The liquidity of the balance sheet reflects the degree of coverage of the company's liabilities by assets, the period of conversion of which into cash corresponds to the maturity of the liabilities. The need to assess the liquidity of the balance sheet of an enterprise arises in connection with the determination of its creditworthiness, i.e. the ability to timely pay for the obligations assumed.
Instructions
Step 1
In order to determine the liquidity of the balance sheet, group the assets. The most liquid assets (A1) are the amounts for all items of cash that can be used to pay off liabilities immediately. In addition, group A1 includes short-term financial investments. Quickly realizable assets (A2) are assets that take some time to convert into cash. This includes accounts receivable, for which payments are expected within 12 months, and other current assets. Slowly traded assets (A3) - this is the part of assets that includes inventories, accounts receivable with a maturity of more than 12 months, VAT on purchased values. Hard-to-sell assets (A4) are the assets of an enterprise that are used for a long time and are difficult to sell on the market. This group includes section I of the balance sheet "Non-current assets".
Step 2
Then group the liabilities of the balance sheet according to the degree of increase in the maturity of obligations. The most urgent liabilities (P1) are accounts payable, dividend payments, loans not repaid on time. Short-term liabilities (P2) are the portion of liabilities that includes short-term loans and borrowings that mature within 12 months. Long-term liabilities (P3) are long-term liabilities of the IV section of the balance sheet. Permanent liabilities (P4) include the results of section III "Capital and reserves" and item V of the section of the balance sheet "Provisions for future expenses" and "Deferred income".
Step 3
To determine the liquidity of the balance sheet, compare the totals of each group of assets and liabilities. The balance sheet of an enterprise is considered absolutely liquid if all conditions are met: A1> P1; A2> P2; A3> P3; A4
