Advice 1: How to determine the solvency of the company

Solvency is the ability of an enterprise to timely pay off the assumed debt. With good financial condition it is sustainably solvent in the bad – occasionally or permanently insolvent. Ideally, when the company always has available funds to repay existing obligations.
How to determine the solvency of the company
To determine the solvency of the company, calculate a number of coefficients. The overall security of the organisation circulating assets, necessary for carrying out business activities and timely calculation of urgent liabilities reflects the current ratio. It is defined as the ratio of negotiable assets, which include finished products, raw materials, cash, accounts receivable, to the most urgent liabilities (accounts payable, short-term loans and borrowings).
The solvency of enterprises also characterizes the ratio of own working capital. For its calculation we use the formula: ber = COC/OA, where SOS working capital; OA – floating assets of the enterprise.
Own circulating assets are calculated as the difference between the value of equity and non-current assets and shows whether the company's own funds, necessary for the formation of current assets. The ratio of own working capital shows the proportion of current assets of enterprises are formed due to own sources.
Please note that the company is considered insolvent if at least one of conditions: the current ratio has a value less than 2 or a ratio of own working capital does not exceed 0.1.
If at least one of these indicators does not meet standard, calculate the rate of restoration of solvency. It is defined as the ratio of current ratio to its normative value:
KV = (KTL to + 6/T(K KTL - KTL n))/2, where
KTL to - current ratio on the accounting period end;
KTL n current ratio at the beginning of the reporting period;
T – the period;
6 regulatory period to restore the solvency.
If you restore the solvency ratio exceeds 1, this indicates that the company has a real chance to restore its solvency within 6 months.

Advice 2: How to determine the financial condition of the company

Analysis of financial condition required to obtain objective information on solvency, business activity and financial stability of the enterprise. Most often it requires the top management of the organization to managerial decision-making. In addition, the financial condition of the banks is evaluated under consideration of the possible loans enterprise.
How to determine the financial condition of the company
You will need
  • - accounting balance sheet (form №1);
  • report and the profit and loss statement (form №2).
Evaluation of the financial condition of the organization is done by the accounting reporting taking into account the trends to change in the best or worst hand, as well as factors determining these changes. The analysis considers selected balance sheet, its structure, asset quality.
The data on the selected reporting date would not characterize financial and economic activities of the enterprise in full, so they need to assess dynamics, at least for 1 year. To do this, make the aggregate balance sheet for 4 of the last reporting period in the form of a table: in the vertical field values of list items of the balance sheet and statement of profit and loss, and horizontal reporting date. Fill in the table based on the data of the accounting statements according to forms No. 1 and No. 2.
The financial condition of the enterprise is estimated using the coefficients: the absolute, quick and current liquidity ratios, own funds and assets turnover ratios and profitability. Absolute liquidity means the readiness of the enterprise immediately to settle up on short-term obligations, with the quick ability to repay the debt in a relatively short time, and the current characterizes all possible means of payment. Ratio availability of own funds shows the percentage of assets that are covered by equity.
For calculation of the indicators use the following lines of the balance sheet (form №1) and profit and loss statement (form №2):- 1210 – Reserves;- 1230 – "Receivables";- 1240 – "Short-term financial investments";- 1250 – "Cash";- 1200 – total section "current assets";- 1300 – the end of the section "Capital and reserves"- 1530 "deferred Income";- 1500 – total section "current liabilities";- 1700 – total liabilities balance;- 2110 – Revenue;- 2200 – "Profit from sales";- the 2400 "Net profit".
Calculate the indices according to the formulas:- absolute liquidity: K1 = (p. 1240+p. 1250)/(p. 1500-1530 page);- quick liquidity: K2 = (p. 1250+p. 1240)/(p. 1500-1530 p.); - current liquidity ratio: K3 = p. 1200/(p. 1500-1530 p.); - availability of own funds: K4 = (line 1300+line 1530)/pp. 1700.
Next, rate the profitability of the organization:- profitability of sales: K5 = p. 2200/p. 2110;- return activities: K6 = p. 2400/p. 2110.
Then determine the indices of turnover different elements of current assets and accounts payable. They are calculated based on daily volume of sales, which is calculated by dividing sales revenue by the number of days in the period under review.
Add the values of lines 1210, 1230 and 1200 on the start and end dates of the period on each article separately, divide by 2 and add all intermediate values. Divide the resulting amount by the number of summands is reduced by 1: you get the average value of stocks, receivables and current assets. To calculate the rate of turnover divide the resulting number by the amount of daily sales.
The turnover ratios characterize the management policies of the enterprise: the higher they are, the Affairs of the company worse, while reducing the turnover period tells about proper business practices, good customer demand for products and timely satisfaction.
Combine the coefficients of liquidity, availability of own funds and turnover in the table, analyze their dynamics, note the improvement, stability or deterioration of some indicators. Based on this analysis, conclusions can be drawn about the financial status of the enterprise, to forecast future developments or possible bankruptcy.

Advice 3: How to determine marginal revenue

Marginal income – one of the Central elements of an operational analysis. This economic term is used in two meanings: the maximum income and one of the sources of revenue to cover fixed costs.
How to determine marginal revenue
For the most effective planning and forecasting financial activity of the enterprise, determine the main results of operations and dependencies overview sales volumes of end products from the production costs used operational analysis. One of the main elements of the system calculations is the concept of marginal revenue.
The term "marginal revenue" appears in economic theory in two meanings. This is due to the original (English) the origin of the word marginal. First, this word means "limit, limit", i.e. that which is on the border. Second, the marginal is the difference, oscillation, hence the use of the term in the sense of "contribution margin" or "margin". In the trading terminology, margin is the difference of exchange rates, this is the part of the remaining profit, which is used to cover fixed costs.
The marginal revenue of an enterprise is the incomewhich brings the sale of additional units of manufactured goods. The division of costs into fixed and variable depends on the specifics of each individual company. In General, the fixed cost is rent for the premises, payment of salaries, implementation of protection, paying taxes etc. Thus, the marginal income is one of the main components of the total profits of the enterprise. The higher margin income, the greater compensation of fixed costs, the higher revenue.
The formula for determining the marginal revenueand looks like this:MD = CD – ROM, where CD – net income of enterprises from sales of goods, PZ is the aggregate of variable costs.There is also the concept of the specific marginal incomeand, namely per unit of traded goods:Mdot = (BH - PZ)/V, where V is the volume of products sold.
In operational analysis there is the concept of the so-called break-even point. Is the amount of sales of the enterprise, in which fixed costs are fully covered by the profit. While the income of the company is equal to zero. This means that the value of the marginal revenueand equal to the sum of the fixed costs.
The breakeven point is a key indicator of the company's solvency and financial equilibrium. The higher the financial performance over the breakeven point, the better the solvency of the company, and the amount of excess is called a margin of financial strength.
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