When analyzing the economic activities of the enterprise, much attention is paid to liquidity indicators. This is due to the fact that liquidity reflects the level of solvency and the availability of a certain amount of funds that can be used for current settlements with suppliers and contractors. There are several indicators with the help of which liquidity is assessed; these include the absolute liquidity ratio. The values of this indicator are used in analytical reports compiled on the basis of an annual assessment of balance sheet data.
A variety of liquidity ratios is calculated by the ratio of assets with the highest degree of liquidity to the company's current liabilities. This economic indicator characterizes the amount of short-term debt of the enterprise, which it is able to repay in the near future. When the absolute liquidity ratio shows a result in the range from 0.2 to 0.25, this value is considered normal.
An analysis of solvency and liquidity balance is often used to consider the possibility of concluding contracts with prospective partner companies in the near future. If we evaluate the overall liquidity ratio of the balance sheet in the short term, for example, over the time interval in the last three years of operation, we can see how stable the company is, how the size of its liquid assets has changed . Based on such data, a decision is usually made on the advisability of working with a supplier.
Large companies today are characterized by a larger share of highly liquid assets reflected in the balance sheet. From another point of view, the absolute liquidity ratio shows the ratio of cash, financial resources and their equivalents to the debt of the organization for a specific period of time. To understand what are the indicators of liquidity of the enterprise, you need to understand what the very concept of "liquidity" implies in the general sense.
So, in the economic literature, liquidity is the ability of a company to pay its short-term obligations on time. When an enterprise has the ability to realize its current assets as quickly as possible and thereby pay off its debt, it can be considered liquid. In order to maintain an absolute liquidity ratio at the proper level, it is necessary to have the balance of free financial resources at the cash desk, which, if necessary, can be allocated for the intended purpose. This is due to the fact that, as a rule, fixed assets acquired not for the purpose of their resale cannot be sources of debt repayment. Of the entire group of assets, the most liquid type is working capital, in particular money supply, short-term financial loans or receivables that are not yet past due, but have already matured. Debt, the payment term of which has expired, as well as other reserves with all the desire, can not be attributed to highly liquid assets. Absolute liquidity ratio shows how solvent a company can be in the short run. The formula for calculating such an absolute liquidity indicator is expressed as the sum of cash and operatively traded securities divided by short-term liabilities.
From the position of accounting, the absolute liquidity ratio shows the amount of debt in the context of the current period, which will be possible to pay off at the time of preparation of the balance sheet. When calculating the coefficient, the data of 2 and 4 sections of the balance are taken as the basis.