The solvency of an enterprise is its ability to timely settle its obligations and debts at the current time, both for short-term and long-term. In the analysis of solvency, assets are considered as collateral for the firm's debts, i.e. property, after the sale of which she will pay off her obligations.
Instructions
Step 1
Speaking about the solvency of an organization, we mean its liquidity, i.e. the possibility of selling the company's assets and paying off debts. This is a broader and more accurate view of solvency. In a narrower sense, solvency is the availability of funds sufficient for an enterprise to pay off current accounts payable in the near future.
Step 2
When analyzing the solvency of an enterprise, three main coefficients are calculated. The first of them - the current solvency ratio - allows you to assess the organization's ability to repay its debts and shows how much working capital falls on one ruble of short-term liabilities. The normative value for this coefficient is 2. The value of the coefficient below the established standard indicates the presence of the risk of the enterprise's untimely calculation of the repayment of current liabilities.
Step 3
The quick solvency ratio is defined as the ratio of the amount of receivables, short-term financial investments and cash to the company's short-term liabilities. Those. when calculating this ratio, inventories are deducted from the value of the assets of the enterprise. And this is quite logical: they not only have less liquidity, but if they are quickly sold, the selling price may be lower than the cost of their manufacture or purchase. The approximate value for this coefficient is 1.
Step 4
The most stringent criterion for the solvency of an enterprise is the ratio of absolute solvency. It is calculated as the ratio of cash to the firm's short-term liabilities and shows how much of the debt can be repaid immediately from the available cash. The standard value for this coefficient is 0.25.
