Financial ratios are the key to a successful analysis of the company's solvency

For a more stable and efficient operation of the enterprise, it is necessary to analyze the state of its operation. Financial coefficients obtained as a result of the research help to find weak links in the activity of the organization and allow to determine the advantages of its actions. It is these data that give a detailed picture of the state of things in the company.

The financial condition (position) of the enterprise depends primarily on the ratio of borrowed capital to own. In this regard, determine:

• The ratio (level) of financial autonomy - while calculating the share of equity in the total amount of money the organization;
• Coefficient (level) of financial dependence - here we are talking about what proportion of the company's total funds is borrowed (borrowed) capital. The indicator can be calculated in terms of time frames. That is, it is possible and possible to determine this index based on the long-term or short-term borrowed funds;
• The level (coefficient) of financial risk, also known as the leverage of the financial lever - here the ratio of borrowed funds to equity is considered. In this case, there is another name for this index - the coefficient of financial activity.

Accordingly, the higher the value of the first proportion, the better and more stable the financial position (position) of the enterprise, if viewed from the standpoint of credit debts and own funds. In ideal systems, the weight of this indicator should tend to unity.

To determine the profitability of raising funds and capital from the side, one more indicator is used: this is the effect of the financial lever. This index shows how much the profitability of the company's own capital will grow if borrowed funds are raised.

Financial ratios, which accurately reflect the state of affairs in the enterprise, are the solvency ratios. If to say in simple words, then these data show how likely the company repays its short-term debts.

Solvency assessment is based on data on the liquidity of its current assets - the ability to repay obligations on loans and debts through the company's assets.

The following financial ratios are used for the analysis:

• Current liquidity - it is also called a coverage indicator. It characterizes the ability of the organization to repay short-term credit obligations with its own available circulating assets;
• Intermediate (fast) liquidity - shows how possible it is to repay obligations with its term assets (cash held in the organization's operating accounts, stocks in warehouses, short-term debts of debtors);
• Absolute liquidity - the final value of this indicator describes how likely it is to pay short-term loan loans at the expense of funds placed on the company's settlement accounts and other financial investments placed for a short period.

These financial ratios are the most important in calculating the solvency and financial position (state) of the enterprise.