We calculate the quick liquidity ratio and other liquidity indicators of the firm
The enterprise is a very complex system,its activities are multifaceted. However, each side of this activity can be described in one way or another in order to draw some conclusions or make certain decisions. Of particular importance for the analysis of the firm's activities are indicators of its financial condition. This state can also be described from various positions, but now I would like to dwell on the assessment of liquidity. This assessment can be carried out by studying the liquidity of the balance sheet, or it can be done by calculating the coefficients such as, for example, the quick liquidity ratio and the like. These methods are not mutually exclusive, so it is better to use both for a complete and accurate analysis. Within the framework of this article, we will focus on the calculation and analysis of coefficients.
The calculation of this group of coefficients consists ofof liquid assets to the value of short-term liabilities. The first coefficient characterizes the sufficiency of the total aggregate amount of current assets for repayment of urgent debts. In this regard, it is called the indicator of total (current) liquidity. Obviously, all enterprises are different, therefore, the indicators of the current liquidity ratio are also different for them. However, there is a normative meaning that enterprises should strive for. The calculated coefficient must be at least one, but not more than two. The lower limit requires liquidity, and the upper limit - on effectiveness. In other words, current assets should be enough to pay off all urgent debts, but there should not be too much, since in this case they will not be used rationally enough.
The next indicator is the coefficient of fastliquidity. Its definition goes by excluding from the numerator, that is, from current assets, the least liquid component - stocks. Thus, the indicator is "specified", so its other name is the refined liquidity ratio. Based on the calculation methodology, we can conclude that this figure can not be greater than the previous one. This determines its upper normal boundary. The lower boundary is also traditionally taken to be equal to one. The quick liquidity ratio can be clarified by including liquid assets in the calculation and eliminating illiquid assets. Thus, the numerator should take into account finished products sold on prepayment, but it is necessary to deduct illiquid financial investments and doubtful debts.
If the numerator is completely cleared of less thanliquid assets, and it only has absolutely liquid assets, the result of the calculation will be the absolute liquidity indicator. It allows you to judge the proportion of debt that the organization can pay off immediately. For enterprises in Russia this share is at best 10%. In more developed economies, the normal level of this indicator is considered to be achieved if a fifth of the company's urgent debts can be immediately returned.
If the enterprise has to resort to implementationreserves in order to raise money to pay off obligations, in this case it makes sense to calculate the liquidity indicator when raising funds. It is determined by dividing the reserves by the amount of available term liabilities. This indicator should normally exceed 0.5, but it should not exceed 0.7.
After calculating these indicators, they are necessaryto analyze. Each of them may be within normal limits, but the financial situation may deteriorate. This conclusion can be made if, for example, the fast liquidity ratio in dynamics for several years moves to one of the boundaries of the normal range. Any identified negative trend requires intervention and the adoption of certain management decisions.