Understanding the terminology is important not only to professional economists, accountants, sometimes it is necessary for people far removed from such areas of activity.Novice specialists also need more information in the financial analysis of the company.
While summarizing the year has to operate with such terms as the leverage ratio.What does it mean?This indicator shows the extent of associates (companies, firms) on the part of creditors and investors.It is the inverse of the index ratio of concentration of capital the firm.With the growth rate of financial dependence of the enterprise dynamics observed increase borrowing.If the value of the index is 1, the owner of their own finances of the organization.If the value of the coefficient of 1.25 can be concluded that for every 1.25 rub., The company's assets invested in twenty-five cents is borrowed.The indicator of financial dependence is widely used in practice.
addition, uses the term "financial stability."This factor is basic for the financial analysis of the company.This value reveals how much the company is stable, independent of the borrowed funds as it is able to freely manage their capital.
can define financial stability as the financial independence of the company, in which the state of its accounts, it allows to determine the guaranteed pay.The following types of financial stability, which is classified according to its degree:
- Absolute stability.When it is observed complete independence from foreign creditors.Loans made by the company for the purchase of stocks covered by working capital.
- Normal resistance.The company with the acquisition of inventory draws normal sources of their coverage.
- unstable state.In this case the company is forced to raise additional resources to cover reserves.
- crisis.It is characterized by the presence of the company outstanding balance.
calculating the coefficient of financial stability, the following figures.Leverage ratio, which measures the extent to which the financing of the company's assets by borrowing.If the equity of the enterprise occupies too large a share, it can be profitable to owners of the company, as it places restrictions on production capacity.But most of the extra capital could undermine the stability of the enterprise, resulting in falling confidence in him counterparties.
Besides this indicator, the analysis of financial performance calculated concentration ratios of capital company;maneuverability, which has its own capital of the organization;factor, showing the concentration of debt capital and others. The value of these indicators (including the leverage ratio) depends on many factors.For example, such as industry, which employs the company, credit conditions, the structure of sources to cover the property.With their help to assess the dynamics and stability of the financial structure of the company.Qualitative indicators can be divided into two groups.
One will include capitalization, showing the structure of flow of funds to the company.The second - indicators of quality costs money.They can be called the index of coverage.They assess the state of the company and its ability to support the structure of sources of funds.
To calculate the leverage ratio is necessary in order to control the proportion of borrowed funds in the total capital of the company and ensure that the index does not become very large.Otherwise it will indicate precarious position of the enterprise and may end up in bankruptcy.
