Solvency analysis is an important procedure for financial analysis

An analysis of solvency is necessary for any enterprise, since with the help of its instruments it is possible to characterize the financial position of a business entity. In other words, it is an assessment of the possibility of timely repayment of their payment obligations available cash resources.

Analysis of the liquidity of the balance sheet and solvency of the enterprise is carried out based on the liquidity characteristics of the current assets and is determined by the time interval that is necessary to convert them into cash. At the same time, it is necessary to take into account that the value of the liquidity indicator depends on the time for the derivation of this asset, i.е. The higher the liquidity, the less time is needed to collect this asset.

Analysis of solvency shows the company's ability to turn assets into cash and repay their own obligations. At the same time, the maturity of liabilities is matched by the time when assets are converted into money. These indicators depend on the results of comparison of the amount of payment means available to the enterprise and the amount of short-term liabilities.

The liquidity of the company is a more general concept in comparison with the liquidity of the balance sheet. The second indicator characterizes the enterprise's ability to seek funds only from internal sources. For example, from the sale of assets. However, the company can attract external borrowed funds with a favorable financial image in the business market and a sufficiently high level of attractiveness in the investment aspect.

The analysis of solvency and liquidity is similar in methods of carrying out, however the second concept is more capacious. After all, if you understand in more detail, solvency depends on solvency. At the same time, with the help of liquidity, the characteristics of both the current state of payments and the outlook are given. The company can be recognized solvent at a specific date, and at the same time unfavorable results of its activity in the near future are expected.

In the specialized literature, the term "liquidity of current assets" is encountered, with the help of which solvency analysis is conducted. And another term - "liquidity of total assets" is used to assess the possibility of their early sale in case of bankruptcy.

All three terms in question are in close relationship with each other. Thus, the liquidity of the balance sheet is the "foundation" of the company's liquidity and solvency. In other words, liquidity is the main way to regulate solvency. At the same time, if there is a sufficiently high image, the enterprise maintains a high level of solvency, thanks to which it is much easier to maintain liquidity at the proper level.

Analysis of solvency and financial sustainability is an obligatory part of the analysis of the financial activities of the entity. In itself, the notion of "financial stability" shows the balance of all financial flows, the availability of the necessary funds to maintain its activities by the enterprise in a certain period of time in the process of performing basic economic activities, repaying financial loans, etc.

In other words, financial stability is a predictor of solvency for a long period of time.

Solvency must be distinguished from such an indicator as creditworthiness. The second term is used to conduct internal financial analysis by special structural divisions of the company.