company is a very complex system, the activities of its many facets.However, each of the parties of this activity can be one way or another to describe, to make any conclusions or to take certain decisions.Of particular importance for the analysis of the company have indicators of its financial condition.This condition can also be described from different perspectives, but now want to focus on an assessment of liquidity.This assessment will be carried out by examining the balance sheet liquidity, and it is possible - by calculating the coefficients such as, for example, the quick ratio and the like.These methods are not mutually exclusive, so a complete and accurate analysis is better to use both.In the framework of this article we will focus precisely on the calculation and analysis of the factors.
calculation of the coefficient group is in relation to the amount of liquid assets to current liabilities.The first factor characterizes the sufficiency of the entire set of current assets to repay the term debt.In this regard, it bears the name of the index total (current) liquidity.It is clear that all companies are different, so the performance of the current liquidity they also differ.However, there is a standard value, which the company must strive.The calculated ratio shall be not less than one but not more than two.The lower limit imposes a requirement in terms of liquidity, and the top - efficiency.In other words, current assets should be sufficient to pay off all the debt term, but should not be too much, because in this case they will be used efficiently enough.
next indicator - quick ratio.Its definition is by exclusion from the numerator, that is, from the current assets, the least liquid component - the stocks.Thus, the indicator "clarifies" why its other name - the coefficient of the adjusted liquidity.Based on the calculation method, it can be concluded that this figure can not be more than the previous one.This determines its upper limit of normal.The lower limit is traditionally taken as equal to unity.Quick ratio can be specified by including in the calculation of liquid assets and illiquid exception.Thus, the numerator should be considered finished products sold on a prepaid basis, but we need to subtract illiquid investments and doubtful debts.
If the numerator is completely cleared from the less liquid assets, and it is only completely liquid assets, the result of calculation will be an absolute indicator of liquidity.It gives an indication of the proportion of the debt that the organization can pay off immediately.For companies in Russia this share is at best 10%.In more developed economies, the normal level of this indicator is achieved if one-fifth of term debt the company can immediately return.
If the company will have to resort to the realization of reserves to bail out the money for the repayment of obligations, in this case it makes sense to calculate the liquidity ratio in the fund-raising.It is determined by dividing the amount of available reserves in the immediate obligations.This indicator normally exceed 0.5, but should not be more than 0.7.
After calculating these indicators need to be analyzed.Each of them can be in the normal range, but the financial situation could deteriorate.Such a conclusion can be made if, for example, the quick ratio in the dynamics of a few years, moving to one of the boundaries of the normal range.Any negative trends require intervention and specific management decisions.
