Solvency of the enterprise: goals, analysis and indicators

To begin with, let's determine the subjects and objectives of financial analysis. Failure of a company to make settlements with counterparties may result in the loss of both its own and attracted financial assets. Therefore, the solvency of the company worries not only its owners, but also other market players (counterparties). The subjects of external business analysis are business partners, investors and lenders. They study the degree of financial risks and property status to make a decision on cooperation. In the case of bankruptcy proceedings, the analysis is carried out by a specially appointed arbitration manager.

Regardless of the legal form, the internal assessment of the solvency of the enterprise pursues the following goals:

• determination of the degree of ability of the object of analysis to fulfill its obligations;
• ensuring the stability of all processes;
• observance of the financial interests of the owner;
• finding additional sources of development;
• ensuring the financial stability of the entire enterprise in the long term.

Properly organized accounting and regular audits will allow you to control the solvency of the enterprise, identify hidden reserves and unsuccessful decisions in managing financial flows.

Analysis methods

Practicing financiers use several approaches to calculate and analyze the solvency of an enterprise. More informative are:

• cash flow calculation;
• calculation of liquidity indicators.

The cash flow method is used to regulate and manage the financial activities of the enterprise. Cash flow can be calculated directly or indirectly. The first is to compare revenue with expenditure. This technique allows us to draw conclusions about the adequacy of funds to fulfill financial obligations. The indirect method demonstrates the relationship of profit with changes in cash flows. The result obtained is a cash-flow indicator for various types of activities - an assessment of the effectiveness of financial management. An analysis of the components of cash flows demonstrates the structure of sources of funds and the direction of their injections.

Much less often, they use methods of analyzing cash flow liquidity and building a factor model.

Liquidity ratios

Such solvency indicators of the enterprise, as liquidity ratios, are calculated using the ratio of the corresponding asset lines to the balance sheet liability . The obtained coefficients are compared with normative, planned or their previous values. Comparison in dynamics allows you to assess the financial position of the object of analysis in the current period.

To analyze the solvency of the company, apply the following basic ratios: total, absolute and current liquidity. The auxiliary are the coefficients of maneuverability, self-sufficiency, critical assessment and the share of working capital in assets.