The financial statements of an enterprise are extremely important documents, not only for external, but also for internal users. The fact is that, based on the reporting data, you can pretty deeply analyze the financial situation of the company, identify problems and even suggest ways to solve them. In Russian practice, the first place is given to such a form of reporting as the balance sheet. Of course, it is impossible to draw a conclusion on the effectiveness of the enterprise, but analyzing the financial condition can be quite simple. In more detail I would like to dwell on how to evaluate the liquidity of the balance sheet of the enterprise.
Before proceeding to the description of the analysis methodology, it is necessary to identify the purpose of such a study. The liquidity of the balance sheet reflects how liabilities and assets of the enterprise are related to each other in terms of volume and timing . In other words, the urgent debts of the enterprise should be covered by liquid assets.
The simplest methodology, allowing the assessment of the least time-consuming way, is to build a liquidity balance. This requires an additional grouping of balance sheet items so that the number of asset groups is equal to the number of liability groups. Moreover, assets must be grouped starting from the most liquid, and liabilities from the most urgent. Most often resort to the formation of four groups on each side of the balance sheet.
We start the grouping of assets from the second section, closer to the end of which the most liquid property is contained. Obviously, the first group consists of money and financial investments that are made for a short time. At the same time, illiquid assets should be excluded from this group.
The second group consists of assets that can be quickly transformed into money. Other current assets, as well as short-term debt of debtors, to a greater extent meet this requirement.
Then it is necessary to summarize assets that cannot be turned into money so quickly, but you can use them to secure not the most urgent obligations. This group includes stocks, as well as longer -term financial investments.
All other assets are included in the last - fourth - group. This property is most difficult to convert into cash, and this indicates its low liquidity.
It is perhaps even easier to group liabilities by urgency. Other current liabilities, as well as accounts payable, are recognized as the most urgent liabilities, and therefore form the first group.
The second group is created at the expense of all remaining short-term debts that were not accounted for earlier.
The third and fourth groups are formed by the fourth and third sections of the balance, respectively, there is not even a need for additional recounts.
After the groups are created, they must be compared with each other - the first group with the first, the second - with the second and so on. Absolute liquidity of the balance sheet is characterized by the fact that the assets of the first three groups should accordingly exceed the value of liabilities. In the fourth group, a different ratio should be observed, since it indicates that the enterprise has its own working capital.
If these conditions are not met, it is necessary to carry out some measures in order to normalize the balance sheet structure. It is clear that the balance will converge in any case, but less liquid assets will compensate for more liquid ones solely from the point of view of arithmetic, but it will not be possible to really use them to pay off debts. The liquidity of the balance sheet is a very important criterion that allows you to judge the current situation of the enterprise, as well as its future prospects.