The data that characterize the various aspects of the enterprise's activities related to education, as well as the use of all its monetary funds and savings, are financial indicators. At the same time, the main and most frequently used financial indicators can be divided into five groups reflecting different aspects of the financial condition of the company: liquidity, profitability, business activity, stability (capital structure indicators) and investment criteria.
Instructions
Step 1
Liquidity indicators characterize the company's ability to satisfy the claims of consumers of short-term debt obligations. In turn, the absolute liquidity ratio determines what proportion of short-term debt liabilities can be covered by cash in the form of deposits and market securities. This ratio can be calculated using the ratio of the amount of cash and short-term financial investments to current liabilities.
Step 2
The quick liquidity ratio is calculated as the ratio of the more liquid part of current assets (short-term financial investments, accounts receivable, cash) to short-term liabilities. It is recommended that the value of this indicator be greater than 1.
Step 3
The value of the current liquidity ratio is determined as a quotient of the ratio of current assets to short-term liabilities. It shows whether the company has enough funds that can be used to pay off short-term obligations.
Step 4
Net working capital is expressed in monetary units as the difference between the company's current assets and its short-term liabilities. This indicator is necessary to support the financial stability of the enterprise, because the excess of working capital over the value of short-term liabilities means that the firm will not only be able to pay off all its short-term liabilities, but it also has reserves for expanding its activities.
Step 5
Capital structure indicators or financial soundness ratios reflect the ratio of equity to debt in the company's sources of financing. They characterize the degree of financial independence of the firm from creditors. In this case, the following values are used to assess the capital structure:
- The financial independence ratio, which characterizes the company's dependence on external loans. It is calculated as the ratio of equity to total assets.
- Interest coverage ratio - characterizes the degree of protection of the creditors themselves from non-payment of interest for the loan provided and shows how many times during the reporting period the company earned funds to pay interest on loans. This indicator can be calculated from the ratio of profit before tax to interest on the loan.
Step 6
Profitability ratios determine how profitable a business is. The ratio of return on sales shows the share of net profit in the volume of all sales of the company. It can be calculated as the ratio of net profit to net sales multiplied by 100%.
Step 7
The return on equity ratio determines the efficiency of using capital that has been invested by the owners of the enterprise. It is calculated using the following formula: net income must be divided by equity and multiplied by 100%.
