The solvency of the enterprise implies the ability of the company to timely "repay" the amount of the existing debts and obligations in the current period of time. Analysis of solvency allows you to consider the assets of the company in the form of collateral for its debts.
Instructions
Step 1
Conduct an analysis of the company's solvency. For this, it is necessary to calculate three fundamental factors. The first of which is the solvency ratio for the current period. This indicator makes it possible to assess the company's ability to recover its debts and reflects how much working capital will fall on one ruble of existing short-term liabilities. There is a standard value for such a ratio - 2. In turn, if the value of the ratio is below the established standard, this will indicate the presence of a risk associated with late repayment of current liabilities.
Step 2
Calculate the value of the second indicator (quick solvency ratio). It is defined as the ratio of the amount of accounts receivable, financial short-term investments and the amount of cash to the value of the company's short-term liabilities. That is, when calculating this coefficient, it is necessary to deduct its reserves from the sum of the assets of the enterprise. After all, stocks have not only the lowest liquidity, but also in the case of their necessary, quick sale, the selling price can be much lower than the cost of their acquisition or manufacture. The standard value for such a coefficient is 1.
Step 3
Determine the value of the ratio of absolute solvency. It can be calculated as the ratio of cash to the sum of the organization's short-term liabilities. This indicator shows what share of debt can be repaid at the moment at the expense of the funds available to the company. In turn, the standard value of such a coefficient is 0.25.
Step 4
Calculate the value of positive net capital (or the amount of net assets of the company) to assess the long-term solvency of the company. Find the leverage ratio as the ratio of debt to equity. Calculate the amount the firm needs to cover interest on long-term obligations. That being said, use their repayment schedule.
