Coefficient of financing

Assessment of the financial state of the organization is carried out using a system or set of coefficients. These indicators are designed to characterize financial stability and be responsible for the company's stable position.

The financial position of the entity can be considered sustainable if it can cover up to 50 percent of financial resources from its own resources. At the same time, the enterprise must effectively use these resources, comply with the settlement, credit and financial discipline and be solvent. The financial state of the company can be said after an analysis of liquidity, an assessment of financial stability and solvency.

The financing ratio shows the economic stability of the economic environment in which the enterprise carries out its main activity. Its results of functioning, effective and active reaction to any changes in external and internal factors are taken into account.

Financial stability of any company should be based on a stable excess of income over expenditure, the effective use of cash, an uninterrupted production process. The financing ratio is calculated on the basis of the production and economic activities of the entity, and is one of the main indicators of enterprise sustainability.

How well an enterprise manages its financial flows as of a certain date allows us to characterize the corresponding analysis of the sustainability of financing. Very important in this case is the compliance of finance with market requirements, and should meet the strategic directions of development of the business entity.

To assess the current economic situation, the financing ratio calculated by the ratio of own sources to the borrowed funds of the enterprise is based on the balance sheet data. This indicator should determine in which proportion of assets consist of equity. This factor characterizes the independence of the business entity from external financial sources.

If the economic situation of an enterprise is favorable, the financing ratio should be greater than one. With a value of less than one, there is a risk of insolvency. And it will be extremely difficult for the enterprise to get a loan in banking institutions.

Another important indicator of assessing the efficiency of the enterprise is the sustainable financing ratio. It is determined by the ratio of the total amount of long-term liabilities and equity to the balance sheet currency.

This indicator reflects that part of the assets of the enterprise, which can be financed by constant sources. In other words, the share of sources of financing that are used for a long time in economic activity.

For any enterprise, one of the main goals should be to ensure the stability of the activities for the long term. Achievement of positive financial results is possible only with low dependence on investors and creditors. Today there is a trend that own funds are invested in production in minimum amounts, and the main "infusion" of finance is carried out at the expense of borrowed funds. That is why the value of the financing sustainability indicator is given special importance. After all, only this coefficient will show the dependence of the enterprise on external financial sources. In addition to using this ratio, financial stability analysis can be performed using the indicators of "net assets".