Instruction

1

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).

2

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.

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.

3

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.

4

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.

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 calculate solvency ratio

The solvency of the company represents its ability to timely pay for the commitments and debts in the current time, both short-term and long-term. In the analysis

**of the solvency**assets are treated as secured debt of the company, i.e. the property, after which it will pay its obligations.Instruction

1

Speaking about

**the solvency**of the organization, meant its liquidity, i.e. the possibility of realization of the company's assets and repayment of debts. It is a broader representation**of solvency**. In the narrower sense, solvency is whether the company has sufficient funds to repay the current accounts payable in the near future.2

In the analysis

**of solvency**of the enterprise calculated for three major**factor**. The first of them is current ratio**solvency**allows to evaluate the ability to repay your debts and shows how much current assets account for one ruble of short-term liabilities. The normative value for this**ratio**is 2. The value**of the coefficient**is below the set standard indicates the presence of the risk of delayed calculation of the enterprise to repay current liabilities.3

The quick ratio

**solvency**is defined as the ratio of the amount of receivables and short-term investments and cash liabilities of the company. Ie when calculating this**coefficient**from the value of the assets of the company are deductible reserves. And this is quite logical: they not only have less liquidity but in case of rapid implementation, the sale price may be below their cost of production or acquisition. The estimated value for this**ratio**is 1.4

The most stringent criterion

**of solvency**of the enterprise is the ratio of the absolute**solvency**. It is calculated as the ratio of cash to short-term liabilities of firms and shows what part of the debt can be repaid immediately from available cash. The normative value for this**ratio**is 0.25.