An enterprise is considered solvent if its short-term financial investments in the form of temporary financial assistance and investments in securities, as well as settlements with debtors, can cover short-term liabilities. And the level of his solvency is determined by the state of the working capital. There are many ways to improve your ability to pay.
It is necessary
conducting an internal analysis and taking a set of measures to improve solvency
Instructions
Step 1
In order for the production process to be uninterrupted, there must be a liquid part of the working capital. There are several ways to increase solvency and improve financial stability. First of all, it is necessary to increase sales profit by introducing progressive regulations, energy-saving technologies and reducing production costs.
Step 2
It is necessary to reduce the production cycle to a minimum and thereby accelerate the turnover of funds.
Attract new long-term sources of funding that will guarantee a constant flow of funds.
Step 3
Improve the efficiency of the use of working capital through control in calculations, which includes the definition of payment terms for manufactured products, the creation of a reserve for debts of doubtful origin and the selection of potential buyers. Improve the efficiency of enterprise property management by applying intensive and extensive factors to improve the use of funds.
Step 4
The current solvency of the organization is affected by the degree of liquidity of current assets, but it should be noted that liquidity and solvency are not identical. The liquidity ratio can speak of a satisfactory position of the organization, however, if the composition of current assets includes mostly assets of dubious value, then the assessment may be erroneous.
Step 5
The financial condition of the enterprise is more dynamic when compared with liquidity, since in the process of stabilizing production activity, the structure of sources of funds and current assets is formed, where abrupt changes rarely occur.
Step 6
Solvency changes very quickly, and it is quite possible at any time to permanently or temporarily lose it. For example, today the organization is solvent, and tomorrow the due date has come to settle with the creditor, but there are not enough funds due to delays in payments by debtors and the company becomes insolvent. This delay is short-term and solvency recovers quickly.
