Many industries use such a thing as liquidity.In the most general sense, it is how fast different property may acquire cash, while maintaining their original cost.Thus, the sooner for some property so you can get the money to not have to underestimate its value, the more liquid it is.However, if we are talking about the liquidity of the enterprise, investing in this concept a slightly different meaning.In this case, liquidity is the organization's ability to pay its obligations on time.The evaluation of the company with this position is carried out in different ways, but we will focus on the calculation of liquidity ratios.
first indicator to which we pay attention - this is a common factor of liquidity.This value, which is also sometimes referred to under the name "current ratio", characterizes the level of how fully the most urgent obligations of the company are covered by current assets.The point of comparison with this group of property is that it is much more liquid compared to non-current assets, ie it can be used to pay debts on time.During research and practice it has been found that the current ratio must be between one and two.The lower limit is the criterion of liquidity - term debt must be fully covered by current assets.The upper limit - the requirement of efficiency, ie greater value indicates that the current assets are too many and they are used effectively.
It is clear that all companies are different, and the rules are largely averaged.In this regard, often produce a calculation of the ratio, which is normal for a particular organization.Method of calculation consists of comparing the amount of required reserve and short-term liabilities with the value of these commitments by the division.The idea is that even if the payment of the total debt at the disposal of the company will have enough current assets to continue operations.
Next index characterizes the extent to which short-term liabilities will be provided with the full collection of receivables, available on the balance sheet.This ratio is called the index of the intermediate liquidity.His case is similar to the previous indicator, but is excluded from the numerator the amount of reserves.Based on the features of the calculation, it can be concluded that the upper limit of the indicator is a current ratio.The standard value of the lower limit is also set at the level of 1.
If you continue to be excluded from the numerator to the property as long as there will be only completely liquid assets, as a result, we can determine the magnitude of the absolute indicator of liquidity.It is obvious that the meaning is, what proportion of the most urgent debts can be repaid immediately.In the western practice, the company is liquid if it can instantly recover a quarter of its debt, but Russia's reality is more common figure at one-tenth.
Despite the fact that stocks are the least liquid part of current assets, the company may decide to implement them, and the direction of the proceeds to cover urgent debts.To determine what portion of the debt will be repaid as a result of this operation, you can use the liquidity ratio, which can be accessed by raising funds.Define it by assigning the amount of reserves established by the company, to the value of short-term liabilities.
addition to standard comparisons, current ratio and other indicators should be studied in dynamics.The fact that compliance with the rate of negative trends may also indicate a worsening financial situation.
