The enterprise is a very complex system, its activities are multifaceted. However, each of the sides of this activity can be described in one way or another in order to draw any conclusions or make certain decisions. Of particular importance for the analysis of the company are indicators of its financial condition. This condition can also be described from various perspectives, but now I would like to dwell on liquidity assessment. This assessment can be carried out by studying the liquidity of the balance sheet, or it is possible by calculating ratios such as, for example, quick ratio and the like. These methods are not mutually exclusive, therefore, for a complete and accurate analysis, it is better to use both. In the framework of this article, we will focus on the calculation and analysis of coefficients.
The calculation of this group of ratios consists of the ratio of liquid assets to the amount of short-term liabilities. The first coefficient characterizes the sufficiency of the entire aggregate value of current assets for repayment of urgent debts. In this regard, it is called the indicator of total (current) liquidity. Obviously, all enterprises are different, therefore, their current liquidity ratios also differ. However, there is a normative value that enterprises should strive for. The calculated coefficient should be not less than one, but not more than two. The lower bound is for liquidity, and the upper is for efficiency. In other words, current assets should be enough to pay off all fixed-term debts, but there should not be too much, since in this case they will not be used rationally enough.
The next indicator is the quick ratio. Its definition is by eliminating from the numerator, that is, from current assets, the least liquid component - stocks. Thus, the indicator is “refined”, therefore its other name is the adjusted liquidity ratio. Based on the calculation methodology, we can conclude that this indicator cannot be greater than the previous one. This determines its upper normal boundary. The lower bound is traditionally also assumed to be equal to one. The quick ratio can be clarified by including in the calculation of liquid assets and exclusion of illiquid assets. Thus, the numerator should take into account finished products sold on a prepaid basis, but it is necessary to subtract illiquid financial investments and doubtful debts.
If the numerator is completely cleared of less liquid assets, and only absolutely liquid property remains in it, then the result of the calculation will be an indicator of absolute liquidity. It allows you to judge the proportion of debt that the organization can pay off immediately. For enterprises in Russia, this share is at best 10%. In more developed economies, the normal level of this indicator is considered to be achieved if the company can immediately repay a fifth of urgent debts.
If the company will have to resort to the sale of reserves in order to earn money to pay off liabilities, then in this case it makes sense to calculate the liquidity indicator for fund raising. It is determined by dividing stocks by the amount of available term liabilities. This indicator should normally exceed 0.5, but should not exceed 0.7.
After calculating these indicators, they must be analyzed. Each of them may be within normal boundaries, but the financial situation may worsen. Such a conclusion can be made if, for example, the quick ratio of liquidity in dynamics for several years moves to one of the boundaries of the normal range. Any identified negative trend requires intervention and certain management decisions.