital structure.
Quick (urgent) liquidity
Quick ratio- financial ratio equal to the ratio of highly liquid current assets to short-term liabilities (current liabilities). The source of data is the company’s balance sheet in the same way as for current liquidity, but inventories are not taken into account as assets, since if they are forced to be sold, losses will be maximum among all current assets.
Kbl = (Short-term accounts receivable + Short-term financial investments + Cash) / Current liabilities
The ratio reflects the company's ability to pay off its current obligations in the event of difficulties with the sale of products.
A coefficient value of at least 1 is considered normal.
Absolute liquidity
Absolute liquidity ratio- financial ratio equal to the ratio of cash and short-term financial investments to short-term liabilities (current liabilities). The source of data is the company’s balance sheet in the same way as for current liquidity, but only cash and funds close to it in essence are taken into account as assets:
Cal = (Cash + short-term financial investments) / Current liabilities
Unlike the two above, this coefficient is not widely used in the West. According to Russian regulations, a coefficient value of at least 0.2 is considered normal.
When deciding on attracting credit resources, it is necessary to determine the creditworthiness of the enterprise.
At the present stage, the following coefficients are accepted:
Current liquidity ratio (coverage), K p;
Coefficient of provision with own working capital, K os;
Coefficient of restoration (loss) of solvency, K uv.
These indicators are calculated based on balance sheet data using the following formulas:
The coefficient K p characterizes the overall provision of the enterprise with working capital for conducting business activities and timely repayment of the enterprise's urgent obligations.
The coefficient K uv shows whether the enterprise has a real opportunity to restore or lose its solvency within a certain period. The basis for recognizing the balance sheet structure as unsatisfactory and the enterprise as insolvent is the fulfillment of one of the following conditions: K p< 2 или К ос >0.1. It should be remembered that when deciding whether to issue a loan from a bank or other credit organization, the following system of financial ratios is calculated:
Absolute liquidity ratio K al;
Intermediate coverage coefficient K pr;
Overall coverage coefficient K p;
Independence coefficient K n.
The absolute liquidity ratio shows the proportion of short-term liabilities that can be repaid using highly liquid assets and is calculated using the formula, the standard value of the indicator is 0.2 – 0.25:
The intermediate coverage ratio shows whether the company will be able to pay off its short-term debt obligations on time. It is calculated by the formula:
Calculating the total coverage ratio is similar to determining the current ratio. The financial independence ratio characterizes the enterprise's provision of its own funds to carry out its activities. It is determined by the ratio of equity to the balance sheet currency and is calculated as a percentage.
The optimal value that ensures a fairly stable financial position in the eyes of investors and creditors: 50 – 60%.
45. Own and borrowed resources of the enterprise
Borrowed and own funds of the enterprise - collectively determine the liquidity of its assets, and directly affect the size of financial and other funds that provide the opportunity to use them at a specific moment or period of time.
Borrowed funds allow an enterprise to increase production, turnover, gain additional profit and even pay off previous debts and much more.
In addition to borrowed funds, to obtain certain financial advantages, an enterprise can also use attracted funds, which, unlike borrowed funds, are not actually repaid - for example, equity shares and gratuitous government financing.
Ordinary entrepreneurs can also actively use borrowed funds. The state policy of the Russian Federation for the development of entrepreneurial activity, through attracting borrowed funds from various sources, provides for obtaining interest-free loans in accordance with current legislation. In addition, such loans are not taxed.
Taxes will only be on the income received, in the case of a cash loan - in the case of a material loan, the material benefit is not calculated. You can use borrowed funds constantly or regularly if it is effective and has a stable profit, or is a necessity.
However, it is advisable to monitor very carefully and pay attention to debt-to-equity ratio and maintain a clearly defined balance - it is good to have a certain strategy of action in case of unforeseen circumstances, since in the case of using borrowed funds, there is a certain threshold of financial losses, beyond which you will not be able to restore your business and will immediately or after a certain time become bankrupt.
Here, it is also necessary to take into account - gearing ratio- it can be approximately calculated by dividing the total amount of existing loans and interest charges on them by total assets and future income.
The value of this coefficient will be one of the fundamental factors in granting you loans, that is, the lower the coefficient, the greater the likelihood of receiving a loan.
In general, it is advisable to use gratuitous and especially reimbursable borrowed funds only when you are already well on your feet and understand your business segment.
Now, the state legislation of the Russian Federation provides for free subsidies for opening a private business, in the form of partial financing of initial capital - but it does not provide guarantees of the success of its development.
Liquidity- the ability of assets to be quickly sold at a price close to the market. Liquidity is the ability to turn into money (see the term “liquid assets”).
Typically, a distinction is made between highly liquid, low liquid and illiquid values (assets). The easier and faster you can get the full value of an asset, the more liquid it is. For a product, liquidity will correspond to the speed of its sale at the nominal price.
In the Russian balance sheet, the company's assets are arranged in descending order of liquidity. They can be divided into the following groups:
A1. Highly liquid assets (cash and short-term financial investments)
A2. Quickly realizable assets (short-term receivables, i.e. debt for which payments are expected within 12 months after the reporting date)
A3. Slowly moving assets (other current assets not mentioned above)
A4. Hard to sell assets (all non-current assets)
Balance sheet liabilities according to the degree of increasing maturity of obligations are grouped as follows:
P1. The most urgent obligations (raised funds, which include current accounts payable to suppliers and contractors, personnel, budget, etc.)
P2. Medium-term liabilities (short-term loans and borrowings, reserves for future expenses, other short-term liabilities)
P3. Long-term liabilities (section IV of the balance sheet "Long-term liabilities")
P4. Permanent liabilities (organization's own capital).
To determine the liquidity of the balance sheet, you should compare the results for each group of assets and liabilities. He considers ideal liquidity to be one in which the following conditions are met:
A1 > P1
A2 > P2
A3 > P3
A4< П4
For example, the above liquidity analysis by group can be performed automatically in the Your Financial Analyst program.
In the practice of financial analysis, there are three main indicators of liquidity.
Current liquidity
The current (total) liquidity ratio (coverage ratio; English current ratio, CR) is a financial ratio equal to the ratio of current (current) assets to short-term liabilities (current liabilities). This is the most common and frequently used liquidity indicator. Formula:
Ktl = OA / KO
where: Ktl - current liquidity ratio;
OA - current assets (attention: until 2011, long-term receivables were indicated in the Balance Sheet as part of current assets - they must be excluded from current assets!);
KO - short-term liabilities.
The ratio reflects the company's ability to pay off current (short-term) obligations using only current assets. The higher the indicator, the better the solvency of the enterprise.
A coefficient value of 2 or more is considered normal (this value is most often used in Russian regulations; in world practice, 1.5 to 2.5 is considered normal, depending on the industry). A value below 1 indicates a high financial risk associated with the fact that the company is not able to reliably pay current bills. A value greater than 3 may indicate an irrational capital structure.
Quick liquidity
The quick liquidity ratio (sometimes called intermediate or quick liquidity; English quick ratio, QR) is a financial ratio equal to the ratio of highly liquid current assets to short-term liabilities (current liabilities). The source of data is the company’s balance sheet in the same way as for current liquidity, but inventories are not taken into account as assets, since if they are forced to be sold, losses will be maximum among all current assets. Quick liquidity formula:
Kbl = (Short-term accounts receivable + Short-term financial investments + Cash) / Current liabilities
The ratio reflects the company's ability to pay off its current obligations in the event of difficulties with the sale of products.
A coefficient value of at least 1 is considered normal.
Absolute liquidity
Absolute liquidity ratio is a financial ratio equal to the ratio of cash and short-term financial investments to short-term liabilities (current liabilities). The source of data is the company’s balance sheet in the same way as for current liquidity, but only cash and funds close to it in essence are taken into account as assets:
Cal = (Cash + short-term financial investments) / Current liabilities
Unlike the two above, this coefficient is not widely used in the West. According to Russian regulations, a coefficient value of at least 0.2 is considered normal.
The current, quick and absolute liquidity ratio can be automatically calculated using the balance sheet data in the program "
Solvency means the ability of an enterprise to cover its obligations to any counterparties.
And the higher this indicator, the more stable the company is financially and independent of external sources of replenishment of funds.
But this indicator must be constantly monitored.
Solvency is the ability of a company to repay debts to the budget, suppliers, employees and other counterparties.
Most the best option- this is the presence of that amount of money that will completely cover current debts, leaving a significant amount for investment in materials, raw materials and other things. And the most stable option for the financial position of the company is the presence of its own funds, and not borrowed funds.
Considered optimal and the solvency that can be secured by liquid assets, i.e. that property that can be quickly converted into cash - the most liquid asset. Such property includes securities with a maturity of up to 12 months and deposits.
Slow to implement, but liquid, are also considered to be reimbursed from the budget; work in progress, goods, products, inventories. And such objects as buildings, land, equipment, vehicles and other fixed assets are considered difficult to sell. Although, under certain circumstances, these objects can act as collateral for loans. Those. actually become money.
The following video tutorial explains what liquidity and solvency of a company are:
In the analysis of ability to pay participate Several coefficients, which we will consider below.
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It is used to determine share of short-term debts company, which is covered by current assets:
KTP = (Current assets - Expenses for future periods): (Short-term liabilities - Income for future periods - Reserves for future expenses).
The excess of working capital over current debts gives creditors confidence that debts to them will be repaid on time. An excess of 2 times is considered optimal. But the higher this indicator, the more stable the company’s position.
Balance calculation this indicator will look like this:
KTP = (p.1250 + p.1240 + p.1230 + p.1260 + p.1210 + p.1220 + p.1170) / (p.1510 + p.1520 + p.1550)
All line numbers (s.) in this formula and subsequent formulas are taken from form No. 1 (). By the way, very often, to calculate this ratio, it is recommended to exclude from line 1230 of the “Accounts Receivable” balance sheet debts that are expected to be paid no earlier than a year has expired, or even more than this period. 
Reflects the ability of a company to cover, at the expense of all its available funds, not only its current obligations, but also long-term ones - with a maturity period of more than a year.
IN calculation All types of accounts payable and all assets – liquid and hard to sell – are involved:
KOP = Total asset on balance sheet / (Long-term + Short-term liabilities)
For balance calculation The coefficient formula will look like this:
COP = p.1600 / (p. 1400 + p. 1500)
KDP = (Long-term loans and credits): Equity
Equity capital includes additional and reserve capital, authorized capital (or); profit not distributed among the owners (account 84 of accounting) and funds received as part of targeted financing:
KDP = p.1410: (p.1310 + p.1350 + p.1360 + p.1370)
This coefficient reflects not just the ratio of equity and borrowed funds, but the level of solvency for long-term obligations. And the lower the value of this ratio, the more independent the enterprise is from borrowed funds.
Having calculated this indicator, the enterprise gets the opportunity to find out, does he have financial resources left after covering his debts for subsequent investment in his activities:
NSP = Net working capital: Current assets
Net working capital = Current assets – Current liabilities = line 1200 – (line 1510 + line 1520 + line 1550).
The higher this indicator, the the company's position is more stable. As for its regulatory significance, it is individual for each industry. Moreover, it is believed that the volume of the net working capital in current assets should be at least half.
The analysis of these indicators is carried out on the basis of a balance sheet. For this purpose, all indicators are calculated both at the beginning of the period and at the end, so that it is possible study their dynamics during a year. In addition, calculations are made for a minimum of 3 years to establish a trend towards a decrease or increase in the level of financial independence of the company.
Important in the analysis is establishing the cause deviations of indicators from their values for previous years. In this case, a serious assistant is to study the changes that occur in the balance sheet item by item - it is necessary to study the dynamics of the indicators involved in the calculation of coefficients. This is what will allow us to determine what caused the improvement or deterioration in the company’s solvency.
The procedure for calculating and analyzing solvency and liquidity is described in this video lecture:
The term "liquidity" is used to refer to those assets of a company that can be sold quickly. The liquidity ratio is used to analyze the market value of assets and the rate at which they are sold. In simple words, the asset liquidity indicator clearly demonstrates the amount of time required to convert assets into cash. Quite often, the term in question is called the debt coverage ratio. In this article, we propose to talk about how to calculate the current liquidity ratio (CTL) and what this analytical tool shows.
Current ratio - calculated by dividing current assets by short-term liabilities (current liabilities)The current liquidity ratio is an economic indicator that allows one to obtain information about the ratio of a company's assets to short-term debt obligations. The use of this analytical tool allows you to determine the level of solvency of the company for one reporting year. In order to make all the necessary calculations, it is necessary to obtain information about the assets on the company’s balance sheet.
According to experts in the field of financial issues, a high index of this ratio clearly demonstrates the solvency of the organization.
Having answered the question of what the current liquidity ratio shows, we should move on to consider the areas where this analytical tool is used. These areas include:
In some situations, the indicator in question may lag significantly behind the established norm. In such a situation, the person conducting the analysis should obtain information about the financial recovery ratio . As a rule, a period of six months is used in calculations. Carrying out such calculations allows us to obtain information about the possibility of restoring the company's solvency in the near future. Special economic formulas are used to make forecasts. According to many experts in this field, using the financial recovery ratio does not always provide accurate data.
When the indicator under consideration meets the established norm, the person conducting the analysis should calculate the indicator of possible loss of solvency. This indicator allows you to get a forecast of the company’s financial condition for the next three months. The loss of solvency ratio is used to prevent situations that could have a negative impact on the current value of assets.
When the amount of current liquidity exceeds the established standard, we can conclude that the company has a certain reserve of capital, which was received through various external sources. From the lender's point of view, companies with high current liquidity have a large fund consisting of working capital. If we assess the situation from the management’s perspective, high liquidity of assets indicates untargeted and ineffective use of existing assets. This property can be used to obtain the most favorable rates on loans and borrowings, which will significantly increase production capacity.
The current ratio shows the company's ability to pay off current (short-term) obligations using only current assets When conducting an economic analysis of the financial well-being of a business entity, it is imperative to take into account the absolute liquidity indicator. This index allows you to determine the size of short-term debt obligations that can be repaid in the near future. Using this analytical tool makes it possible to refuse to sell the company’s property assets in order to repay existing loans.
When calculating the size of the absolute liquidity ratio of assets, the following formula is used: “(Financial assets + short-term investments) / current loans.” In order to use this formula, you should study the balance sheet in detail in order to obtain all the necessary information. This indicator is less popular compared to other economic analysis tools. An overestimated value of this indicator indicates that the company is using its financial fund irrationally.
As a rule, economic analysis is carried out at the end of the reporting year. This step allows you to determine the efficiency of using the company's assets. In addition, the availability of such information allows comparison with other reporting periods.
In order to characterize the assets stored on the balance sheet of an enterprise, an indicator is used that demonstrates the rate at which assets are converted into monetary resources. All assets of the company are divided into several groups, differing in the degree of liquidity. Assets with a high degree of liquidity include financial resources and short-term investment projects. The second category includes quickly realizable assets. This category includes receivables and loans issued to counterparties.
The third degree of asset liquidity combines assets related to the item “Inventories”. Long-term investment projects can also be included in this category. The last group is assets that are difficult to sell. As a rule, such assets are used to replenish internal funds and authorized capital.
The standard value of the current ratio varies from two to three percent. When conducting economic analysis, it is very important to take into account not only the obtained coefficients, but also the segment of market relations in which the enterprise is involved. According to experts, each market niche has its own specific characteristics.
In the case where the KTL is equal to one or one and a half percent, there is a high probability of difficulties in repaying existing debt obligations. It is important to note that this value is the norm for companies operating in the retail industry. In the case of such companies, KTL is covered by an impressive flow of financial resources received through trade turnover and operating activities.
When the KTL is several values below the norm, there is a high risk that the company will not be able to cover all existing debts. Exceeding the standard value clearly demonstrates the ineffective use of assets.
The higher the coefficient, the better the solvency of the enterprise To calculate the indicator under consideration, the formula “Working funds / current debt” is used. As mentioned above, KTL is the ratio of assets used in circulation and financial liabilities of a short-term nature. To obtain the required information, it is necessary to take all the data stored in the balance sheet form.
The indicator under consideration can be calculated using the formula: “(A1+A...+A3)/(P1+P2)=Ktl”. To obtain information about the current ratio of assets, it is necessary to add up all the current assets of the company. The result should be divided by the sum of all short-term financial liabilities.
In addition to the above calculation methods, you can use balance sheets. The current ratio formula for the balance sheet is as follows:
“(str1200+str1170) / (str1500-1530-1540) = Ktl.”
To compile these calculations, the first form of the balance sheet is used.
Timely economic analysis of the company’s financial condition allows one to prevent possible losses and take measures to improve the company’s health. For this purpose, employees of the financial department need to constantly study the current state of affairs. As mentioned above, the ratio of assets to short-term financial liabilities should be two percent. This indicator indicates the availability of working capital, the amount of which is twice the amount of the company’s debt. In such a situation, any changes in the market will not affect the well-being of the company.
During the assessment, the fact of exceeding the standard value may be revealed. It should be noted that this phenomenon is observed quite rarely. Exceeding the standard KTL value indicates that the company has many in-demand assets that are being used incorrectly. This factor contributes to receiving less income compared to the full use of assets.
Due to the high demand for its assets, the company has the opportunity to sell them at an inflated price. The funds received should be used to purchase more less-in-demand assets.
Liquidity ratios are of interest both to the management of the enterprise and to external subjects of analysis Falling liquidity is a cause for concern. In such a situation, the head of the company needs to make maximum use of the company’s marketing specialists. Another method of correcting the situation is the rapid sale of assets. In order to be able to predict market behavior, you should turn to experienced analysts. Experts in this field are able to predict the timing of the decline and the volume of consumer demand. This factor should be used to make a profit.
A drop in KTL to one percent indicates the presence of significant risks. In practice, dynamic upward growth of the indicator is quite rare. From all of the above, we can conclude that a significant drop in the current liquidity ratio indicates that the company is on the verge of bankruptcy.
Based on all of the above, we can conclude that the current liquidity indicator clearly demonstrates the level of solvency of the company for its existing debt obligations. An increase in financial condition allows you to reduce the amount of borrowed capital by obtaining more favorable loan offers. This factor helps to increase the company's net revenue and increase the profitability of the enterprise.
There are several effective methods to increase the KTL indicator:
Liquidity – the ability of assets to be quickly sold at a price close to the market The economic analysis tool under consideration allows you to gain complete control over the financial condition of the company. An increase in the current liquidity ratio makes it possible to attract large investment companies to business development. This step allows you to obtain additional financial resources that can be used to develop new market segments and increase the profitability of the company itself.
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