In many sectors of the economy, such a thing as liquidity is used. In the most general sense, it consists in how quickly various assets can acquire monetary form, while maintaining their original value. Thus, the faster money can be received for some property so that it does not have to underestimate its value, the more liquid it is. However, if we are talking about the liquidity of an enterprise, then we put a slightly different meaning into this concept. In this case, liquidity consists in the ability of the organization to repay its obligations on time. Evaluation of a company from this position is carried out in different ways, but we will focus on the calculation of liquidity ratios.
The first indicator that we will pay attention to is the liquidity ratio. This value, which is also sometimes referred to as the "current ratio," characterizes the level of how fully the most urgent obligations of the company are covered by its current assets. The meaning of comparison with this particular group of property is that it is much more liquid in comparison with non-current assets, that is, it can be used to pay on fixed debts. In the course of scientific and practical activities, it was found that the current ratio should be in the interval between one and two. The lower limit is a liquidity criterion - fixed-term debts should be fully covered by current assets. The upper limit is the requirement of efficiency, that is, a greater value indicates that there are too many current assets and they are used inefficiently.
It is clear that all enterprises are different, and the norms are largely averaged. In this regard, often calculate the value of the coefficient, which is normal for a particular organization. The calculation method consists in comparing the amount of the stock standard and short-term obligations with the value of these obligations by dividing. The point is that even if all the debts are paid, the company will have enough current assets to continue its activity.
The following indicator characterizes the extent to which short-term liabilities will be secured with the full collection of receivables on the balance sheet of the enterprise. This ratio is called the indicator of intermediate liquidity. Its calculation is similar to the previous indicator, but the amount of reserves is excluded from the numerator. Based on the features of the calculation, we can conclude that the upper boundary of the indicator is a current ratio. The normative value of the lower boundary is also set at 1.
If we continue to exclude property from the numerator until only absolutely liquid assets remain there , then in the end we will be able to determine the magnitude of the absolute liquidity indicator . Obviously, the point is what proportion of the most urgent debts can be repaid immediately. In Western practice, an enterprise is liquid if it can instantly repay a quarter of its debts, however, in Russian reality, a figure of one tenth is more common.
Despite the fact that stocks are the least liquid part of current assets, an enterprise may decide to sell them and channel the proceeds to cover urgent debts. Determine how much of the debt will be repaid as a result of this transaction, you can using the liquidity ratio, which can be obtained by raising funds. It is determined by assigning the amount of stocks created by the company to the value of short-term liabilities.
In addition to regulatory comparisons, the current ratio and other indicators should be studied in dynamics. The fact is that compliance with the norm in the presence of a negative trend can also indicate a worsening financial situation.