Before each financial manager without fail there is a problem of determining the financial situation of the enterprise. It, in turn, is evaluated from various points of view, one of the most important of which is liquidity assessment. For these purposes, an assessment of the liquidity of the balance sheet of the enterprise, as well as calculating the liquidity ratios. Their calculation should be discussed in more detail.
The first step is to determine the current liquidity ratio (otherwise, the general indicator of coverage), which describes the organization’s ability to pay short-term debt from current assets. Accordingly, to determine it, it is necessary to divide the value of current assets by the amount of short-term liabilities. In the course of practical activity, it was determined that the normal value of this indicator should correspond to the interval from 1 to 2. Sometimes it is more correct to apply not generally accepted norms, but the norms of a particular industry or even a specific enterprise. To calculate the rate, it is required to divide the sum of short-term debts and the reserve ratio by the amount of short-term debts. In addition, the overall coverage indicator is the upper limit for such an indicator as the quick ratio.
To calculate this ratio, which is also called the intermediate coverage ratio, it is necessary to divide current assets from which inventories are excluded by the amount of short-term liabilities. Quick liquidity determines how much the company is able to pay off its debts if all receivables are recovered. The lower limit of the indicator is 1, and the upper, as already noted, is the total coverage ratio.
For a correct assessment of the financial situation, it is necessary to more accurately calculate the quick ratio. This can be achieved by excluding the least liquid assets from the calculation , but including more liquid ones. If an enterprise ships part of its products on an advance payment basis, then this share should be included in the calculation. On the other hand, it is logical not to take into account illiquid financial investments and overdue debts, as they will distort the real picture.
The quick liquidity ratio does not reflect the company's ability to repay its debts instantly; therefore, it is necessary to calculate the absolute liquidity ratio. It is determined by the ratio of the most liquid assets of the enterprise, that is, its short-term financial investments (excluding illiquid) and cash, and the amount of the most urgent liabilities. In accordance with Western experience, an enterprise should be able to immediately pay off 20-25 percent of its urgent debts, but Russian enterprises rarely reach this level. Limited access to highly liquid securities, as well as frequent non-compliance with payment discipline, set the average level of the indicator in Russian reality at around 0.1.
To pay debts, an enterprise may take such a measure as the sale of stocks. The amount of the share of obligations that will be covered in this case is determined by the liquidity ratio during fundraising. Normally, it is from 0.5 to 0.7.
The head of the financial department of the enterprise should carefully monitor the levels of liquidity ratios, special attention should be paid to accurately calculate the quick ratio. For a more complete assessment of the state, it makes sense to draw up a liquidity balance, as well as calculate other financial ratios. If certain indicators do not comply with the standards or have negative dynamics, it is necessary to identify the reasons for this and take measures to stabilize the situation.