Liquidity ratio: balance formula and normative value. The financial analysis

Liquidity Formula is calculated by the ratio of highly liquid assets, marketable assets and slowly convertible and the most urgent liabilities and medium-term liabilities.

There are 3 types of liquidity ratios:

  • current liquidity,
  • Fast (urgent) liquidity,
  • absolute liquidity.

The very concept of liquidity means the ability of an enterprise's assets to quickly transform into cash that can be directed:

  • Payment of wages,
  • Payment of taxes and other obligatory payments to the budgets,
  • Dividend payment,
  • Payment of debts to creditors, contractors, etc.

Liquidity is often equated with solvency, that is, the ability of an enterprise to sell its own assets at a market price. The term liquidity itself comes from the word liquidate (sell or sell). Liquidity is the basic concept of financial analysis, which reflects the speed at which a company's assets are converted into money.

Current liquidity formula

Current liquidity ratio is one of the three main criteria characterizing the liquidity of the enterprise.

Current liquidity is a key indicator of the financial condition of any enterprise, it must be constantly monitored.

The growth of the coefficient makes the enterprise more investment attractive for investors and creditors, which gives it more additional leverage and financial resources while increasing the market value, including profitability.

There are several types of assets and liabilities of the company that make up the liquidity formula.

Asset classification:

  • A1 - Highly liquid assets (line 1250),
  • A2 - Marketable assets (p. 1230),
  • A3 - Slowly convertible assets (p. 1220).

Liabilities are classified as follows:

  • P1 - The most urgent liabilities (p. 1520),
  • P2 - Medium-term liabilities (p. 1510).

When this classification is taken into account, the (current) liquidity formula has the following form:

To current =(A1+A2+A3)/(P1+P2)

If we take into account the balance lines, then the formula will take the following form:

To current =p. 1200 / (str.1510+str.1520+str.1550)

Quick (term) liquidity formula

The quick liquidity ratio is an indicator that characterizes the company's solvency in the medium term. Using this indicator, you can determine whether the company will be able to pay off short-term liabilities if it uses liquid assets.

Liquidity formula (quick) in general:

K is fast. \u003d (DS + KV + KZ) / TO

KV - the amount of short-term financial investments,

KZ - short-term receivables,

TO - the amount of current liabilities.

Another version of the liquidity formula:

K is fast. = OA-Z / TO

Here, OA is the sum of current assets,

Z - stocks,

TO - current liabilities.

Absolute liquidity formula

The absolute liquidity ratio shows the share of short-term debt that can be repaid using the company's most salable property in a short time.

The liquidity formula (absolute) is determined by the ratio of the amount of easily marketable property to the amount of short-term debt:

To abs. = (DS + KFV) / KO

Here DS is the amount of money,

KFV - short-term financial investments,

KO - short-term liabilities.

Examples of problem solving

EXAMPLE 1

Exercise Determine the current liquidity ratio of the enterprise if it has the following indicators for the past period in the balance sheet:

The amount of funds - 50 thousand rubles,

The amount of short-term financial investments is 32 thousand rubles,

Debtors' debt - 126 thousand rubles,

Creditors' debt - 115 thousand rubles,

Stocks of production - 158 thousand rubles,

Short-term loans in the amount of 98 thousand rubles.
Solution The liquidity formula for solving this problem is as follows:

Kcurrent =(A1+A2+A3)/(P1+P2)

To current =(50+32+126+158)/(115+98)=366/213=1.72

Conclusion. The company for the past period worked with a current ratio of more than one. This means that there is no real threat of bankruptcy. A coefficient of 1.72 means that in this number of times, current assets cover the amount of short-term liabilities. That is, this company can be considered solvent.
Answer To current =1.72

EXAMPLE 2

Exercise Calculate the liquidity ratio (absolute) at the beginning and end of the year, while making a conclusion about the state of the company.

Amount of easily marketable property

Beginning of the year - 312 thousand rubles,

End of the year - 398 thousand rubles,

Short term debt

Beginning of the year - 645 thousand rubles,

End of the year - 689 thousand rubles.
Solution Formula for absolute liquidity:

To abs. = Marketable property value/Short-term debt

To abs. (beginning of the year)=312/645=0.48

To abs. (end of the year)= 398/689=0.58

Conclusion. The normal value of the absolute liquidity ratio is from 0.2 to 0.5. We see that its value has increased over the year. An increased value of the indicator may indicate a higher solvency of the company, but may also indicate unjustified costs when using highly liquid assets.
Answer To abs. (beginning of the year) = 0.48, K abs. (end of the year)=0.58

Let's consider the basic formulas and examples of calculating liquidity ratios. These indicators help to assess the company's ability to timely and fully meet short-term obligations at the expense of current assets.

Liquidity or current solvency is one of the most important characteristics of the company's financial condition, which determines the ability to pay bills on time and is actually one of the indicators of bankruptcy. Therefore, the results of the analysis of financial liquidity ratios are important from the point of view of both internal and external users of information about the company.

Calculation of liquidity ratios

To assess liquidity, the well-known liquidity ratios general, medium-term (interim) and absolute (instant) liquidity.

Since the value of current assets and short-term liabilities is changing rapidly, the ratios sometimes reflect outdated data. When interpreting them, this feature should be taken into account. See how to do liquidity analysis by balance sheet lines.

The overall liquidity ratio characterizes the company's ability to fulfill short-term obligations at the expense of all current assets. Classically, it is calculated as the ratio of current assets (current assets) and short-term liabilities (current liabilities) of the company.

All indicators used in the calculations must refer to the same reporting date.

The absolute (instantaneous) liquidity ratio reflects the company's ability to fulfill short-term obligations at the expense of free cash and short-term financial investments, i.e. at the expense of the most liquid part of the assets.

Here, cash is cash according to the balance sheet; KFV - short-term financial investments according to the balance sheet.

liquidity

Coefficient of medium-term (intermediate) liquidity characterizes the ability of the enterprise to fulfill short-term obligations at the expense of current assets with an average degree of liquidity.

When calculating the indicator, the main issue is the division of current assets into liquid and low-liquid parts. This issue in each specific case requires a separate study, since only cash can be unconditionally attributed to the liquid part of the assets. In the classical version of the calculation of the coefficient, the most liquid part of current assets is understood as cash, short-term financial investments and non-overdue receivables up to 12 months.

Coverage ratio of average daily cash payments

When calculating the liquidity ratios of an enterprise, there are fewer difficulties than when interpreting them. For example, the managerial interpretation of the absolute liquidity indicator in fractional terms (0.05 or 0.2) is difficult. How to evaluate whether the obtained value is optimal, acceptable or critical for the company? To get a clearer picture of the state of absolute liquidity of the company, you can calculate the modification of the absolute liquidity ratio - the coefficient of coverage of average daily payments in cash. The point of this calculation is to determine how many “payment days” the company has cash to cover.

The first calculation step is to determine the amount of average daily payments made by the organization. The source of information on the amount of average daily payments can be a profit and loss statement (form No. 2), or rather, the sum of the values ​​​​for the items of this report "Cost of sales", "Selling expenses", "Administrative expenses". Non-cash payments such as depreciation must be deducted from this amount. A similar recommendation is given in foreign literature. However, it is difficult to apply it directly to Russian enterprises. First, Russian enterprises often have significant stocks of materials and finished products in stock. In this regard, the value of real payments associated with the implementation of the production process can be much larger than the cost of goods sold reflected in Form No. 2.

Thus, to determine the average daily cash outflows, you can use information on the cost of goods sold (net of depreciation), but taking into account changes in the balance sheet items "Inventory", "Work in progress" and "Finished products", as well as taking into account tax payments for the period.

It is correct to take into account both positive (increase) and negative (decrease) increments in inventories, work in progress and finished products.

Thus, the calculation of average daily payments for current production activities based on financial statements (balance sheet, income statement) can be carried out as follows:

Cash payments for the period = (Cost of goods sold + Administrative expenses + Selling expenses) for the period - Depreciation deductions for the period + Income tax for the period + Increase in inventories of materials, work in progress, finished goods for the period.

Note that for the calculation it is necessary that the information of form No. 2 be presented for the period (not on an accrual basis) and all indicators used in the calculations refer to the same period of time.

For a more accurate calculation of average daily payments, in addition to information on the costs of production and sales of products, you can take into account investment investments for the period, expenses for the maintenance of the social sphere and other costs of the period. However, it is necessary to observe the principle of reasonable sufficiency - in the calculations it is recommended to take into account only "significant for the current account" payments.

You can create individual modifications of the formula for calculating average daily payments. For example, depreciation may not be excluded from the value of costs for sold products. In this way, you can compensate for some of the other payments that need to be included in the calculation (for example, taxes or social payments). The total amount of taxes paid for the period is not directly allocated in the form No. 2, so you can limit yourself to income tax (highlighted in the form No. 2).

To determine the value of average daily payments, it is necessary to divide the total cash payments for the period by the duration of the analyzed period in days (Int).

To determine how many "days of payment" are covered by the enterprise's availability, it is necessary to divide the cash balance on the balance sheet by the amount of average daily payments.

When calculating the coverage ratio of average daily cash payments, a fair remark may arise: the cash balance on the balance sheet may not quite accurately characterize the amount of cash that the company had at its disposal during the analyzed period. For example, shortly before the reporting date (the date reflected in the balance sheet), large payments could be made, in connection with this, the cash balance on the balance sheet is insignificant. The opposite situation is possible: during the analyzed period, the company's cash balance was insufficient, but shortly before the reporting date, the customer repaid the debt, in connection with this, the amount of money on the company's current account increased. Note that both the classic indicator of absolute liquidity and liquidity in payment days are based on the data reflected in the balance sheet. In this regard, the error of both coefficients is the same.

The obtained values ​​of liquidity in days of payments are more informative than fractional values ​​of the liquidity ratio, and allow a more accurate assessment of the situation with absolute liquidity. For example, the head of an enterprise that has stable terms of settlements with suppliers and buyers, producing serial products, considers the coverage ratio of average daily payments in cash to be acceptable for 10–15 days, i.e. cash balance covering 15 days of averaged payments. In this case, the absolute liquidity ratio can be 0.08, i.e. be lower than the value recommended in Western practice of analysis using financial ratios.

Ratio Analysis

In the Western practice of financial analysis, a comparative method is used to assess the liquidity of a company, in which the calculated values ​​of the coefficients are compared with the industry average. Although the optimal coefficient values ​​for a certain industry and a certain enterprise are unique, the following values ​​are often used as a guideline:

  • for the overall liquidity ratio - according to international standards, this ratio should be in the range from 1 to 2;
  • for the absolute liquidity ratio - in Russia for this ratio the value of 0.20 ^ 0.25 is accepted; in other countries its meaning is not regulated;
  • for the intermediate liquidity ratio - according to international standards, the value of the quick liquidity ratio should be greater than 1; in Russia, its recommended value lies in the range of 0.7-0.8.

In Russia, there is not yet an updated statistical database of optimal values ​​for companies' liquidity indicators various areas activities. Therefore, in Russian practice, when assessing liquidity, it is recommended:

  • pay attention to the dynamics of changes in coefficients;
  • determine the values ​​of the coefficients sufficient (acceptable) for this particular company.

There are several options for calculating the allowable value of the total liquidity ratio. The calculation of the indicator acceptable for a given enterprise is based on the management rule, according to which, due to equity the least liquid current assets were financed.

Algorithm for calculating sufficient liquidity ratio

1. Determination of the least liquid current assets. As noted above, it is advisable to allocate the least liquid assets individually for the company, but you can use the statement

The least liquid current assets that must be financed from own funds = Inventory + Work in progress.

2. Determination of receipts from buyers available to the maturity date of obligations to creditors:

Here DZ is the average value of receivables;
ObKZ - the period of turnover of accounts payable;
ObDZ - the period of turnover of receivables.

The maximum value between the formula value and zero is selected.

5. Determination of the permissible value of short-term liabilities:

KO allowable \u003d Actual current assets - NOK sufficient

Permissible values ​​of the general liquidity ratio must be compared with its actual values, on the basis of which it can be concluded that the level of the organization's general liquidity is sufficient or insufficient.

An example of calculating a sufficient value of the overall liquidity ratio

The company whose balance sheet is presented in Table. 1, for the first three reporting dates, there is an active growth in the overall liquidity ratio, as well as a significant excess (by 1.75 times) of the actual value of the ratio over the minimum required level.

In the last reporting period, there has been a noticeable decrease in the overall liquidity ratio - from 2.28 to 1.18. However, the absolute value of 1.18 did not fall below the minimum allowable level of 1.16 (it fell to the minimum required level). Thus, even a two-fold reduction in the overall liquidity ratio does not mean a loss of liquidity and the emergence of a critical situation. Of course, the decrease in the overall liquidity ratio should attract attention and be noted, but the company's position even in such a situation can be considered acceptable.

Table 1. Calculation of a sufficient value of the overall liquidity ratio

Name of positions 01.01.13 Reporting dates 01.01.14 01.01.15 01.01.16
Balance
Unfinished production 1 227 1 809 3 082 4 502
Stocks of raw materials and materials 8 251 9 969 26 093 32 999
Finished products and goods 1 916 9919 19 584 37 308
Accounts receivable 5 400 14 546 58 917 187 930
Cash 732 775 17 351 7 201
Other current assets 3313 4 179 5 156 5 694
Total current assets (actual) 20 842 42 737 131084 276 885
Total current liabilities (actual) 11 258 16 765 57 532 235 294
The cost of the least liquid part of current assets (stocks of raw materials, work in progress) 9 478 11 778 29 175 37 501
Receipts from buyers (accounts receivable and advances) available by the maturity date of obligations to creditors. 6 708 17 971 83 165
Funds needed to ensure uninterrupted payments to suppliers (to pay off accounts payable, pay advances to suppliers) 0 0 0
Total own funds needed (sufficient amount of net working capital) - 11 778 29 175 37 501
Actual value of net working capital 9 584 25 973 73 552 41 591
The actual value of current (current) assets 20 842 42 737 131 083 276 885
Permissible (normal) value of current liabilities - 30 959 101 908 239 384
Sufficient level of overall liquidity ratio - 1,4 1,3 1,2
Actual level of total liquidity ratio 1,9 2,5 2,3 1,2

A single calculated sufficient level of the overall liquidity ratio is not a once and for all fixed benchmark for the company. He is eligible in a specific period, characterized by certain working conditions. When the parameters of the company's activity change (value of assets, profitability of activity, etc.), the sufficient level of liquidity ratios will also change. In this regard, it is advisable to calculate the total liquidity indicator that is acceptable for a given company for each analysis interval.

Gradually, the organization will be able to accumulate a statistical base of acceptable (optimal) values ​​of the total liquidity ratio, depending on the working conditions.

Factors that determine the amount of total liquidity

A common "stamp" of analysis using financial ratios is the search for the reasons for the change in the overall liquidity indicator in its calculation formula. In this case (as in the case of the PSC formula), the components of the calculation formula are indicators of the financial position, but not the reasons that determine it. Here it is appropriate to draw an analogy with the temperature that arose as a result of a sunstroke. In this case, high temperature is only an indicator of problems that have arisen in the body. The real reason for the deterioration of a person's condition is the abuse of the sun. To improve the condition, it is necessary to deal with the root cause - to reduce exposure to the open sun. In diagnosing the financial condition of a company, the situation is similar: to determine the reasons for the change in indicators, you need to go a little further, and not just calculate the coefficients.

The minimum knowledge of fractions allows us to conclude that the reason for the decrease in the coefficient is the outstripping growth of the denominator compared to the growth of the numerator. Very often, this mathematical key is used to open the economic meaning, for example: “The decrease in the overall liquidity indicator is caused by too much accounts payable. To increase the ratio, it is necessary to reduce accounts payable and other current liabilities and increase the amount of current assets.”

The inadequacy of such a conclusion becomes obvious if it is translated into managerial language: in order to improve the company's solvency, it is recommended to refuse advances from buyers, speed up payments to suppliers as much as possible, refusing even the deferred payments allowed by suppliers (all this applies to the recommendation to reduce liabilities). The advice to increase current assets means buying stocks for many years to come, overstocking the warehouse of finished products, allowing buyers not to pay receivables, trying to pay as large advances as possible to suppliers. These recommendations will by no means contribute to the improvement of the company's condition.

In fact, the reasons for the change in liquidity lie somewhat deeper. They can be determined both logically and mathematically. Let's look at logic searches first. Why did the company's accounts payable begin to grow or why was it forced to take out a loan? It is unlikely that the reason was the lack of control over the payment of invoices presented (they did not pay attention to the invoices, in connection with which the debt grew uncontrollably). In most cases, the decision to postpone the payment of a particular invoice is made consciously for a specific reason - there are not enough own funds to finance the current activities of the company. Own funds, as we have already found out, arise as a result of making a profit. Conducting production activities is the creation of working capital and the acquisition of non-current assets (investments).

As with the NCF indicator, the main reason for the decrease in the total liquidity ratio is losses, and, consequently, a decrease in equity (Fig. 1). Optimization of the indicator is possible primarily by increasing the profitability of activities and increasing the share of profit remaining at the disposal of the enterprise (reducing the share of profit directed to non-production purposes).

  • Losses (and resulting reduction in equity)
  • Significant investment investments (acquisition of fixed assets, capital construction)
  • Deteriorating conditions for working capital management
  • Financing of the investment program through short-term liabilities

Rice. one.

The company can make capital investments, for example, in the construction of workshops, the purchase of equipment, the acquisition of other organizations that exceed its financial capabilities (in this case, this is the sum of profits received and attracted long-term loans). Capital expenditures that exceed the amount of profits earned and long-term loans raised will require additional borrowings. The outstripping growth of borrowed funds will lead to a decrease in liquidity indicators.

Financing investment investments (growth of non-current assets) through short-term loans is another reason for the reduction in the overall liquidity of the company. The rules of financial management are simple and logical: long-term loans should be attracted to finance investment costs, short-term loans - to finance working capital. Attracting short-term loans, the company should be able to repay them in the short term. The increase in working capital in most cases is associated with an increase in production volumes, which, in turn, will make it possible to receive additional profit in the near future - a source of debt repayment. When implementing an investment program, obtaining a result in the form of additional profit is delayed in time. For this reason, it is also logical to attribute the repayment of obligations to a longer period, i.e. attract long-term financing. With funding long-term investments With short loans, an obvious contradiction arises: it is necessary to repay the loan in the short term, an additional result as a source of loan repayment arises in the long term. In this case, the company is in a tougher, riskier situation in terms of current payment security.

As for the NCF indicator, in order to ensure the minimum required level of general liquidity, it is possible to determine the allowable increase in assets (in particular, allowable investments in non-current assets), which will not lead to a reduction in the general liquidity ratio below the allowable level:

Permissible increase (non-current assets + least liquid current assets)<= Прирост собственного капитала + Прирост долгосрочных обязательств + ЧОК (фактический) предыдущего периода – ЧОК (допустимый) предыдущего периода.

Equity capital gain - profit remaining at the disposal of the enterprise, i.e. profit received for the period less expenses from profit. With a high level of self-financing, the increase in equity capital can be taken equal to the net profit earned for the period.

If the difference between the actual and the minimum allowable NER is negative (i.e. the available NER is not sufficient for the prevailing operating conditions), the negative value is also taken into account.

To increase the overall liquidity ratio and ensure its minimum required value, it is required:

  • ensure the profitability of the company and its growth;
  • comply with the financial rule: financing the investment program (investments in non-current assets) through long-term rather than short-term loans (short loans should finance the growth of current assets, but not non-current assets);
  • to carry out investment investments within the limits of the received profit and attracted long-term investments, taking into account the state of the NRC of previous periods (taking into account whether or not the actual NRC exceeds its minimum required value);
  • strive to minimize (reasonable) inventory, work in progress, i.e. the least liquid current assets.

Financial ratio equal to the ratio highly liquid current assets to short-term liabilities(current liabilities). The data for calculation is the balance sheet of the company. In contrast to the current liquidity ratio, here analysts do not take into account inventories as part of assets, since in case of their forced sale, losses are maximum among all current assets.

Quick liquidity ratio - what does it show

This is a more stringent assessment of the company's liquidity. This ratio is also called the "acid test", and is calculated using only a portion of current assets - cash, marketable securities and receivables - that are matched against current liabilities:

This ratio shows how much it will be possible to pay off current liabilities if the situation becomes critical. The assumption is that inventory has no salvage value. For the correct calculation of the quick liquidity ratio, the quality of securities and receivables is assessed.

The purchase of untrustworthy securities and the increase in the number of doubtful debtors creates a favorable impression when calculating the quick liquidity ratio. But it is highly likely that by selling such securities, the company will suffer a loss, and the receivables will not be paid or will be repaid after a long period of time, which is tantamount to non-payment.

Liquidity ratios are informative both for the management of the enterprise and for external subjects of analysis:

  • absolute liquidity ratio - for suppliers of raw materials and supplies;
  • quick ratio- for banks;
  • current liquidity ratio - for investors.

Quick liquidity ratio - formula

The general formula for calculating the coefficient:

A1 - the most liquid assets; A2 - fast-selling assets; P1 - the most urgent obligations; P2 - short-term liabilities

Calculation formula according to the old balance sheet:

where p.240, p.250, p.260 etc. - lines of the balance sheet (form No. 1)

Calculation formula according to the new balance sheet:

Quick liquidity ratio - value

The normal value of the coefficient falls in the range of 0.7-1. However, it will not be sufficient if a large proportion of liquid funds is accounts receivable, some of which is difficult to collect on time. In such cases, a larger ratio is required.

Average statistical values ​​by years for Russian enterprises

RevenueValues ​​by years, rel. units
2012 2013 2014 2015 2016 2017 2018
Micro enterprises (revenue< 10 млн. руб.) 0.849 0.876 0.853 0.884 0.792 0.839 0.825
Mini-enterprises (10 million rubles ≤ revenue< 120 млн. руб.) 0.871 0.872 0.844 0.816 0.852 0.811 0.843
Small enterprises (120 million rubles ≤ revenue< 800 млн. руб.) 0.888 0.880 0.814 0.872 0.859 0.874 0.916
Medium enterprises (800 million rubles ≤ revenue< 2 млрд. руб.) 0.890 0.872 0.935 0.911 0.896 0.934 0.950
Large enterprises (revenue ≥ 2 billion rubles)1.095 1.064 1.058 1.113 1.074 1.061 1.084
All organizations1.027 0.978 0.968 1.002 0.977 0.981 1.010

Table values ​​are calculated based on Rosstat data

Quick liquidity ratio - scheme

Synonyms

  • quick ratio
  • critical liquidity ratio
  • intermediate liquidity ratio
  • intermediate coverage ratio
  • critical appraisal factor

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The current ratio is the ratio of highly liquid assets, fast-moving assets and slowly convertible to the most urgent liabilities and medium-term liabilities. This indicator is one of the three main criteria characterizing the liquidity of the enterprise.

Liquidity, as a rule, is equated with the solvency and ability of an enterprise (firm, company) to sell assets at a market price. The concept of liquidity comes from the term to liquidate, that is, to sell. Liquidity is one of the key concepts of financial analysis and shows the rate at which assets are converted into money.

Below is a classification of the types of assets and liabilities of the enterprise used to assess liquidity.

A1 = Highly liquid assets (line 1250)

A2 = Marketable assets (p. 1230)

A3 = Slowly convertible assets (line 1220)

--------------------–

P1 = Most urgent obligations (p. 1520)

P2 = Medium-term liabilities (line 1510)

The new balance was adopted in 2011, the main differences are in the names of the lines, and not in the economic sense of the formula.

Current liquidity ratio = line 1200 / line 1510 line 1520 line 1550

There are two options for calculating the old formula for this indicator.

Current liquidity ratio = (line 290 Form No. 1) / (line 610 line 620 line 630 line 640 line 660);

Current liquidity ratio = (line 290-line 230 Form No. 1) / line 690.

The value of the current liquidity indicator for 2009 for the JSC Transneft enterprise is 3.48, which is quite high according to general standards. Let's compare the enterprise with similar enterprises with a similar type of activity and size.

Type of activity of OAO Transneft - Oil and gas industry, Petroleum products - sale, transportation, Oil and gas - production. For OAO Transneft, sales revenue exceeds 1,000 million rubles. The final calculation of the industry average value of the indicator is presented in the table below.

The value of current liquidity for similar enterprises was calculated, which amounted to 2.76. As we can see, JSC Transneft has a higher solvency in relation to the industry average. This indicates a good financial condition of the company.

An example of comparing the current liquidity ratio of an enterprise with an industry

In addition to comparison with the industry average value of the current liquidity indicator, you can compare it with the indicator for a selected region, for example, Moscow, as one of the leading regions of Russia.

The liquidity of the balance sheet is the possibility and degree of coverage of the obligations of the enterprise by its assets. Moreover, the term for the conversion of assets into cash corresponds to the maturity of liabilities. The liquidity of the company's balance sheet is analyzed:

  • credit organizations - to assess the possibility of issuing loans;
  • investors - to determine the difficulty of withdrawing funds invested in the business;
  • prudent suppliers and contractors – before making big deals.

In order to analyze the liquidity of the balance sheet of an enterprise, it is necessary to combine the lines of assets and liabilities of the balance sheet by groups (table 1). The liquidity level of the balance is determined by comparing the items of assets, grouped by the degree of liquidity, and liabilities, grouped by the urgency of their payment (debt repayment).

Table 1. Assets by liquidity and liabilities by maturity

Balance lines

Balance lines

A1 - absolutely liquid assets

Short-term financial investments

Cash

Page 1240 Page 1250

P1 - urgent obligations

Toeditorialdebt

A2 - quickly realizable assets

Accounts receivable

P2 - short-term liabilities

Borrowed funds

Estimated liabilities

Other liabilities

Page 1510 Page 1540 Page 1550

A3 - slow-moving assets

VAT payable

Other current assets minus RBP

Page 1210 Page 1220 Page 1260 - Page 12605

P3 - long-term liabilities

long term duties

A4 - permanent assets

Fixed assets

P4 - own funds

Capital and reserves

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Table 2. Comparison of rows of asset items grouped by liquidity and liabilities grouped by maturity

(amp)gt; = (amp)lt;?

(amp)gt; = (amp)lt;?

(amp)gt; = (amp)lt;?

(amp)gt; = (amp)lt;?
  • A1 ≥ P1 - the company is able to pay debts to creditors from its own funds. In practice, this ratio is extremely rare and means inefficient use of funds.
  • A1 A2 ≥ P1 P2 - the company can pay all current liabilities by converting fast-moving assets into cash. For the company, this means that if any of the creditors file an application for recognition of its financial insolvency, it will be able to pay off its debts.
  • A3 ≥ P3 - the company will be able to pay off long-term obligations by converting slow-moving assets into cash.
  • A4 ≤ P4 - fixed assets of the enterprise - hard-to-sell assets - are fully financed from their own funds.

The company's balance sheet is considered absolutely liquid if all four liquidity conditions are met. But since liquidity is not the main purpose of the functioning of a business, in practice there may be different combinations of inequalities. Therefore, the liquidity of the balance sheet is also estimated by the coefficients. See also horizontal and vertical balance sheet analysis.

Consider the main ratios for analyzing the liquidity of the enterprise.

Absolute liquidity is understood as the provision of an enterprise with cash in a very short period of time, literally “today”.

The normative value of the coefficient is 0.2 or more.

But the values ​​can vary quite widely depending on the industry, on the size of the enterprise, on the production cycle.

It should be noted that too high values ​​of the absolute liquidity ratio - from 0.8 or more - this is also bad and indicates an inefficient use of the company's funds.

For example, let's analyze the liquidity of the balance sheet using the example of the company "Magnitogorsk Iron and Steel Works" (PJSC "MMK").

Table 4. Extracts from the balance sheet of PJSC Magnitogorsk Iron and Steel Works for 2014-2016

BALANCE SHEET

(in millions of rubles)

Code page

2016

2015

2014

ASSETS:

BHE0000THE ASSETS

270 624

298 344

314 851

CURRENT ASSETS, incl.

VAT refundable

Trade and other receivables

Investments in securities and other financial assets

Cash and cash equivalents

Other current assets

Total current assets

TOTAL ASSETS

394 304

448 776

441 995

EQUITY AND LIABILITIES

CAPITAL

LONG TERM DUTIES:

SHORT-TERM LIABILITIES, incl.

Short-term loans and borrowings, as well as the current portion of long-term loans and borrowings

Trade and other payables

Total current liabilities

TOTAL EQUITY AND LIABILITIES

394 304

448 776

441 995

Table 5. Assets and liabilities by groups, million rubles

Asset group

Group of liabilities

(amp)gt; = (amp)lt;

(amp)gt; = (amp)lt;

(amp)gt; = (amp)lt;

(amp)gt; = (amp)lt;

(amp)gt; = (amp)lt;

The table shows that the inequality A1≥P1 is fulfilled only in 2015. And in 2016, A1 is significantly less than P1. This means that the enterprise will not be able to repay the claims of creditors "in one day", it will not have enough free money supply.

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A1 A2 (amp)lt; P1 P2 throughout the analyzed period. This means that in the short term, the company does not have enough liquid working capital to pay off short-term liabilities.

A3(amp)gt; P3 in 2016. This means that the level of inventories and other assets of the enterprise allows it to cover long-term obligations to creditors. In 2015 and 2014, the inequality is not fulfilled.

A4(amp)lt;P4 only in 2016. This means that only by 2016 the company earned its own capital, which allows it to cover the cost of non-current assets.

Based on the above analysis, PJSC MMK's balance sheet is generally not liquid, but positive dynamics are observed in the period under review.

Recall that PJSC MMK operates in the iron and steel industry, which is very capital-intensive and has a long production cycle. This explains the low liquidity of the balance sheet.

Table 6. Calculation of liquidity ratios

Index

Indicator value

Change in indicator

standard

Current (total) liquidity ratio

1,91

1,45

1,41

0,51

Quick (intermediate) liquidity ratio

0,82

0,78

0,69

0,13

Absolute liquidity ratio

0,30

0,51

0,35

0,05

0.2 or more

Working capital ratio

0,12

0,37

0,73

0,85

0.1 or more

The coefficient of maneuverability of own working capital

0,05

0,23

0,42

0,47

As of December 31, 2016, with the standard range of 1–2.5, the current (total) liquidity ratio is 1.91. In previous years, the ratio also had exceptionally good values ​​and shows positive for the entire period under review.

The interim liquidity ratio is 0.82 in 2016, which is also within the normal range. In 2014, it was below the norm (0.69), but in two years it increased by 0.13.

The absolute liquidity ratio has a value corresponding to the norm (0.30). At the same time, over the analyzed period, the coefficient decreased by 0.05. The decrease is recognized as insignificant, since large fluctuations in the coefficient are possible at different stages of the production cycle.

An example of liquidity analysis of the company's balance sheet

  • for the overall liquidity ratio - according to international standards, this ratio should be in the range from 1 to 2;
  • for the absolute liquidity ratio - in Russia for this ratio the value of 0.20 ^ 0.25 is accepted; in other countries its meaning is not regulated;
  • for the intermediate liquidity ratio - according to international standards, the value of the quick liquidity ratio should be greater than 1; in Russia, its recommended value lies in the range of 0.7-0.8.

In Russia, there is not yet an updated statistical database of optimal values ​​for the liquidity indicators of companies in various fields of activity. Therefore, in Russian practice, when assessing liquidity, it is recommended:

  • pay attention to the dynamics of changes in coefficients;
  • determine the values ​​of the coefficients sufficient (acceptable) for this particular company.

There are several options for calculating the allowable value of the total liquidity ratio. The calculation of the indicator acceptable for this enterprise is based on the management rule, according to which the least liquid current assets were financed at the expense of equity.

  • current liquidity, indicating the company's ability to pay obligations in the near future by the analyzed period: if at the same time A 1 A 2 ≥ P 1 P 2 is fulfilled, then the position of the company is steadily stable (A 4 ≤ P 4);
  • prospective, i.e., predictable liquidity based on a comparison of upcoming transactions: if A 3 ≥ P 3, then A 4 ≤ P 4;
  • insufficient level of projected liquidity;
  • illiquidity of the balance sheet: A 4 ≥ P 4 .

Such an assessment is very approximate, a more detailed analysis of the liquidity of the balance sheet is carried out using the calculations of special coefficients.

Current liquidity ratio standard

If the current liquidity ratio is greater than 2, this indicates that the company has more current assets than short-term liabilities with double coverage. An enterprise (company) has a high ability to pay off its obligations (debts) in the short term. The normative value of current liquidity equal to 2 was obtained in practice and is most often found in domestic regulations.

In world practice, a coefficient in the range from 1.5 to 2.5 is considered optimal. If the current liquidity ratio is less than 1, then the enterprise cannot pay off its short-term obligations steadily. The table below shows a comparison of domestic and international standards and the level of solvency of the enterprise.

Current liquidity ratio in infographic

In the figure below, the infographic shows the key features of the current liquidity ratio, the directions of use, the calculation formula and the assessment of the indicator.

Click to enlarge

Comparison of the current liquidity ratio with other liquidity indicators

In addition to the current liquidity ratio, in the practice of financial analysis, the quick liquidity ratio and the absolute ratio are often used. They show the ability of the enterprise to repay its debt obligations with fast-moving and highly liquid types of assets.

So the absolute liquidity ratio shows the ability of the company to repay its debts at the expense of the most liquid assets (money and short-term financial investments). That is, this indicator shows the maximum speed with which the company can pay off creditors (and other borrowers).

The quick liquidity ratio shows the ability of an enterprise to pay off its debts using not only highly liquid assets, but also quickly realizable ones - this is a short-term receivables.

How to calculate the current liquidity ratio for the industry?

Normative values ​​are also affected by industry average values ​​of the current liquidity ratio. Here is an algorithm for calculating the current liquidity ratio for any industry.

In different industries, there may be different values ​​of the coefficient. To calculate industry average values, OKVED codes (Classifier of types of activity) are used. According to them, enterprises engaged in one type of activity are grouped, the coefficient values ​​​​are calculated on them and averaged.

For example, take the enterprises of the oil and gas industry, enterprises will have the following activities.

In addition to selecting enterprises according to a single OKVED code, companies should also be selected by size, for this we use the indicator "Volume of sales revenue". This is done in order to make the sample for analysis as homogeneous as possible.

Current liquidity ratio of the industry = Current liquidity ratios of the enterprise (according to one OKVED code and Revenue volume) / Number of enterprises

For all similar enterprises, according to the selected OKVED code and size, the current liquidity ratio is calculated and the arithmetic average is made. For such an analysis, the data analysis information system SPARK is excellent. To improve accuracy, you can assign different weighting factors for different groups of enterprises.

Forecasting the current liquidity ratio

A point calculation of the current liquidity ratio cannot fully characterize the state of the enterprise. Therefore, it is necessary to analyze the dynamics of changes in the indicator for several reporting periods. This allows you to predict its further change. The figure below shows the dynamics of changes in the current liquidity ratio and made a forecast based on linear regression.

Dynamics of changes in the current liquidity ratio for OAO Transneft

As we can see, there is an upward trend in the change in the current liquidity indicator. This indicates favorable programs for the financial recovery of the enterprise, when in 2007 the indicator was less than 0.5, which does not meet the standards, while in 2010 it is higher than the standard value (equal to 2.1).

How to increase the current liquidity ratio

As we found out, the current liquidity ratio characterizes the financial condition of the enterprise and is used by many credit institutions to assess the solvency of the company. Increasing the solvency of the enterprise leads to a decrease in the cost of borrowed capital (interest rates on loans), which means it allows you to increase the net profit and profitability of the company.

Consider several ways to increase the coefficient:

  • Reducing the volume of accounts payable due to its restructuring by offsetting or writing off as unclaimed.
  • Increase in current assets.
  • An increase in current assets and at the same time a reduction in accounts payable.

Summary

The indicator of current liquidity is an important indicator of the financial condition of an enterprise / company, which must always be monitored. An increase in the indicator makes the enterprise more investment attractive for investors and creditors, which can give it more additional leverage and financial resources to increase its market value and profitability.

Assessment of the financial well-being of the company is usually carried out using various financial indicators.

A striking example is the current liquidity ratio.

Concept and application

Considered indicator makes it possible to evaluate the extent to which the firm is able to meet current liabilities. These include those debts that need to be repaid in this financial year.

This indicator, when calculating, allows us to take into account that not all assets can be quickly converted into cash. Such a tool helps the company to correctly plan the possible amount of debt based on the amount of assets.

Lenders often use specified indicator to assess the solvency of the company. This is done when the organization wants to get a short-term loan. In addition, the financial department of the enterprise can calculate the indicator in order to analyze its financial condition. This will help to take timely action in case of threatening factors.

Formula and calculation example

The current liquidity ratio is the ratio (the result of division) of current assets to short-term liabilities.

Ktl \u003d Current assets / Current liabilities

Numerator indicator includes assets:

  • absolutely liquid - money, as well as financial investments made for short periods;
  • fast-selling - receivables that will be repaid within a year;
  • slow-moving - others.

Current responsibility are made up of:

  1. the most urgent liabilities - current debt to creditors;
  2. short-term liabilities - loans and borrowings, the maturity of which does not exceed a year, reserves for future expenses.

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Example

The current assets of the company at the beginning of the year amounted to 300 million rubles, at the end - 400 million. Current liabilities are 150 million and 250 million respectively. Draw conclusions based on the current liquidity indicator.

  1. Calculate the value of the indicator at the beginning of the year:
    Ktl early = 300 / 150 = 2
  2. Calculate the value of the indicator at the end of the year:
    Ktl con. = 400 / 250 = 1.6
  3. Percent change of indicator:
    Ktl con. / Ktl early = 1.6 / 2 = 0.8

Based on the calculations carried out, it can be judged that there is coefficient reduction, which means that the position of the organization in terms of its solvency has worsened. It is required to analyze the causes and correct the situation.

Balance calculation

Typically, the calculation of the coefficient is carried out on the basis of data obtained from the balance sheet. In this case, the values ​​for substitution in the numerator are taken from the assets of the balance sheet, and in the denominator - from the liability.

Many people know that a new form of balance sheet has been in force in Russia since 2011. However, it is often required to calculate the current ratio in the future for the past few years. Therefore, until now, the formula based on previously existing reporting forms remains relevant.

It looks like this:

Ktl = p.290 / (p.610 + p.620 + p.660),

where data is taken from old reporting form No. 1 "Balance sheet":

  • line 290 is the total amount for the second section "Current assets";
  • line 610 - these are loans and credits, which are taken from the fifth section "Current liabilities";
  • line 620 - debt to creditors from the same section;
  • line 660 - other short-term liabilities.

Now let's take a closer look at the formula based on the values ​​obtained from new form of balance:

Ktl \u003d (p. 1200 + p. 1170) / (p. 1500 - p. 1530 - p. 1540),

where the data is taken from the new balance sheet:

  • line 1200 - total for the second section "Current assets";
  • p.1170 - "Financial investments";
  • line 1500 - total for the fifth section “Current liabilities;
  • p.1530 - "Deferred income";
  • p.1540 - "Reserves for future expenses and payments."

What is the current ratio and the rules for its calculation are discussed in the following video:

Standard values

The coefficient makes it possible to check the solvency of the organization on a short-term time period (up to one year). At data analysis calculation, it is important to understand that the greater the value of the indicator, the more liquid the company's assets are. And, consequently, its financial stability is higher.

The normal or optimal value of the indicator is those that approach 2. At the same time, world practice in some industries allows it to be at the level of 1.5.

If the calculation results in a very small figure (below 1), it can be said that the organization will have significant difficulties if it is necessary to repay its financial obligations. But before talking with confidence about the existence of problems, a complete analysis of all indicators should be carried out. It is impossible to judge the state of the company by just one coefficient.

So for organizations engaged in trade and catering an indicator equal to one is considered the norm. This is due to the fact that these industries usually have rather large short-term liabilities in the form of debts to suppliers.

Too high value of the indicator also does not allow to judge a favorable financial condition. This option may indicate that the company is inefficiently using current assets, as well as cash received in the form of short-term financing.

But for businesses that have long production cycle, the value of the indicator equal to three and higher will be the norm. This is explained by the large volume of stocks, as well as work in progress.

Moreover, if we talk about credit institutions, when calculating solvency, they prefer that the value of the coefficient be as large as possible.

Analysis and forecast of the indicator

To fully assess the financial well-being of the company, it is not enough to discretely calculate the coefficient. It is important to exercise analysis of changes in this coefficient over several periods. Thanks to this, it becomes possible to make a forecast about what values ​​it will take in the future.

This will allow you to understand how effective the financial policy of the enterprise is. In addition, analysts based on such analysis are able to give advice on improving the financial health of the company.

Enlargement methods

The coefficient under consideration is of great importance when assessing the solvency of a company by credit institutions or potential investors. For them, a higher value of the indicator is a sign of better solvency. This allows the company to reduce the interest for the use of borrowed funds, which means to increase profits and. That is why enterprises seek to increase the current liquidity ratio.

Can be called 3 ways, which allow you to achieve this:

  • reduce accounts payable by writing off unclaimed amounts;
  • increase the volume of current assets;
  • a combination of the first two methods.

It becomes clear that the current ratio is an extremely important financial indicator, because it has a direct impact on the solvency of the organization. But do not forget that a full-fledged analysis of the financial condition of the company should be carried out on the basis of the calculation of a larger number of indicators.

The procedure for calculating the main liquidity ratios is given in this video lecture:

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