In order to reliably assess the liquidity of assets, it must be borne in mind that not all assets are equally liquid; taking this into account, they speak of asset structure. The assets of an enterprise, depending on the degree of liquidity (the rate of conversion into cash), are divided into 4 groups, which are designated A1, A2, A3, A4.

These asset structure groups are used for.

Group A1 asset structure

The most liquid assets with the shortest time to convert into money. These include: cash on hand and funds in current accounts, which can be used to carry out current payments immediately. This group also includes short-term financial investments. The formula for A1 for balance sheet items is:

A1 = page 250 + page 260

style="center">

Group A2 asset structure

Assets that are quickly realizable and require a certain amount of time to convert into cash. This group includes accounts receivable for which payments are expected within 12 months after the reporting date. The formula for A2 for balance sheet items is:

A2 = page 240

Group A3 asset structure

Slowly selling assets. The least liquid assets are inventories, accounts receivable, payments for which are expected more than 12 months after the reporting date, value added tax on acquired assets, and other current assets. The formula for A3 for balance sheet items is:

A3 = page 210 + page 220 + page 230 + page 270

Group A4 asset structure

Hard to sell assets. Assets that are intended to be used in business activities for an extended period of time. This group includes the articles of section I of the balance sheet asset “Non-current assets”. The formula for A4 for balance sheet items is:

A4 = page 190

The company's liabilities are similarly grouped into four groups P1, P2, P3, P4, according to the terms of their payment. With a good structure of assets and liabilities, the following relationships are satisfied:

A1 ≥ P1
A2 ≥ P2
A3 ≥ P3
A4 ≤ P4

Page
4

The absolute liquidity conditions are as follows:

A prerequisite for absolute balance sheet liquidity is the fulfillment of the first three inequalities. The fourth inequality is of a balancing nature. Its implementation indicates that the enterprise has its own working capital (capital and reserves - non-current assets).

Comparing A1 with P1 and A1 + A2 with P2 allows us to establish the current liquidity of the enterprise, which indicates its solvency in the near future. Comparing A3 with P3 expresses long-term liquidity, which is the basis for forecasting long-term solvency.

Absolute indicators of the liquidity of the enterprise’s balance sheet are presented in the tables:

Table 3

Balance sheet aggregates for assessing liquidity

Liquidity indicators
A1 – quickly realizable assets (cash + short-term financial investments)
A2 – average realizable assets (accounts receivable)
A3 – slowly selling assets (group of articles “Inventories” of Section II)
A4 – hard-to-sell assets (articles of Section I “Non-current assets”)
P1 – most urgent obligations (creditors)
P2 – short-term liabilities (items of section V of the balance sheet)
P3 – long-term liabilities (items of section IV of the balance sheet)
P4 – permanent (fixed) liabilities (articles of Section III “Capital and Reserves”).

Table 4

Enterprise liquidity indicators

According to these analytical tables, we state the fact that the company does not meet the condition of absolute liquidity according to the first and third criteria. Quickly realizable assets are not much smaller than short-term liabilities, therefore, at a particular point in time, TD Kupets LLC cannot pay off all its obligations - it takes time to attract additional funds. In addition, there is a significant gap in the third criterion due to the fact that a long-term bank loan was used to replenish working capital, therefore, in the long term, the solvency of the trading house is unsatisfactory.

For a qualitative assessment of the financial position of an enterprise, in addition to absolute indicators of balance sheet liquidity, it is advisable to determine a number of financial ratios. The calculated values ​​of liquidity and solvency ratios are given in the table:

Table 5

Liquidity ratios

Name of indicators				Standard
1. Absolute (quick) liquidity ratio (Cal)	(DS+ KFV)/ KO
2. Current (adjusted) liquidity ratio (Ktl)	(DS+ KFV+ DZ)/KO
3. Liquidity ratio when mobilizing funds (CLMS)
4. Total liquidity ratio (Kol) (DS+ KFV+ DZ+Z)/ KO	(DS+ KFV+ DZ+Z)/ KO	(0+163+ 85+484)/279
5. Own solvency ratio (SRR)				Individual

DS – cash;

KFV – short-term financial investments;

KO – short-term liabilities;

DZ – accounts receivable;

Z – reserves;

NWC – net working capital = current assets – short-term liabilities.

The absolute liquidity ratio shows what part of the short-term debt the company can repay in the near future (as of the balance sheet date). The coefficient is greater than the standard value.

The current liquidity ratio reflects the projected payment capabilities of the enterprise in the conditions of modern settlements with debtors. The calculation showed that in the medium term the trading house is solvent.

The liquidity ratio when mobilizing funds indicates the degree of dependence of the enterprise's solvency on inventories in terms of mobilizing funds to pay off short-term obligations. The trading house has large stocks of liquid goods in warehouses, so the value of this coefficient is greater than the normative one.

The total liquidity ratio indicates the sufficiency of the company's working capital to cover its short-term obligations. It also characterizes the margin of financial strength of the enterprise. The company has enough working capital to cover its short-term obligations.

Thus, liquidity analysis shows that TD Kupets LLC is a solvent enterprise; all its liquidity indicators show positive values.

One of the key tasks of analyzing the financial condition of an enterprise is to study indicators that reflect its financial stability. It is characterized by a stable excess of income over expenses, free maneuvering of funds and their effective use in the process of current (operating) activities.

Accumulating information about the property and capital of a company in the balance sheet is not a whim of legislators, but a very important component in the life and development of any company. After all, according to the information contained in this report, they determine the situation in the enterprise at a certain moment, the possibilities of its growth, liquidation, re-profiling of production, etc. One of the main indicators is the liquidity of the balance sheet, which assesses the position of the company.

Balance sheet liquidity: what is it?

This term refers to the degree to which obligations are repaid using the assets available in the company. The period of their conversion into money corresponds to the period of debt coverage, and since the property has a different degree of turnover, the solvency of the company is considered according to the liquidity levels of different categories of balance sheet assets. The question of its definition is always relevant, i.e. the degree of liquidity is determined using certain algorithms, independent of the purpose of the analysis. They are the same for a rapidly developing entity, when it is necessary to determine a strategy for further development, and for liquidation measures, when the question arises about the amount of the company’s funds to pay off accumulated debts in the event of a predicted bankruptcy and making a decision on approving an interim liquidation balance sheet (a sample can be viewed here).

The main criterion of liquidity is the excess of the amount of current assets over short-term liabilities. And the higher it is, the more stable the company’s financial position can be.

Balance sheet liquidity assessment

To analyze the solvency of a company, a distinction is made between balance sheet items:

• property according to the degree of liquidity - from quickly sold to hard to sell;
• liabilities - according to the urgency of their repayment.

Assets			Liabilities
		Balance line number			Balance line number
Most liquid			Most urgent
Quickly implemented			Short-term liabilities		1510 + 1540 + 1550
Slow to implement		1210 + 1220 + 1260	Long-term
Difficult to implement			Permanent

When assessing liquidity, the values ​​of each category of assets are compared with a similar group of sources. For example:

1. when A 1 > P 1, we can talk about a sufficient amount of funds in the company to repay the most urgent obligations as of the balance sheet date;
2. A 2 > P 2 means that the organization can become solvent very soon if the conditions for timely settlements with creditors and debtors are met;
3. A 3 > P 3 speaks of the upcoming possibility of increasing solvency during the period of average duration of funds turnover.

The fulfillment of the listed inequalities will lead to conditions when A 4 ≤ P 4, and this indicates compliance with the minimum acceptable level of stability of the company and the funds owned by the company.

Balance sheet liquidity analysis

• current liquidity, indicating the company’s ability to pay obligations in the near future for the analyzed period: if in this case A 1 + A 2 ≥ P 1 + P 2 is satisfied, then the company’s position is stable (A 4 ≤ P 4);
• prospective, i.e., predicted liquidity based on comparison of upcoming operations: if A 3 ≥ P 3, then A 4 ≤ P 4;
• insufficient level of forecast liquidity;
• balance sheet illiquidity: A 4 ≥ P 4.

Such an assessment is very approximate; a more detailed analysis of the liquidity of the balance sheet is carried out using calculations of special coefficients.

Liquidity ratio: balance sheet formula

Several coefficient values ​​are calculated. For example:

1. Current liquidity ratio, indicating the organization’s provision of funds to pay obligations throughout the year and is determined as follows:

K = (A 1 + A 2 + A 3) / (P 1 + P 2)

The norm is a value in the range from 1 to 2. Exceeding the level of 2 indicates irrationality in the distribution of funds, and a coefficient below 1 indicates a shortage;

2. The quick liquidity ratio establishes the share of debt collateral with liquid assets, excluding inventory and materials, and is calculated using the formula:

K = (A 1 + A 2) / (P 1 + P 2)

An indicator in the range of 0.7 - 1.5 is considered acceptable;

3. The absolute liquidity ratio is calculated if you need to find out what part of the debts to creditors the company can cover immediately:

K = A 1 / (P 1 + P 2)

This indicator characterizes the stable state of the company if it is not lower than the critical level of 0.2.

4. The total value of liquidity is calculated to determine a comprehensive assessment of the solvency of the enterprise.

K = (A 1 + 0.5 x A 2 + 0.3 x A 3) / (P 1 + 0.5 x P 2 + 0.3 x P 3)

The calculation of this value is used when assessing fluctuations in the financial situation of the company and is taken into account when the company selects a counterparty. A normal value is 1 or higher.

Kamchatka State Technical University

Department of Accounting and Finance

Test

in the discipline "Analysis of financial statements"

on the topic: Analysis of balance sheet liquidity

Petropavlovsk-Kamchatsky

The liquidity of an organization is understood as its ability to cover its obligations with assets, the period of transformation of which into cash corresponds to the period of repayment of obligations. Liquidity means the unconditional solvency of an organization and presupposes constant equality between its assets and liabilities simultaneously in two parameters:

· by total amount;

· according to the timing of conversion into money (assets) and maturity dates (liabilities).

An analysis of an organization's liquidity is carried out on the balance sheet and consists of comparing assets, grouped by degree of liquidity and arranged in descending order, with liabilities, arranged in ascending order of maturity.

Liquidity is distinguished:

· current – ​​compliance of receivables and cash receivables;

· calculated – correspondence of asset and liability groups according to their turnover periods, under the normal functioning of the organization;

· urgent – ​​the ability to repay obligations in the event of liquidation of the organization.

Depending on the degree of liquidity, i.e. the rate of conversion into cash, the organization’s assets are divided into the following groups.

1. The most liquid assets A 1:

· amounts for all items of funds that can be used for settlements immediately;

· short-term financial investments (securities)

A 1 = page 260 + page 250

2. Quickly realizable assets A 2 – assets that require a certain time to convert into cash:

· accounts receivable, payments for which are expected within 12 months after the reporting date;

· other receivable assets

A 2 = page 240 + page 270

3. Slowly selling assets – the least liquid assets:

· inventories, except for the line “Deferred expenses”;

· value added tax on purchased assets;

· accounts receivable for which payments are expected more than 12 months after the reporting date

A 3 = page 210 + page 220 + page 230 – page 217

4. Hard-to-sell assets A 4. This group includes all balance sheet items of Section I “Non-current assets”

A 4 = page 190

These assets are intended to be used in business activities for a sufficiently long period.

The first three groups of assets can constantly change during the business period and relate to the current assets of the organization. They are more liquid than other assets.

The organization's liabilities (balance sheet liability items) are also grouped into four groups and arranged according to the degree of urgency of payment.

1. The most urgent obligations P 1:

· accounts payable;

· debt of participants (founders) for payment of income;

· other short-term liabilities;

· loans not repaid on time

P 1 = page 620 + page 630 + page 660

2. Short-term liabilities P 2:

· short-term loans and credits;

· other loans to be repaid within 12 months after the reporting date

P 2 = page 610

3. Long-term liabilities P 3:

This group includes long-term loans and borrowings, items in section IV of the balance sheet

P 3 = page 590

4. Constant liabilities P 4:

· articles of section III of the balance sheet “Capital and reserves”;

· individual items of section V of the balance sheet “Current liabilities” that were not included in the previous groups;

· deferred income;

· reserves for future expenses.

To maintain the balance of assets and liabilities, the total of this group should be reduced by the amount under the item “Deferred expenses”:

A 4 = page 490 + page 640 + page 650 – page 216

The relationship and difference between indicators of profitability of an enterprise and the liquidity of its assets

An organization is considered liquid if its current assets exceed its short-term liabilities. The real degree of liquidity of an organization and its solvency can be determined based on an analysis of balance sheet liquidity.

At the first stage of the analysis, the specified groups of assets and liabilities are compared in absolute terms. The balance sheet is considered liquid subject to the following ratios of groups of assets and liabilities:

Moreover, if the first three inequalities are met: A 1 ≥ P 1; A 2 ≥ P 2; A 3 ≥ P 3, i.e. assets exceed the external liabilities of the organization, then the last inequality is necessarily satisfied: A 4 ≤ P 4, which confirms that the organization has its own working capital. All this means compliance with the minimum condition of financial stability.

Failure to meet one of the first three inequalities indicates violations of balance sheet liquidity. At the same time, the lack of funds in one group of assets is not compensated by their surplus in another group, since compensation can only be based on cost; in a real payment situation, less liquid assets cannot replace more liquid ones.

A comparison of the first and second groups of assets (the most liquid assets and quickly realizable assets) with the first two groups of liabilities (the most urgent liabilities and short-term liabilities) shows current liquidity, i.e. solvency or insolvency of the organization at the time closest to the time of analysis.

A comparison of the third group of assets and liabilities (slow-moving assets with long-term liabilities) shows promising liquidity, i.e. forecast of the organization's solvency.

At the time of drawing up the balance sheet, it cannot be considered liquid, since only two of the ratios of groups of assets and liabilities meet the conditions of absolute liquidity.

Practical task: conduct an analysis of the liquidity of the organization’s balance sheet based on the reporting data presented in the appendices to these instructions.

Assets	At the beginning of the period	At the end of the period	Passive	At the beginning of the period	At the end of the period	Payment surplus
						At the beginning of the period	end of period
The most liquid assets (A 1)	9881	7859	Most urgent obligations (P 1)	25664	47210	-15783	-39351
Quickly realizable assets (A 2)	61352	631741	Short-term liabilities (P 2)	70462	59277	-18110	3897
Slowly selling assets (A 3)	119176	122066	Long-term liabilities (P 3)	7822	7075	111354	114991
Hard to sell assets (A 4)	128260	129520	Constant liabilities (P 4)	205721	209057	-77461	-79237
Balance	318669	322619	Balance	318669	322619

At the beginning of the period:

A 1 = page 250 + page 260 = 2516 + 7365 = 9881

A 2 = page 230 + page 240 = 201 + 61151 = 61352

A 3 = page 210 + page 220 + page 270 = 115134 + 4042 + 0 = 119176

A 4 = page 190 = 128260

Balance = A 1 + A 2 + A 3 + A 4 = 9881 + 61352 + 119176 + 128260 = 318669

P 1 = page 620 = 25664

P 2 = page 610 + page 630 + page 660 = 79462 + 0 + 0 = 79462

P 3 = page 590 = 7822

P 4 = page 490 + page 640 + page 650 = 201798 + 3923 + 0 = 205721

Balance = P 1 + P 2 + P 3 + P 4 = 25664 + 79462 + 7822 + 205721 = 318669

At the end of the period:

A 1 = page 250 + page 260 = 1334 + 6525 = 7859

A 2 = page 230 + page 240 = 443 + 62731 = 63174

A 3 = page 210 + page 220 + page 270 = 121277 + 789 + 0 = 122066

A 4 = page 190 = 129520

Balance = A 1 + A 2 + A 3 + A 4 = 7859 + 63174 + 122066 + 129520 = 322619

P 1 = page 620 = 47210

P 2 = page 610 + page 630 + page 660 = 59277 + 0 + 0 = 59277

P 3 = page 590 = 7075

P 4 = page 490 + page 640 + page 650 = 206190 + 2867 + 0 = 209057

Balance = P 1 + P 2 + P 3 + P 4 = 47210 + 59277 + 7075 + 209057 = 322619

At the beginning of the period:

A 1 – P 1 = 9881 – 25664 = -15783

A 2 – P 2 = 61352 – 79462 = -18110

A 3 – P 3 = 119176 – 7822 = 111354

A 4 – P 4 = 128260 – 205721 = -77461

At the end of the period:

A 1 – P 1 = 7859 – 47210 = -39351

A 2 – P 2 = 63174 – 59277 = 3897

A 3 – P 3 = 122066 – 7075 = 114991

A 4 – P 4 = 129820 – 209057 = -79237

During the reporting period, the payment shortage of the most liquid assets increased. The amount of short-term loans exceeded expected receipts from debtors. The amount of reserves exceeded long-term liabilities. The existing payment surplus for these groups can be used to cover the lack of funds to pay off the most urgent obligations. The balance sheet is not completely liquid.

Application

ASSETS	Line code	At the beginning of the reporting period	At the end of the reporting period
I.NON-CURRENT ASSETS Intangible assets	110	603	644
Fixed assets	120	87731	97532
Unfinished construction	130	28527	19830
Long-term financial investments	140	11399	11514
TOTAL for section I	190	128260	129520
II.CURRENT ASSETS Inventories	210	115134	121277
Including raw materials, materials and other similar values	211	20720	9010
Costs in work in progress	213	1366	2246
Finished products and goods for resale	214	92803	109623
Deferred expenses	216	245	398
Value added tax on purchased assets	220	4042	789
Accounts receivable (payments for which are expected more than 12 months after the reporting date)	230	201	443
	231	201	443
Accounts receivable (payments for which are expected within 12 months after the reporting date)	240	61151	62731
Including: Buyers and clients	241	49391	50448
Short-term financial investments	250	2516	1334
Cash	260	7365	6525
TOTAL for section II	290	190409	193099
BALANCE	300	318669	322619

PASSIVE	Line code	At the beginning of the reporting period	At the end of the reporting period
III. CAPITAL AND RESERVES Authorized capital	410	65000	65000
Additional capital	420	23600	23600
Reserve capital	430	13167	14427
Reserves formed in accordance with the constituent documents	432	13167	14427
retained earnings	470	100031	103163
TOTAL for section III	490	201798	206190
IV.LONG-TERM LIABILITIES Loans and credits	510	7822	7075
TOTAL for section IV	590	7822	7075
V.SHORT-TERM LIABILITIES Loans and credits	610	79462	59277
Accounts payable	620	25664	47210
Including Suppliers and contractors	621	16574	31513
Debt to the organization's personnel	622	705	568
Debt on taxes and fees	624	2345	4827
Other creditors	625	6040	10302
Deferred income	640	3923	2867
TOTAL for Section V	690	109049	109354
BALANCE	700	318669	322619

Let's try to understand how the liquidity analysis of an enterprise's balance sheet is carried out, and what are the main types of liquidity ratios for assessment.

Liquidity of the enterprise's balance sheet

Liquidity of the enterprise's balance sheet– the company’s ability to cover its obligations to creditors using its assets. Balance sheet liquidity is one of the most important financial indicators of an enterprise and directly determines the degree of solvency and the level of financial stability. The higher the liquidity of the balance sheet, the greater the speed of repayment of the company's debts. Low balance sheet liquidity is the first sign of bankruptcy risk.

Balance sheet liquidity analysis is a grouping of all assets and liabilities of an enterprise. So assets are ranked according to the degree of their realizability, i.e. The greater the liquidity of an asset, the higher the rate of its transformation into cash. The funds themselves have the maximum degree of liquidity. The company's liabilities are ranked according to the degree of maturity. The table below shows the grouping of assets and liabilities of the enterprise.

Types of enterprise assets			Types of enterprise liabilities
A1	Have the fastest implementation speed	Cash and short term. Finnish investments	P1	High maturity	Accounts payable
A2	Have a high implementation speed	Accounts receivable<12 мес.	P2	Moderate maturity	Short-term liabilities and loans
A3	Have a slow implementation speed	Accounts receivable >12 months, inventories, VAT, work in progress	P3	Low maturity	Long-term liabilities
A4	Hard to sell assets	Non-current assets	P4	Permanent liabilities	Company's equity

Analysis of the liquidity of the enterprise's balance sheet. Solvency assessment

To assess the liquidity of an enterprise's balance sheet, it is necessary to conduct a comparative analysis between the size of assets and liabilities of the corresponding groups. The table below presents an analysis of the company's liquidity.

Liquidity analysis	Solvency assessment
A1 > P1	An enterprise can pay off its most urgent obligations using absolutely liquid assets
A2 > P2	An enterprise can pay off short-term obligations to creditors with quickly realizable assets
A3 > P3	An enterprise can repay long-term loans using slow-selling assets
A4 ≤ P4	This inequality is satisfied automatically if all three inequalities are met. The enterprise has a high degree of solvency and can pay off various types of obligations with the corresponding assets.

Analysis and implementation of inequalities for various types of assets and liabilities of an enterprise allows us to judge the degree of liquidity of the balance sheet. If all conditions are met, the balance is considered absolutely liquid. When analyzing the balance sheet, it should be taken into account that more liquid assets may cover less urgent liabilities.

Master class: “An example of analysis and assessment of balance sheet liquidity”

Balance sheet liquidity ratios. Absolute and relative

At the next stage of liquidity analysis, the solvency indicators of the enterprise are assessed, and the following two absolute coefficients are calculated:

Current liquidity– an indicator reflecting the ability of an enterprise to repay its obligations in the short term.

Prospective liquidity– an indicator reflecting the company’s ability to repay debt in the future.

Analysis of balance sheet liquidity allows you to determine the availability of resources to repay obligations to creditors, but it is general and does not allow you to accurately determine the solvency of the enterprise. For this purpose, in practice, relative liquidity indicators are used. Let's look at them in more detail.

Current ratio (Current ratio) – an indicator reflecting the degree to which assets cover the most urgent and medium-term obligations of the enterprise. The formula for calculating the coefficient is as follows:

Quick ratio(Quick ratio) – an indicator reflecting the degree to which highly liquid and quickly realizable assets cover the current liabilities of the enterprise. The formula for calculating the absolute liquidity ratio is as follows:

Quick ratio > 0,7.

Absolute liquidity ratio (Cash ratio) – shows the degree to which the most liquid assets cover the current liabilities of the enterprise. The formula for calculating quick liquidity is as follows:

In practice, the optimal value of this indicator is considered Cash ratio > 0,2.

Total balance sheet liquidity(Total liquidity) – an indicator reflecting the degree to which the assets of the enterprise repay all its liabilities. It is calculated as the ratio of the weighted sum of assets and liabilities according to the formula:

In practice, the optimal value of this indicator is considered Total liquidity > 1.

Provision ratio of own working capital– reflects the degree to which the enterprise uses its own working capital. The formula is presented below:

The normative value of the indicator is K sos > 0.1.

Capital agility ratio– reflects the amount of capital in reserves. The calculation formula is as follows:

This indicator is analyzed over time and its tendency to decrease is considered optimal. In addition to the presented indicators, to analyze the liquidity of the balance sheet, enterprises use indicators that include the company’s operating activities, the size of cash flow, indicators of capital maneuverability, etc.

Master class: “An example of assessing liquidity ratios for OJSC Gazprom.” Example with conclusions

Resume

Analysis of balance sheet liquidity is an important task of the enterprise in terms of the state of assets and liabilities, as well as the ability to timely and fully pay off its obligations to borrowers. The higher the liquidity of the balance sheet, the higher the solvency of the company and the lower the risk of bankruptcy. When assessing the solvency of an enterprise, it is necessary to analyze the coefficients over time and in comparison with industry averages. This will identify possible threats to the risk of bankruptcy.