before each financial manager necessarily arises the problem of determining the entity's financial position.It, in turn, is evaluated from different points of view, one of the most important of which is the evaluation of liquidity.To this end, an assessment of liquidity balance sheet and liquidity ratios are calculated.Their calculation is worth looking in more detail.
First determined current ratio (aka - the total coverage), which describes the organization's ability to pay short-term debt by circulating assets.Accordingly, to determine it is necessary to divide the value of current assets to current liabilities.During practice, it was determined that the normal value of this parameter must correspond to the range of 1 to 2 times more correctly, do not use generally accepted standards and norms of individual industry or a particular company.To calculate the rules you want to divide the sum of short-term debts and required reserve by the amount of short-term debt.In addition, the overall coverage is an upper bound for this index as the quick ratio.
To calculate this factor, which is also called an intermediate cover ratio, it is necessary to divide the current assets which are excluded from reserves in the amount of short-term liabilities.Quick ratio determines how the company is able to pay its debts, will be charged if all receivables.The lower limit of the index - 1, and the top, as already mentioned - the total coverage ratio.
For proper evaluation of the financial situation it is necessary to more accurately calculate the quick ratio.This can be achieved by excluding from the calculation of the least liquid assets, but the inclusion of more liquid.If the company ships some of its output on a prepaid basis, this share should be included in the calculation.On the other hand, illiquid investments and arrears logical to ignore, as they will distort the real picture.
Quick ratio does not reflect the company the opportunity to instantly recover their debts, so it is necessary to calculate the ratio of absolute liquidity.It is determined by the ratio of the most liquid assets of the enterprise, ie its short-term investments (excluding non-liquid) and cash, and the amount of the most urgent obligations.According to the Western experience, the company should be able to immediately repay 20-25 percent of its term debt, but Russian companies rarely reach such a level.Restricted access to highly liquid securities, as well as frequent failure to comply with the payment discipline set the average of this indicator in the Russian reality, at around 0.1.
to repay the debt, the company may take such action as the sale of stocks.The value share of the obligations which will be covered in this case is determined by the liquidity factor in mobilizing funds.Normally it ranges from 0.5 to 0.7.
head of the financial department of the enterprise should monitor closely the levels of liquidity ratios, special attention should be paid to accurate calculation of the quick ratio.For a more complete assessment of the state it makes sense to create a balance of liquidity, and other financial ratios calculated.If these or other indicators do not meet the standards, or have a negative trend, it is necessary to identify the reasons for this and take steps to stabilize the situation.
