Explanation of the essence of the indicator
Financial stability indicator (English analogue - Equity to Debt Ratio) - indicator financial stability, which indicates the company's ability to meet its obligations in the medium and long term. The value of the indicator indicates how many rubles of equity account for each ruble of the company's liabilities. A high value indicates a low level of financial risk.
A low value of the indicator does not necessarily mean a high risk of bankruptcy. For example, if 80% financial resources obligations, but the company is able to consistently generate positive cash flow - there should be no difficulties in paying off obligations. The stages of economic cycles, the level of technological development, the active actions of competitors, changes in consumer tastes - all this can lead to a change in the market situation.
A decrease in sales may result in a change in the positive amount of net cash flow to a negative one. Under such conditions, a low value of the financial stability indicator will indicate the possibility of an early bankruptcy, while companies with a standard value and a high share of equity capital will be able to continue working. Given this, the low value of the indicator does not indicate imminent bankruptcy, but indicates the presence of financial risks in the long term.
Conversely, a high value of the indicator may indicate the incomplete use of the company's potential. Credit capital allows you to increase the volume of production and sales, intensify financial, investment and operating activities. If the effect of financial leverage (a coefficient that indicates an increase in the return on equity when attracting an additional ruble of borrowed funds) is positive, then additional borrowing is desirable.
Standard value
Standard value indicator is in the range of 0.67-1.5. A value below 0.67 indicates a high level of financial risk. A value above 1.5 may mean that there are additional reserves for increasing efficiency through borrowing.
The credit organization Rosselkhozbank considers the following indicators to be normative. However, it must be remembered that the interests of creditors and other participants differ. These values should be taken into account if the financial analysis conducted from the perspective of the borrower.
Table 1. Normative value of the indicator
Source: Vasina N.V. Modeling the financial condition of agricultural organizations in assessing their creditworthiness: Monograph. Omsk: Publishing house of NOU VPO OmGA, 2012. p. 49.
Directions for solving the problem of finding an indicator outside the normative limits
As in the case of the indicator of financial autonomy, in order to increase the value of the indicator, it is necessary to attract funds from owners or investors, reinvest profits in the company's work, etc.
If it is possible to intensify activities, it is desirable to attract additional borrowed funds.
Average value in the economy
Rice. 1 Dynamics of financial stability of organizations (excluding small businesses) by Russian Federation(according to financial statements)
Assessment of the financial condition of the organization is carried out using a system or a set of coefficients. These indicators are designed to characterize the financial stability and be responsible for the stable position of the company.
The financial position of an entity can be considered stable if it can cover up to 50 percent from its own funds. At the same time, the enterprise must effectively use these resources, observe settlement, credit and financial discipline and be solvent. O financial condition companies can be said after the 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 activities. It takes into account the results of its functioning, effective and active response to any changes in external and internal factors.
The financial stability of any company should be based on a stable excess of income over expenses, efficient use of funds, continuous manufacturing process. The financing ratio is calculated based on the production and economic activity subject, and is one of the main indicators of enterprise sustainability.
How well the company manages its own as of a certain date, allows you to characterize the appropriate analysis of the sustainability of financing. very important in this case is the compliance of finance with market requirements, and must meet the strategic directions of development of a business entity.
To assess the current economic situation and serves as a financing ratio calculated by the ratio of own sources to borrowed funds of the enterprise based on the data of the balance sheet. This indicator must determine to what extent the assets consist of equity capital. This factor characterizes the independence of a business entity from external financial sources.
With a favorable economic situation of the enterprise, the financing ratio should be greater than one. If the value of the indicator is less than one, there is a risk of insolvency. And it will be extremely difficult for an enterprise to get a loan from banking institutions.
Another important indicator for assessing the effectiveness of the enterprise's life activity is the coefficient of sustainable financing. It is determined by the ratio of the total amount of long-term liabilities and equity to the balance sheet currency.
This indicator reflects the part that can be financed from permanent sources. In other words, the share of long-term sources of financing used in economic activity.
For any enterprise, one of the main goals should be to ensure the stability of activities in the long term. Achieving positive is possible only with low dependence on investors and creditors. Today there is such a tendency that investments are made in production in minimum sizes, and the main "infusion" of finance is carried out at the expense of borrowed funds. That is why particular importance is attached to the indicator of sustainability of financing. After all, only this coefficient will show the dependence of the enterprise on external financial sources. In addition to using the specified coefficient, it can be carried out using indicators of "net assets".
I. Liquidity ratios
1. Absolute liquidity ratio
Shows what proportion of current debt (accounts payable, short-term bank loans and other liabilities) can be immediately repaid from cash and cash equivalents.
K AL = ( Cash+ Short-term financial investments) / Current responsibility
2. Quick liquidity ratio (critical assessment)
The ratio of the most liquid part of current assets (cash, receivables, short-term financial investments) to short-term liabilities.
K SL = (Cash + Short-term financial investments + Short-term receivables) / Current liabilities
3. Current liquidity ratio
Shows what proportion of current debt obligations can be repaid in short time through liquid current assets
K TL \u003d Current assets / Current liabilities
- 1. Own working capital
Shows the extent to which current assets are formed at the expense of equity capital.
SOS = Equity - Non-current assets
- 2. Working capital ratio
Koss= SOS / working capital
6. Net working capital
Shows the excess of current assets over short-term liabilities. Reflects the ability of the enterprise to continue the current production activities after paying off their current liabilities.
NFC = Current Assets - Current Liabilities = Equity + Long-Term Liabilities - Non-Current Assets
II. Capital structure indicators (financial stability ratios)
7. Autonomy coefficient (financial independence)
This ratio shows to what extent the company's assets are formed from its own capital, and to what extent the company, regardless of external sources financing.
K A \u003d Equity capital / Balance sheet
8. Funding ratio (ratio of borrowed and own funds) characterizes the amount of borrowed funds per unit of equity capital.
K F \u003d Borrowed capital / Equity capital
9. Current debt ratio characterizes the share of short-term borrowed capital in the total amount of capital.
To TK \u003d Current liabilities / Balance currency
10. Financial stability ratio (long-term financial independence)
shows to what extent the assets of the enterprise are formed at the expense of own and long-term borrowed funds.
TO FU \u003d Equity capital + Long-term borrowed capital / Balance sheet currency
III. Profitability ratios
11. Return on sales ratio, %
Demonstrates the share of net profit in the sales volume of the enterprise. It is calculated for all products in general and for individual assortment types.
ROS= Net profit from sales / Revenue from sales * 100%
12. Return on current assets, %
Demonstrates the ability of the enterprise to provide a sufficient amount of profit in relation to the used working capital companies. The higher the value of this ratio, the more efficiently working capital is used.
RCA= Net income * 100% / Average current assets
13. Return on assets , %
Along with the ROE indicator, it is the main one used in countries market economy to characterize the effectiveness of investments in activities of a particular type.
ROA= Profit* 100% / average cost assets
14. Return on equity ratio, %
Allows you to determine the effectiveness of the use of capital invested by the owners of the enterprise. Usually this indicator is compared with a possible alternative investment in other assets.
ROE= Net profit* 100% / Equity
15. ROI
Shows how many monetary units it took the company to receive one monetary unit of profit. This indicator is one of the most important indicators of competitiveness.
ROI= Net profit* 100% / (Equity + Long-term liabilities)
IV. Turnover ratios (business activity)
16. Turnover ratio of fixed assets (capital return)
This coefficient characterizes the effectiveness of the use of fixed assets by the enterprise.
K OS \u003d Sales proceeds / Average cost of fixed assets
17. Asset turnover ratio (transformation ratio, resource efficiency)
It characterizes the effectiveness of the company's use of all available resources, regardless of the sources of their attraction.
K OA = Sales proceeds / Average asset value
18. Inventory turnover ratio
Reflects the rate at which stocks are sold.
K OZ = Cost of goods sold / Average inventory
19. Accounts receivable turnover ratio
The higher the turnover ratio and the shorter the collection period, the less funds are frozen in accounts receivable, the more mobile the current assets of the enterprise.
TO ODZ \u003d Sales revenue / Average receivables
Period of collection of receivables: T IDZ = 365 / K ODZ
20. Accounts payable turnover ratio
K OKZ \u003d Cost of sales / Average amount of accounts payable
V. Market Activity Ratios
21. Earnings per share
One of the most important indicators affecting the market value of a company. Shows the share of net profit (in monetary units) attributable to one ordinary share.
EPS= (Net income - Dividends on preference shares) / Number of ordinary shares
22. Dividends per share
Shows the amount of dividends distributed to each ordinary share.
DPS= Dividends paid on common shares) / Number of common shares
23. Share Price to Earnings Ratio
This ratio shows how many monetary units shareholders are willing to pay for one monetary unit of the company's net profit. It also shows how quickly an investment in a company's stock can pay off.
P / E= Market price stock /EPS
24. Coefficient of sustainability of economic growth
This ratio shows how fast the equity through financial and economic activities, and not by attracting additional equity capital.
sgr = (Net Income - Total Dividends Paid) / EquityThe main factors determining the financial stability of an enterprise include the financial structure of capital (the ratio of borrowed and own funds, as well as long-term and short-term sources of funds) and the policy of financing individual components of assets (primarily non-current assets and stocks). Therefore, in order to assess financial stability, it is necessary to analyze not only the structure of financial resources, but also the directions of their investment.
To assess the level of financial stability, the following indicators are used (table 1.2.1):
The ratio of borrowed and own funds;
Coefficient of autonomy (solvency);
The coefficient of maneuverability of own funds;
The coefficient of financial stability of the organization;
Coefficient of financial dependence;
Equity concentration ratio;
Debt capital concentration ratio;
Debt capital structure ratio;
Ratio of borrowed and own funds.
Table 1.2.1
Indicators of financial stability.
Continuation of table 1.2.1
|
Coefficient of financial independence (autonomy) |
It characterizes the independence of the enterprise from borrowed funds and shows the share of own funds in the total value of all the funds of the enterprise. |
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Equity ratio |
Shows that the enterprise has its own funds necessary for its financial stability. |
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Agility factor |
Shows what part of own working capital is in circulation. The ratio should be high enough to allow flexibility in the use of own funds. |
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The ratio of mobile and immobilized means |
Shows how many non-current assets account for each ruble of current assets. |
Continuation of table 1.2.1
Financial stability ratios are calculated to assess various kinds activities of the company (for example, operations with own, borrowed funds, etc.).
1. Ratio of own and borrowed funds:
KSZS \u003d ZK / SK, where ZK is borrowed capital;
SC - equity.
This ratio gives the most general assessment of the financial stability of the enterprise. For example, its value at the level of 0.5 shows that for every ruble of own funds invested in the assets of the enterprise, there are 50 kopecks of borrowed sources. The growth of the indicator indicates an increase in the dependence of the enterprise on external financial sources, i.e. in a certain sense, about reducing its financial stability.
2.Coefficient of autonomy:
KA =SK/VB, where SK - equity;
VB - balance currency.
The coefficient shows the degree of independence of the enterprise from borrowed sources of funds. The coefficient value must be > 0.5.
3. Coefficient of maneuverability of own funds:
KM=CC/CK, where СС - own working capital;
SC - equity.
It shows how much of the equity capital is used to finance current activities, i.e. invested in working capital. The value of this indicator can vary significantly depending on the type of activity of the enterprise and the structure of its assets. For industrial enterprises, the maneuverability coefficient should be ≥ 0.3.
4. Coefficient of financial stability of the organization.
Financial stability ratio - determines the degree of efficiency in the use of capital invested in the assets of the enterprise. The calculation is made according to the formula:
KFU=(NC+FEFD)/WB, where FEFD is long-term financial liabilities.
5.Coefficient of financial dependence:
Kfz=Vb/Sk, where: Kfz is the reciprocal of the equity concentration ratio; Sk - equity, Vb - balance sheet currency. If the coefficient of financial dependence has a value greater than 1.5, then this means that a sufficiently large proportion of the total assets of the enterprise is financed by borrowed funds. The financial stability of such an enterprise is low, as the enterprise becomes dependent on creditors.
6.Coefficient of concentration of own capital.
Determines the share of funds invested in the activities of the enterprise by its owners. The higher the value of this ratio, the more financially stable, stable and independent of external creditors the enterprise.
The equity concentration ratio is calculated using the following formula:
KKSK=SK/VB, where: SK-own capital;
WB - balance sheet currency.
7.Coefficient of concentration of borrowed capital.
The concentration ratio of debt capital is essentially very similar to the concentration ratio of equity
The debt capital concentration ratio is calculated using the following formula:
ККЗК=ЗК/ВБ, where: ЗК - borrowed capital (long-term and short-term obligations of the enterprise);
VB - balance currency.
8.Coefficient of the structure of borrowed capital.
The indicator shows from what sources the borrowed capital of the enterprise is formed. Depending on the source of capital formation of the enterprise, it can be concluded how the non-current and current assets of the enterprise are formed, since long-term borrowed funds are usually taken for the acquisition (restoration) of non-current assets, and short-term loans for the acquisition of current assets and the implementation of current activities.
Debt capital structure ratio is calculated using the following formula:
KSZK=DP/ZK, where: DP-long-term liabilities;
ZK-borrowed capital.
9. The ratio of borrowed and own funds.
The more the coefficient exceeds 1, the greater the dependence of the enterprise on borrowed funds. The permissible level is often determined by the operating conditions of each enterprise, primarily by the speed of turnover of working capital. Therefore, it is additionally necessary to determine the turnover rate of inventories and receivables for the analyzed period. If accounts receivable turn around faster than working capital, which means a rather high intensity of cash flow to the enterprise, i.e. as a result - an increase in own funds. Therefore, with a high turnover of material working capital and an even higher turnover of accounts receivable, the ratio of own and borrowed funds can be much higher than 1.
The ratio of own and borrowed funds is calculated according to the following formula:
KSZ=ZK/SK, where: ZK-borrowed capital of the enterprise;
SC-own capital of the enterprise.