Analysis of the financial activity of the enterprise. Ratio analysis of the financial condition of the enterprise Analysis of financial ratios
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 \u003d (Cash + Short-term financial investments) / Current liabilities
2. Quick liquidity ratio (critical assessment)
The ratio of the most liquid part working capital(cash, receivables, short-term financial investments) to short-term liabilities.
K SL = (Cash + Short-term financial investments + Short-term accounts receivable) / Current responsibility
3. Current liquidity ratio
Shows what share of current debt obligations can be repaid in a short time due to 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 current production activities after repayment of its short-term 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 (the ratio of borrowed and own funds) characterizes the volume of attracted borrowed money per unit of equity.
K F \u003d Borrowed capital / Equity capital
9. Current debt ratio characterizes the share of short-term borrowed capital in total amount 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, %
Shows share net profit in the company's sales volume. 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 ensure a sufficient amount of profit in relation to the working capital used by the company. 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 Asset Value
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 influencing market value companies. Shows the share of net profit (in monetary units) attributable to one ordinary share.
EPS= (Net profit - Dividends on preferred shares) / Number 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 of the stock /EPS
24. Coefficient of sustainability of economic growth
This ratio shows the rate at which equity capital is increasing at the expense of financial and economic activity rather than by raising additional equity capital.
sgr = (Net Income - Total Dividends Paid) / EquityFor rate financial analysis enterprises use a system of indicators included in the following groups:
1) liquidity ratios;
2) profitability ratios;
3) coefficients of market activity;
4) financial stability ratios;
5) coefficients of business activity.
Liquidity ratios.
Liquidity - the ability of the company to meet its short-term obligations (up to 12 months). If current assets (working capital) exceed short-term liabilities, then the company is liquid. To measure liquidity, a system of coefficients is used. Consider the most important:
1) Total Liquidity Ratio = (Current Assets)/(Total Liabilities)
The indicator gives an overall assessment of the liquidity of assets, showing how many rubles of current assets account for 1 ruble of current liabilities. The value of the indicator may vary in different industries, its growth in dynamics is considered as a positive trend. Meaning - the company is recommended to have working capital 2 times more than its short-term accounts payable
2) Quick liquidity ratio = (Current stocks - Stocks) / (Current current liabilities)
The indicator should be greater than 1. The meaning of the criterion is that the company should strive to ensure that the amount of credit provided to customers (accounts receivable) does not exceed the amount of accounts payable. The growth of the indicator is a positive trend if it is not associated with an unreasonable increase in receivables. If the growth of this indicator is associated with an unjustified increase in receivables, then this does not characterize the activity of the enterprise on the positive side.
3) absolute liquidity ratio = (current assets)/(short-term liabilities)
The absolute liquidity ratio must be greater than 0.2. The ratio shows what part of short-term liabilities, if necessary, can be repaid immediately.
4) The value of own working capital (SOS) \u003d Current assets - Short-term liabilities
The value of own working capital (SOS) \u003d current assets - short-term liabilities. This indicator shows how much current assets will remain at the disposal of the enterprise after the settlement of short-term obligations. If it's Profit Ratios.
1) Return on Equity = Net Income / Equity
2) Return on Advance Equity = Net Income / Advance Capital
3) Return on Assets = Net Income / Average Annual Asset Value
4) Sales profitability indicator = Net profit / Sales proceeds
Efficiency ratios characterize the efficiency of the use of material and financial resources of the enterprise.
1) Asset turnover = Sales proceeds / Assets
2) Accounts receivable turnover = Sales revenue / Average accounts receivable
3) Loan debt turnover = (Average debt / Cost price) × 360 days
Answer in days.
4) Inventory turnover in turnover = Cost of sales / Average inventory
Indicators of financial stability.
1) Equity concentration ratio (sustainability ratio) = Equity / Total economic assets advanced into the enterprise's activities (assets)
Must be greater than 0.6. The growth of the indicator is a positive trend. It characterizes the share of the property of the owners of the enterprise in the total amount of funds advanced in its activities.
2) Financial stability ratio = Total business assets / Equity capital)
The decrease in the indicator is a positive trend. If the coefficient = 1, then the owners fully finance their enterprise, if it = 0.25, then for every 1 rub. 25 kopecks invested in assets, 25 kopecks - borrowed.
3) Debt capital concentration ratio = Debt capital / Total business assets (assets)
The decline is a positive trend.
4) Equity concentration ratio + Debt concentration ratio = 1
5) Structure coefficient long-term investments= Long-term liabilities / Non-current assets
Shows what part of fixed assets and other non-current assets is financed by external investors, that is, it belongs to them, and not to the owners of the enterprise.
6) Long-term leverage ratio = Long-term liabilities / (Long-term liabilities + equity))
It characterizes the capital structure. Growth in dynamics is a negative trend, as it means that the company is increasingly dependent on external investors.
7) The ratio of own and borrowed funds \u003d Equity / Borrowed capital (current liabilities)
Growth in dynamics is a positive trend. An enterprise in the general sense is considered solvent if the value of its total assets exceeds the value of external liabilities.
8) Level financial leverage= Long-term borrowings / Equity
It characterizes how many rubles of borrowed capital account for 1 ruble. own funds. The higher the value, the higher the risk associated with the company.
Indicators of market activity of the enterprise.
The indicators of this group characterize the results and effectiveness of the current main production activities. An assessment of business activity at a qualitative level can be obtained as a result of comparing activities this enterprise and related in the field of capital investment enterprises. Such qualitative criteria are: the breadth of product sales markets, the reputation of the enterprise, etc. Quantitative assessment is given in two areas:
- the degree of implementation of the plan for the main indicators, ensuring the specified rates of their growth;
- the level of efficiency in the use of enterprise resources.
1) Earnings per share = (Net income - Preferred dividends) / Total number of ordinary shares outstanding
2) The ratio of the market price of a share and earnings per share = Market value / Earnings per share
3) Book value per share = (Value of equity – Value of preferred shares) / Number of shares outstanding
4) The ratio of the market and book value of the share = Market value / Book value
5) Share current yield = Dividend per share / Market value of 1 share
6) Ultimate share return = (Dividend per share + (Purchase price - Sale price)) / Market price or purchase price
7) Share of dividends paid = Dividend per 1 share / Net profit per 1 share(less than 1)
Method financial ratios-- Calculation of data relations of financial statements, determination of interrelations of indicators. When conducting an analysis, the following factors should be taken into account: the effectiveness of the applied planning methods, the reliability of financial statements, the use various methods accounting (accounting policy), the level of diversification of the activities of other enterprises, the static nature of the applied coefficients.
Expressing relative values, financial ratios make it possible to evaluate indicators in dynamics and compare the results of an enterprise's activities with industry and parameters of competing organizations, as well as compare them with recommended values. The use of financial ratios makes it possible to quickly assess the financial condition of the enterprise.
Financial ratios can be systematized according to certain criteria:
- - proceeding from the meters put in a basis: cost and natural;
- - depending on which side of phenomena and operations they measure: quantitative and qualitative;
- - based on the use of individual indicators or their ratios: volumetric and specific.
Specific indicators include financial ratios, which are widely used in analytical work.
The composition of the indicators of each group includes several main generally accepted parameters and many additional ones, determined based on the goals of the analysis.
The most widespread are four groups of financial indicators:
Indicators of financial stability.
Solvency and liquidity meters.
Indicators of profitability (profitability).
Parameters of business activity and production efficiency.
The condition for the financial stability of an enterprise is an acceptable value of solvency and liquidity indicators. They express its ability to repay short-term liabilities with quickly realizable assets. The financial balance of the organization is ensured sufficiently high level her solvency. The low value of solvency and liquidity ratios characterizes the situation of cash shortage to maintain normal current (operational) activities. On the contrary, high values of these parameters indicate an irrational investment in current assets. Therefore, the study of the solvency and liquidity of the balance sheet of the enterprise is always given the closest attention.
Profitability indicators allow you to obtain a generalized assessment of the effectiveness of the use of assets (property) and equity capital of the enterprise.
The parameters of business activity are also designed to assess the effectiveness of the use of assets and equity, but from the standpoint of their turnover. The volume of assets should be optimal, but sufficient to fulfill production program enterprises. If it experiences a shortage of resources, then it must take care of the sources of financing for their replenishment. Such sources can be both own and borrowed funds. When assets are redundant, the company incurs additional expenses their content, which reduces their profitability.
The group of indicators characterizing the business activity of an enterprise includes parameters expressing the value and profitability of its shares on the stock market. Market activity ratios relate the market price of a share to its par value and earnings per share. They allow the management and owners of the enterprise to evaluate the attitude of investors to its current and future activities.
Table 1.1. represented individual indicators recommended for analytical work. These indicators can be used by external users of financial statements, such as investors, shareholders and creditors.
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Name of indicator |
What characterizes |
Calculation method |
Interpretation of the indicator |
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Coefficients characterizing the financial stability of the enterprise |
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1. Coefficient of financial independence (Kfn) |
The share of equity capital in the balance sheet |
To fn = SK / WB, where SK is equity; WB -- balance currency |
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2. Debt ratio (Kz) or financial dependence |
The ratio between borrowed and own funds |
K s = ZK / CK, where ZK -- borrowed capital; SC - equity |
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3. Funding ratio (Kfin) |
The ratio between own and borrowed funds |
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4. The coefficient of provision with own working capital (Ko) |
The share of own working capital (net working capital) in current assets |
K o = SOS / OA, where SOS -- own working capital; About A - current assets |
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5. Agility factor |
The share of own working capital in equity |
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6. Permanent asset ratio (Kpa) |
The share of equity allocated to cover the non-mobile part of the property |
K pa \u003d BOA / CK, where BOA -- non-current assets |
The indicator is individual for each enterprise. It can be compared to a company that has absolute financial stability. |
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7. Coefficient of financial tension (Kf ex) |
The share of borrowed funds in the borrower's balance sheet currency |
K f ex = ZK / WB, where ZK is borrowed capital, WB is the balance sheet currency |
Not more than 0.5 (50%). Exceeding the upper limit indicates a large dependence of the enterprise on external sources of financing. |
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8. Long-term borrowing ratio (Kdp zs) |
The share of long-term borrowed sources in total value own and borrowed capital |
K dp zs \u003d DZI / SK + ZK, where DZI -- long-term borrowed sources; SK equity; ZK-- borrowed capital |
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9. Ratio of mobile and immobilized assets (Kc) |
How many current assets account for each ruble of non-current assets |
K c \u003d OAIBOA where OA is current assets; BOA -- non-current (immobilized) assets |
Individual for each enterprise. The higher the value of the indicator, the more funds are advanced into current (mobile) assets |
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10. Coefficient of industrial property (Kipn) |
The share of industrial property in the assets of the enterprise |
K ipn = BOA + 3/A, where BOA -- non-current assets; 3 - stocks; A - the total amount of assets (property) |
Kipn > 0.5. If the indicator drops below 0.5, it is necessary to attract borrowed funds to replenish the property |
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Financial ratios used to assess liquidity and solvency of the enterprise |
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1. Absolute (quick) liquidity ratio (Kal,) |
How much of the short-term debt the company can repay in the near future (as of the balance sheet date) |
K al \u003d (DS + KFV / KO), where ds is cash; KFV -- short-term financial investments; |
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2. Current (adjusted) liquidity ratio (Ktl) |
Predictable payment capabilities of the enterprise in the conditions of timely settlements with debtors |
K tl \u003d DS + KFV + DZ / KO, where DZ is receivables |
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3. Liquidity ratio when raising funds (CLMS) |
The degree of dependence of the solvency of the enterprise on inventories from the position of mobilizing funds to repay short-term obligations |
K lms \u003d 3 / KO, where 3 -- inventories |
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4. Total liquidity ratio (Col) |
Sufficiency of working capital of the enterprise to cover its short-term obligations. It also characterizes the margin of financial strength due to the excess of current assets over short-term liabilities |
K ol \u003d (DS + KFV + + DZ + 3) / KO |
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5. Own solvency ratio (Ksp) |
Characterizes the share of net working capital in short-term liabilities, that is, the ability of the enterprise to compensate for its short-term liabilities at the expense of net current assets |
Ksp \u003d CHOK / KO, where CHOK is net working capital; KO -- short-term liabilities |
The indicator is individual for each enterprise and depends on the specifics of its production and commercial activities. |
An enterprise is considered solvent if the following condition is met:
where OA -- current assets (section II of the balance sheet); TO -- short-term liabilities (section V of the balance sheet).
A more particular case of solvency: if own working capital covers the most urgent obligations (accounts payable):
where SOS - own working capital (OA - KO); CO - the most urgent obligations (items from section V of the balance sheet).
In practice, the solvency of the enterprise is expressed through the liquidity of the balance sheet.
Thus, in order to conduct a financial analysis and to identify the insolvency of Master Yug LLC, we can use the indicators given in this chapter and compare them with the normative value.
Financial ratios are relative indicators financial condition enterprises. They are calculated as ratios of absolute indicators of financial condition or their linear combinations.
The system of relative financial ratios in economic terms can be divided into a number of characteristic groups:
- -indicators of assessing the profitability of the enterprise
- - business activity assessment indicators
- -indicators for assessing market stability
- -indicators for assessing the liquidity of the balance sheet assets as the basis of solvency.
Enterprise profitability assessment.
Indicators for evaluating the profitability of the enterprise - characterize the profitability of the enterprise and are calculated as the ratio of the profit received to the funds spent or the volume of sales.
Profitability indicators are the most generalized characteristic of the efficiency of economic activity. Depending on the base of comparison, the profitability of the total capital is distinguished, production assets. equity, etc.
1) The profitability ratios of all capital show how much balance sheet or net profit is received per 1000 rubles of the value of the property:
balance sheet profit
Total return on equity = ______________________ x 100% (1)
Property value
Net profit
Net return on equity = ____________________ x 100% (2)
Property value
2) Efficiency ratios for the use of own funds reflect the share of balance sheet or net profit in the company's own funds:
Overall profitability Balance sheet profit
equity = _____________________ x 100% (3)
Own funds
Net margin Net profit
equity = ______________________ x 100% (4)
Own funds
Return on equity shows how much profit is received from each 1000 rubles invested by the owners of the enterprise. This indicator characterizes the effectiveness of the use of invested equity capital and serves as important criterion estimates of the level of stock quotes. The ratio allows you to evaluate the potential income from investing in securities of various enterprises.
The ratio of the overall profitability of the enterprise is compared with the ratio of the overall profitability of own funds. The difference between these indicators characterizes the attraction of external sources of financing.
3) The profitability of production assets is calculated by the ratio of the amount of profit to the cost of fixed assets and inventories:
Overall profitability book profit
production assets \u003d ___________________________ x100% (5)
working capital
Net profit net profit
production assets \u003d _________________________ x 100% (6)
Fixed assets + material
working capital
In Russian practice, it is these indicators that are of great importance, since they reflect the share of profit per thousand production assets.
4) Profitability of the main (fundamental profitability):
balance sheet profit
Total return on equity = ________________________ x 100% (7)
funds and other non-current assets
Net profit
Net return on equity = ________________________ x 100% (8)
The average value of the main
funds and other non-current assets
The profitability of fixed assets and other non-current assets reflects the efficiency of the use of fixed assets and other non-current assets, measured by the amount of profit per unit cost of funds. The growth of this indicator indicates an excessive increase in mobile means, which may be the result of the formation of excessive stocks of inventory items, overstocking of finished products as a result of a decrease in demand, an excessive increase in receivables or cash
5) Return on sales (the difference between these indicators in the numerator of formulas, i.e. in financial results reflecting a certain aspect of economic activity):
Net profit per Net profit of the enterprise
1000 rubles of revenue \u003d _________________________________x100% (9)
Revenues from sales
Profit from sales Profit from product sales
Products per = __________________________________ x100% (10)
1000 rubles of proceeds Sales proceeds
Total profit on book profit
1000 rubles of revenue \u003d ________________________________x100% (11)
Revenues from sales
These ratios show how much profit falls on the unit of sales. The growth of this indicator is a consequence of the rise in prices at fixed costs for the production and sale of goods and services or reduce costs when constant prices. A decrease in the profitability of sales indicates a decrease in prices at constant costs for production and sale of products or an increase in costs at constant prices, i.e. a decrease in demand for the company's products.
6) The profitability of financial investments is calculated as the ratio of income received from securities and from equity participation in the authorized capital of other enterprises to the cost of financial investments:
Income from + income from
Return on Equity Securities
financial investments =______________________________ х100% (12)
The cost of financial investments
7) The return on equity and long-term borrowed (permanent) capital serves to assess the efficiency of using the entire long-term capital of an enterprise:
Total profitability balance sheet profit permanent = x100% (13)
borrowed funds
Total profitability net profit permanent = ___________________________________________ x100% (14)
capital Equity + Long-term
borrowed funds
Estimated profitability indicators for 1996 - 1998 are shown in table 7.
Table 7
Profitability indicators.
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Name of indicator |
The value of indicators, |
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Overall profitability capital |
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Net profit Capital |
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Overall profitability equity |
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Net profit equity |
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Overall profitability production assets |
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Net profit production assets |
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General fondorent- whiteness |
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Net fondorenta whiteness |
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Net profit per 1000 rubles of revenue |
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Profit from sales products for 1000 rubles |
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Total profit per 1000 rubles of revenue |
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Total return on permanent capital |
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Net return on permanent capital |
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Table 7 data allow us to draw the following conclusions. In general, for the analyzed enterprise, there is an improvement in the efficiency of the use of its property. From each ruble of the value of the property, the enterprise in 1996 had the following results: balance sheet profit of 12.3 and net profit of 10.0. This suggests that for 1 ruble of the value of the property, OAO kms received 12 kopecks of balance sheet profit and 10 kopecks of net profit. Accordingly, for 1997 these figures are 10.2 and 8.4 - this indicates a deterioration in the profitability of the enterprise. The best indicators were obtained in 1998 - 16 kopecks of balance and 11 kopecks of net profit per 1 ruble of property value. An analysis of the return on equity allows us to draw similar conclusions, the most profitable year was 1998 - 20.8 and 14.2, respectively, i.е. 20.8 kopecks of book profit and 14.2 kopecks of net profit were received from each ruble of equity capital. Less profitable 1996, whose figures are 15.0 and 12.5, respectively. And the worst figures were obtained in 1997 - 13 kopecks of book profit and 11 kopecks of net profit per 1 ruble of equity capital.
In Russian practice, indicators of profitability of production assets are of great importance, because reflect the share of profit for each ruble of production assets. For OAO ISS, these values are 39 and 27 for 1998, 25 and 28 for 1997, and 23 and 18.8 for 1996.
The profitability of non-current assets reflects the efficiency of the use of fixed assets and other non-current assets, shows the amount of profit per unit cost of funds. In our case, these figures are 23.4 gross profit and 16 net profit for 1998, 13.5 and 11, respectively, for 1997, and 16 13.3 for 1996.
Return on sales, showing how efficiently and profitably the company conducts its activities, in 1996, these values are equal to 10.4, 13.3 and 12.8, respectively, i.е. 10.4 kopecks of net profit per ruble of proceeds, 13.3 kopecks - profit from the sale of products for each ruble of proceeds and 12.8 kopecks of gross profit per 1 ruble of proceeds. For 1997, the net profit per ruble of proceeds is 7.1, the profit from the sale of products per 1 ruble of proceeds is 9.4, and the total profit per 1 ruble of proceeds is 8.7. From the analysis of 1996 and 1997. it can be seen that there was a decrease in the profitability of sales - this indicates a decrease in prices at constant production costs or an increase in production costs at constant prices, i.e. a decrease in demand for products. The indicators for 1998 have changed significantly - these figures are equal to 8.6 net profit, 13.7 profit from the sale of products and 12.6 total profit per 1 ruble of revenue. Such a change in indicators is a consequence of an increase in prices at constant costs for the production and sale of goods or a decrease in costs at constant prices. Considering economic situation in the country, as well as the prosperity of this enterprise, both of these reasons are justified. Because there are no short-term financial investments in the balance sheet of jsc mks, then the indicator of profitability of financial investments is not calculated.
Assessment of business activity.
relative financial indicators can be expressed both as ratios and as percentages. Indicators of business activity are more clearly presented in coefficients.
Return on capital:
Revenues from sales
Return on capital =___________________________ (15)
Property value
2) Return on assets:
Return of the main sales proceeds
production means =__________________________________ (16)
and intangible assets Average cost of fixed assets
and intangible assets
Working capital turnover:
working capital =_____________________________________ (17)
Average value of current assets
Inventory turnover:
Cost of goods sold
Inventory Turnover =__________________________________ (18)
Average inventory value
Accounts receivable turnover:
accounts receivable = ______________________________ (19)
average value
accounts receivable
The accounts receivable turnover ratio shows the expansion or decrease in commercial credit provided by the enterprise. If the ratio is calculated based on sales revenue generated as invoices are paid, an increase in this indicator means a decrease in sales on credit. A decrease in this case indicates an increase in the amount of credit provided.
6) Average period of turnover of receivables:
Average turnaround time 365
accounts receivable = ____________________________________________ (20)
debts Accounts receivable turnover ratio
debt
The average turnover period of receivables characterizes average term repayment of receivables.
7) Turnover of banking assets:
Turnover revenue from sales
bank assets=_______________________________________ (21)
Average free cash
8) Turnover of own capital:
Turnover revenue from sales
equity =__________________________ (22)
Own funds
The equity turnover ratio shows the rate of turnover of equity, which for joint-stock companies means the activity of funds at risk to shareholders. The sharp increase in this indicator reflects the increase in the level of sales, which should be largely secured by loans and, therefore, reduce the share of owners in the total capital of the enterprise. Significant decrease - reflects the tendency to inactivity of part of own funds.
9) Mobile assets turnover ratio:
turnover = _______________________________________ (23)
Mobile Funds Average for the period + Average for the period
stocks and costs the amount of cash
funds and other assets
The turnover ratio of mobile assets shows the turnover rate of all mobile (both tangible and intangible) assets of the enterprise. The growth of this indicator is characterized positively.
10) Accounts payable turnover ratio:
Product sales revenue ratio
turnover = ______________________________________________ (24)
creditor
indebtedness Average accounts payable for the period
The accounts payable turnover ratio shows the expansion or decline of a commercial loan provided to an enterprise. The growth of this indicator means an increase in the speed of payment of the company's debts, a decrease - an increase in purchases on credit.
11) Average term of accounts payable turnover:
Average turnaround time 365
accounts payable = _____________________________ (25)
Turnover ratio
accounts payable
The average turnover period of accounts payable reflects the average period of repayment of the company's debts (excluding liabilities to banks and other loans).
Estimated indicators of business activity are presented in table 8.
Table 8
Business Activity Indicators
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Name of indicator |
Indicator value |
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return on capital |
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return on assets |
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Working capital turnover |
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inventory turnover |
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Accounts receivable turnover |
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Average turnover period of receivables |
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Turnover of banking assets |
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Equity turnover |
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Mobile asset turnover ratio |
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Accounts payable turnover ratio |
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Average turnover period of accounts payable |
As can be seen from table 8., the coefficients of return on capital for jsc ms are 0.965 for 1996, 1.173 for 1997. and 1.279 for 1998, i.e. 965 rubles per 1,000 rubles of property value in 1996; similarly, 1,173 rubles and 1,279 rubles per 1,000 rubles of property value in 1997 and 1998, respectively.
The return on assets ratio shows how many rubles of proceeds from sales fall on 1000 rubles of fixed assets of the enterprise. In this case, these values are 1.282 1.547 and 1.870 for 1996.1997 and 1998. accordingly, every year this figure increases, which indicates the effective use of available resources by the enterprise.
The turnover of working capital for this enterprise over the past 3 years amounted to 4.58 5.01 and 4.35 turnovers per year, thus the turnover period for 1996 was 79.7 days, for 1997 - 72.8 days and for 1998 - 83.9 days, at the same time, for most civilized countries, the standard for the turnover of working capital is 3 turnovers, i.e. approximately 122 days. Thus, when compared with developed countries, the turnover is very high. An increase in the inventory turnover ratio is also observed - it is equal to 5.1 7.3 and 9.1 turnovers, i.e. the turnover is 71.9 days 49.9 days and 40.1 days respectively. This positively characterizes the marketing activities of the enterprise, and also indicates an increase in demand for finished products.
The turnover of receivables for OAO kms for 1996 is 30.04 for 1997 -15.97 for 1998 -11.43. A decrease in this indicator may indicate an increase in the volume of credit provided. The average turnover period of receivables, in this case, is 12.2 22.9 31.9, respectively, for 1996, 1997, 1998. this trend of increasing the indicator can be given a negative assessment, because. the average period of turnover of receivables characterizes the average maturity of receivables.
The turnover of bank assets is equal to the following values
93.4 - for 1996, 88.9 - for 1997. and 56.3 for 1998. the increase in the company's cash has affected the decrease in turnover.
The turnover of equity capital is 1.25 1.49 and 1.75 turnovers, respectively, for each analyzed year. This indicator shows how many rubles of revenue fall on 1000 rubles of own funds. Therefore, for 1996 - 1246 rubles. revenue falls on 1000 rubles. own funds and the turnover lasts 304 days, for 1997 -1496 rubles. for 1000 rubles. own funds and turnover rate of 244 days and for 1998 the turnover of own funds lasts 208 days and 1748 rubles. sales revenue falls on 1000 rubles. own funds. The growth of this indicator, as in our case, reflects a trend towards greater employment in the production of the enterprise's own funds.
The turnover ratio of mobile means shows the turnover rate of all mobile, both tangible and intangible assets of the enterprise. For this enterprise, it is equal to the turnover ratio of working capital.
The accounts payable turnover ratio is 7.64 10.08 and 12.98, respectively, for the three analyzed periods. The growth of this indicator, as well as for Jsc ISS, means an increase in the speed of payment of the company's debts.
The average term of the accounts payable turnover reflects the average term of the company's debts. for this case, these indicators are equal to 47.77 36.21 and 28.12 or 7.6 10.1 and 12.9 days, respectively, for 1996, 1997, 1998.
assessment of market stability.
Financial stability ratios - characterize the degree of protection of the interests of investors and creditors.
1) One of the most important characteristics of the stability of the financial condition of the enterprise, its independence from borrowed sources of funds is the coefficient of autonomy, equal to the share of sources of funds in the total balance sheet:
Own funds
Autonomy coefficient =__________________________________ (26)
Property value
A sufficiently high level of autonomy coefficient in the US and European countries is considered to be a value equal to 0.5 - 0.6. In this case, the risk of creditors is minimized: by selling half of the property formed at the expense of its own funds, the company can pay off its debt obligations, even if the second half, in which the borrowed funds are invested, is depreciated for some reason. In Japan, this indicator can be reduced to 0.2, since there is a very strict observance of the contractual obligation and attaches great importance to the reputation of the company.
The growth of the autonomy coefficient indicates an increase in the financial independence of the enterprise, reducing the risk of financial difficulties in future periods. From the point of view of creditors, this trend increases the security of the enterprise's obligations.
2) The indicator, the reciprocal of the autonomy coefficient, is the share of borrowed funds in the value of property:
Amount owed
Share of borrowed funds = ___________________________ (27)
Property value
Share of borrowed funds = 1- Coefficient of autonomy
3) The coefficient of autonomy complements the ratio of borrowed and own funds, equal to the ratio of the value of the enterprise's obligations to the value of its own funds, or it can be calculated using a different formula:
Ratio factor 1
borrowed and own funds = ______________________ - 1 (28)
Autonomy coefficient
The higher the value of the indicator, the higher the risk of shareholders, since in case of default on payments, the possibility of bankruptcy increases. 1 is taken as the critical value of the indicator. The excess of the amount of debt over the amount of own funds indicates that financial stability enterprise is questionable.
- 4) While maintaining the minimum financial stability of the enterprise, the ratio of borrowed and own funds should be limited from above by the value of the ratio of the cost of the enterprise's mobile funds to the cost of its immobilized funds. This indicator is called the ratio of mobile and immobilized funds and is calculated by dividing current assets (section 2 assets) by immobilized assets (section 1 asset).
- 5) A very significant characteristic of the stability of the financial condition is the coefficient of maneuverability, equal to the ratio of the company's own working capital to the total value of sources of own funds:
Agility coefficient=_______________________________ (29)
Own funds
It shows what part of the enterprise's own funds is in a mobile form, allowing relatively free maneuvering of these funds. High values the maneuverability coefficient positively characterizes the financial condition, however, there are no normal values of the indicator that are well-established in practice. sometimes in the literature, 0.5 is recommended as the optimal value of the coefficient. The calculation of own working capital occurs by deducting the amount of fixed assets from the company's own funds, the remaining value is the company's own working capital.
6) In accordance with the determining role played for the analysis of financial stability by the absolute indicators of the security of the enterprise with funds from the sources of formation of reserves and costs, one of the main relative indicators of the stability of the financial condition is the ratio of own working capital, equal to the ratio of the value of own working capital to the value of stocks and enterprise costs:
Own working capital
Security ratio=______________________________ (30)
own working capital Cost of inventories and costs
means
The normal limit of this indicator is:
The coefficient of provision with own working capital is 0.6 - 0.8.
7) An important characteristic of the structure of an enterprise's assets is given by the coefficient of industrial property, equal to the ratio of the sum of the values (taken on the balance sheet) of fixed assets, capital investments, equipment, inventories and work in progress to the balance sheet total.
Based on the data of economic practice, the following limitation of the indicator is considered normal:
Industrial property ratio 0.5 or 50%
In the event of a decrease in the indicator below the critical limit, it is advisable to attract long-term borrowed funds to increase the production property, if the financial results in the reporting period do not allow to significantly replenish the sources of own funds.
8) To characterize the structure of the sources of funds of the enterprise, along with the coefficients of autonomy, the ratio of borrowed and own funds, flexibility, one should also use private indicators that reflect various trends in the change in the structure of individual groups of sources.
The short-term debt ratio expresses the share
Ratio of short-term liabilities loans
short-term debt = _____________________ (31)
total debt
9) The ratio of accounts payable and other liabilities expresses the share of accounts payable and other liabilities in the total amount of the company's liabilities:
Accounts payable and other liabilities ratio = 1 - Short-term debt ratio
In our case, it is equal to: on 07/01/96 - 0.48 and at the beginning of the year - 0.423.
10) Data on the debt of the enterprise must be compared with the debts of debtors, the share of which in the value of property is calculated by the formula:
Accounts receivable
Accounts receivable ratio=___________________ (32)
Property value
11) The financial stability of the enterprise also reflects the share of own and long-term borrowed funds (for a period of more than a year) in the value of property:
Share of own funds Long-term borrowed funds
Own =_________________________________________ (33)
and long-term
borrowed funds Property value
Estimated indicators for assessing market stability are shown in Table 9.
Table 9
Indicators for assessing market stability.
|
Name indicator |
Standard value of the indicator |
|||||
|
Coefficient autonomy |
not lower than 0.5 - 0.6 |
|||||
|
Specific gravity Borrowed money |
not higher than 0.5 |
|||||
|
Coefficient Debt to Equity Ratio |
||||||
|
Coefficient Ratios of mobile and immobilized means |
||||||
|
Coefficient maneuverability |
||||||
|
Coefficient security own funds |
||||||
|
Industrial property ratio |
More than 0.5 |
|||||
|
Share and long-term borrowings |
||||||
|
Short-term debt ratio |
||||||
|
Accounts payable ratio |
||||||
|
Accounts receivable ratio |
From the data in Table 9, the coefficient of autonomy for JSC ISS as of January 1, 1996 was 0.81, as of January 1, 1997 - 0.84, as of January 1, 1998 - 0.81, and at the end of the analyzed period - 0, 82, which indicates a fairly high independence of the firm from external financial sources.
The share of borrowed funds at the beginning of 1996 was 0.19, but by the end of the year it decreased by 0.03, but in the next 1997 it was less prosperous and this indicator rose to the previous level - 0.19, but by the end of 1998 it amounted to 0.18, which indicates a positive trend in the structure of the balance sheet. The ratio of borrowed and own funds for this enterprise as of January 1, 1996 amounted to 0.23, as of January 1, 1997 this indicator decreased to 0.19, and as of January 1, 1998 and January 1, 1999 it is equal to 0.23, which, as already mentioned, indicates a fairly high independence from external sources of financing. In our case, the ratio of mobile and immobilized funds as of January 1, 1999 was 0.45, and if we compare it with the previous indicators, we can see that the ratio of borrowed and own funds is in the range from 0 to 0.45, which means about a fairly stable independent state of the firm. On January 1, 1998, this coefficient was 0.33, on January 1, 1997 - 0.28, and on January 1, 1996 - 0.27.
The coefficient of maneuverability shows what part of the company's own funds is in a mobile form, which allows you to freely maneuver these funds. The optimal value of the coefficient is recommended 0.5. In our case, the indicators did not reach optimal level and amounted to -0.03 on 1.01.96; on 01.01.97. - 0.03; on 01.01.98 -0.04 and on 01.01.99. -0.09, however, the trend of increasing this coefficient can be assessed positively.
The coefficient of provision with own working capital has limitations of 0.6 - 0.8. For JSC ISS these figures were 0.13 - as of 01.01.96, 0.13 as of 01.01.97. 0.23 as of 01.01.98 and 0.54 - as of 01.01.99. this is much less than the normative coefficients, which indicates the insufficient provision of the enterprise with the means of sources of formation of reserves and costs. However, there is a favorable trend towards its increase, especially in 1998 this indicator more than doubled.
An important characteristic of the structure of the company's funds gives the coefficient of industrial property. The normative value is 0.5 or 50. A high property coefficient was obtained for the analyzed period 0.95 - on 01/01/96 0.94 - on 01/01/97 0.87 - on 01/01/98 and 0.83 - as of 01.01.99, i.e. the value of this indicator is normal and since the beginning of the year there has been a downward trend.
The coefficient of short-term debt, in this case, these are bank loans, amounted to 0.32 on 01/01/96; up to 0.46. In 1998, a downward trend appeared, and as of January 1, 1999, it amounted to 0.42.
The accounts payable ratio for this enterprise was 0.68 at the beginning of 1996, and 0.78 at the end of the year. During 1997, this indicator decreased to 0.54, and by the end of 1998 it increased by 0.004 and amounted to 0 .58.
The accounts receivable ratio at the beginning of the analyzed period amounted to 0.025 and over 3 years it rapidly increased at the end of 1996 - 0.039, at the beginning of 1998 - 0.11 and at the end of 1998 - 0.13. Such an increase is negative, because funds are diverted from circulation, which threatens to reduce profits.
The share of own and long-term borrowed funds amounted to 0.81 as of 01.01.96; 0.88 as of 01.01.97; 0.85 as of 01.01.98; and 0.82 as of 01.01.99. Such high figures indicate that the financial stability of the enterprise is not in doubt.
Estimation of liquidity of the enterprise.
The general indicator of liquidity, discussed above, expresses the ability of the enterprise to carry out settlements for all types of obligations - both for the nearest and for distant ones. This indicator does not give an idea of the company's capabilities in terms of repayment of short-term liabilities. Therefore, to assess the solvency of the enterprise, three relative liquidity indicators are used, which differ in the set of liquid funds considered as covering short-term obligations. When calculating these indicators, short-term liabilities are taken as the calculation base.
1) Absolute liquidity ratio.
This ratio is equal to the ratio of the most liquid assets to the sum of the most urgent liabilities and short-term liabilities. The most liquid assets are cash and short-term securities. Short-term liabilities of the enterprise are represented by the sum of the most urgent liabilities and short-term liabilities:
short-term
ratio cash financial investment
absolute liquidity = ________________________________ (34)
Short-term liabilities
limiting theoretical value this indicator is 0.2 - 0.35.
Intermediate coverage ratio for short-term liabilities (critical liquidity ratio).
To calculate this ratio, accounts receivable and other assets are included in the composition of liquid funds in the numerators of the relative indicator:
Short term
intermediate cash financial receivables
ratio of investment funds debt
coatings =________________________________________________ (35)
Short-term liabilities
The liquidity ratio reflects the projected payment capabilities of the enterprise, subject to timely settlements with debtors. The theoretical value of the indicator is recognized as sufficient at the level of 0.7 - 0.8.
3) Current liquidity ratio or coverage ratio. It is equal to the ratio of the value of all current (mobile) assets of the enterprise to the value of short-term liabilities.
the value of the indicator should not fall below one. According to other data, a value greater than one is considered normal for it:
Short term
intermediate cash financial receivables and
ratio investment funds debt costs
coatings =_______________________________________________ (36)
Short-term liabilities
The coverage ratio characterizes the expected solvency of the enterprise for a period equal to the average duration of one turnover of all current assets.
4) Solvency indicators also include the share of reserves and costs in the amount of short-term liabilities:
Stocks and costs
Share of stocks and costs =_____________________________ (37)
in current liabilities Current liabilities
Calculated indicators for assessing the liquidity of the balance sheet are presented in table 10.
Table 10
Balance liquidity assessment indicators
The absolute liquidity ratio shows what part of the short-term debt the company can repay in the near future. The limiting theoretical value of this indicator is 0.2 - 0.35. This indicator is especially important for investors. The absolute liquidity ratio characterizes the solvency of the enterprise on the date of the balance sheet.
For jsc mks this indicator is equal to 0.04 - on 01/01/96, which indicates the low current liquidity of the enterprise, on 01/01/97 - 0.08 on 01/01/98 - 0.07, and at the end of the analyzed period this indicator amounted to a much larger amount - this means that in the near future it can repay 19% of its short-term obligations.
The intermediate coverage ratio of short-term obligations characterizes the expected solvency of the enterprise for a period equal to the average duration of one turnover of receivables. This indicator is of particular interest to shareholders. The standard value of the indicator is 0.6-0.8.
For this enterprise on 01/01/96 it is equal to 0.17 or 17%, on 01/01/97 - 0.35 or 35, which confirms the data of the previous indicator about the low current solvency of the enterprise. at the end of 1997 and the beginning of 1998 this indicator was equal to 0.64, which is within the normative value, which indicates the normal current solvency of the enterprise. On 01.01.99 the intermediate coverage ratio for short-term obligations is 0.89, which exceeds the normative values and characterizes the high solvency of the enterprise.
The coverage ratio shows the payment capabilities of the enterprise, assessed on the condition of not only timely settlements with debtors and favorable implementation finished products, but also sale in case of need of other elements of material current assets. Liquid funds should be sufficient to meet short-term obligations, i.e. the value of the indicator should not fall below one.
For OAO ms, this figure is 1.09 1.36 1.32, respectively, at the beginning of 1996, 1997, 1998, 1999. - all indicators are greater than one, and the growth of this coefficient characterizes a positive trend in increasing the short-term solvency of the enterprise.
The share of stocks and costs in short-term liabilities as of 01.01.96. equal to 0.91 as of 01.01.97. - 1.03 as of 01.01.98 - 0.67 and on 01.01.99. - 0.71, the values of the indicator indicate that the value of reserves and costs, with the exception of data as of 01.01.97. does not exceed the value of short-term liabilities, and the upward trend of this ratio is assessed positively.
Thus, for the analyzed period of 1996 - 1998, Stavropol Dairy Plant JSC has a dynamic development model.
The organizational structure of OJSC MKS ensures a fairly stable financial condition of the enterprise. This confirms the analysis of the financial results of the enterprise.
In the course of the analysis, an increase in profitability indicators is observed. Highest value profitability coefficients of the enterprise obtained for 1998 - the total return on capital is 16%, net profitability - 11%, which indicates the effective use of the enterprise's property.
The analysis of the coefficients of business activity also allows us to conclude that the company's activities have improved, since there is an increase in the coefficients of capital productivity, capital productivity, and a high turnover of working capital. The indicator of receivables turnover deserves a negative assessment, as the average repayment period of receivables has increased.
An analysis of market stability indicators indicates a fairly high independence of the company from external sources of the enterprise, and over the analyzed period, there is a significant improvement in all indicators of market stability, with the exception of the receivables ratio. The receivables ratio has increased and this change is negative, as funds are diverted from turnover.
The indicators for assessing the liquidity of the balance sheet, if they do not correspond, then are extremely close to normative values coefficients, which characterizes the normal solvency of the enterprise.
- Financial analysis is carried out by companies not only to assess the current financial condition of the company, it also allows you to predict its further development. At the same time, analysts need to carefully consider the list of indicators that will be used to strategic planning.
Analysis of the level of sustainable growth of the company is a dynamic analytical framework that combines financial analysis with strategic management to explain the critical relationships between strategic planning variables and financial variables, and to test the alignment of corporate growth objectives with financial policy. This analysis allows you to determine the presence of the company's existing opportunities for financial growth, to establish how financial policy companies will influence the future and analyze the strengths and weak sides competitive strategies companies.
In this article, we will consider the components of the analysis of financial indicators.
Any measures for the implementation of strategic programs have their cost. A necessary part of the planning and implementation of the strategy is the calculation of the necessary and sufficient financial resources that the company must invest.
Information for financial analysis
The most complete definition of the concept of financial analysis is given in the “Financial and Credit Encyclopedic Dictionary” (edited by A.G. Gryaznova, M.: “Finance and Statistics”, 2004): “ Financial analysis - a set of methods for determining the property and financial position of an economic entity in the past period, as well as its capabilities in the short and long term". The purpose of financial analysis is to determine the most effective ways to achieve the profitability of the company, the main tasks are to analyze the profitability and assess the risks of the enterprise.
Analysis of financial indicators and ratios allows the manager to understand the competitive position of the company at the current time. Published reports and company accounts contain a lot of numbers, the ability to read this information allows analysts to know how efficiently and effectively their company and competing companies are working.
The ratios allow you to see the relationship between sales profit and expenses, between the main assets and liabilities. There are many types of ratios, and they are usually used to analyze the five main aspects of a company's performance: liquidity, equity ratio, asset turnover, profitability, and market value.
Rice. 1. The structure of the company's financial indicators
The analysis of financial ratios and indicators is an excellent tool that provides an idea of the financial condition of the company and competitive advantages and prospects for its development.
1. Performance analysis. The ratios allow you to analyze the change in the performance of the company in terms of net profit, use of capital and control the level of costs. Financial ratios allow you to analyze the financial liquidity and stability of the enterprise through effective use systems of assets and liabilities.
2. Evaluation of market business trends. By analyzing the dynamics of financial indicators and ratios over a period of several years, it is possible to study the effectiveness of trends in the context of the existing business strategy.
3. Analysis of alternative business strategies. By changing the indicators of the coefficients in the business plan, it is possible to analyze alternative options for the development of the company.
4. Monitoring the progress of the company. Having chosen the optimal business strategy, the company's managers, continuing to study and analyze the main current ratios, can see a deviation from the planned indicators of the development strategy being implemented.
Ratio analysis is the art of relating two or more indicators financial activities companies. Analysts can see a more complete picture of the performance results in dynamics over several years, and additionally by comparing the company's performance with industry averages.
It is worth noting that the system of financial indicators is not a crystal ball in which you can see everything that was and will be. It's just a convenient way to generalize a large number of financial data and compare performance various companies. By themselves, financial ratios help the company's management focus on the strengths and weaknesses of the company's activities, correctly formulate questions that these ratios can rarely answer. It is important to understand that financial analysis does not end with the calculation of financial indicators and ratios, it only begins when the analyst has completed their calculation.
The real utility of the calculated coefficients is determined by the tasks set. First of all, the coefficients make it possible to see changes in financial position or results of production activities, help to determine the trends and structure of the planned changes; which helps management to see the threats and opportunities inherent in this particular enterprise.
The company's financial reports are a source of information about the company not only for analysts, but also for the company's management and a wide range of stakeholders. It is important for users of information on financial ratios to know the main characteristics of the main financial statements and the concepts of indicator analysis for effective ratio analysis. However, when conducting financial analysis, it is important to understand that the main thing is not the calculation of indicators, but the ability to interpret the results.
When analyzing financial performance, it should always be borne in mind that the assessment of performance is based on data from past periods, and on this basis, extrapolation of the future development of the company may turn out to be incorrect. Financial analysis should be directed to the future.
Concepts behind financial performance analysis
Financial analysis is used in the construction of budgets, to identify the causes of deviations of actual indicators from planned and correction of plans, as well as in the calculation of individual projects. The main tools used are horizontal (dynamics of indicators) and vertical (structural analysis of items) analysis of accounting documents of management accounting, as well as calculation of coefficients. Such an analysis is carried out for all major budgets: BDDS, BDR, balance sheet, sales, purchases, inventory budgets.
The main features of financial analysis are the following:
1. The vast majority of financial indicators are in the nature of relative values, which makes it possible to compare enterprises of various scales of activity.
2. When conducting financial analysis, it is important to apply a comparison factor:
- compare the performance of the company in a trend for different periods of time;
- compare the performance of this company with the average performance of the industry or with similar performance of enterprises within the industry.
3. For financial analysis, it is important to have a complete financial description of the company for selected time periods (usually years). If the analyst has data for only one period, then there should be data on the balance sheet of the enterprise at the beginning and end of the period, as well as a profit statement for the period in question. It is important to remember that the number of balances for analysis should be one more than the number of profit reports.
Accounting management is important element analysis of financial ratios and indicators. Basic Equation accounting, expressing the interdependence of assets, liabilities and property rights, is called the balance sheet:
ASSETS = LIABILITIES + EQUITY
Assets usually classified into three categories:
1. Current assets include cash and other assets that must be converted to cash within one year (for example, publicly traded securities; receivables; notes receivable; working capital and advances).
2. Land property, fixed assets and equipment (fixed capital) include assets that are characterized by a relatively long service life. These funds are usually not intended for resale and are used in the production or sale of other goods and services.
3. Long-term assets include the company's investments in securities, such as stocks and bonds, as well as intangible assets, including: patents, expenses on monopoly rights and privileges, copyrights.
Liabilities usually divided into two groups:
1. Short-term liabilities include amounts of accounts payable that should be paid within one year; for example, accrued liabilities and bills payable.
2. Long-term obligations are the rights of creditors, which do not have to be realized within one year. This category includes obligations under a bonded loan, long-term bank loans, and mortgages.
Equity These are the rights of the owners of the enterprise. From an accounting point of view, this is the balance of the amount after deducting liabilities from assets. This balance is increased by any profit and reduced by any losses of the company.
Measures commonly considered by analysts include the income statement, balance sheet, measures of changes in financial position, and measures of changes in equity.
A company's income statement, also referred to as a profit and loss statement or income statement, summarizes the results of a company's options activity for a specific reporting period. Net income is calculated using the periodic accounting method used to calculate profits and costs. It is usually considered the most important financial indicator. The report shows whether the percentage of earnings on the company's shares for the reporting period decreased or increased after the distribution of dividends or after the conclusion of other transactions with the owners. The income statement helps owners assess the amount, timing and uncertainty of future cash flows.
The balance sheet and the income statement are the main sources of indicators used by companies. A balance sheet is a statement showing what a company owns (assets) and owes (liabilities and equity) as of a specific date. Some analysts refer to the balance sheet as a "picture of a company's financial health" at a particular point in time.
System of financial indicators and ratios
The total number of financial ratios that can be used to analyze the company's activities is about two hundred. Usually, only a small number of basic coefficients and indicators are used and, accordingly, the main conclusions that can be drawn from them. For the purpose of a more streamlined consideration and analysis, financial indicators are usually divided into groups, most often into groups that reflect the interests of certain stakeholders (stakeholders). The main groups of stakeholders include: owners, management of the enterprise, creditors. At the same time, it is important to understand that the division is conditional and indicators for each group can be used by different stakeholders.
As an option, it is possible to streamline and analyze financial indicators by groups that characterize the main properties of the company's activities: liquidity and solvency; the effectiveness of the company's management; profitability (profitability) of activity.
The division of financial indicators into groups characterizing the features of the enterprise's activities is shown in the following diagram.
Rice. 2. The structure of the company's financial indicators
Let's consider in more detail the groups of financial indicators.
Operating costs indicators:
Analysis of operating costs allows you to consider the relative dynamics of the shares various kinds costs in the structure of the total costs of the enterprise and is an addition to the operational analysis. These indicators allow you to find out the reason for the change in the profitability of the company.
Indicators effective management assets:
These indicators make it possible to determine how effectively the company's management manages the assets entrusted to it by the company's owners. The balance can be used to judge the nature of the assets used by the company. At the same time, it is important to remember that these indicators are very approximate, because. In the balance sheets of most companies, a variety of assets acquired at different times are indicated at historical cost. Consequently, the book value of such assets often has nothing to do with their market value, this condition is further exacerbated by inflation and an increase in the value of such assets.
Another distortion of the current position may be related to the diversification of the company's activities, when specific types activities require the attraction of a certain amount of assets to obtain a relatively equal amount of profit. Therefore, when analyzing, it is desirable to strive for the separation of financial indicators for certain types of company activities or products.
Liquidity indicators:
These indicators allow you to assess the degree of solvency of the company on short-term debts. The essence of these indicators is to compare the value of the current debt of the company and its current assets, which will ensure the repayment of these debts.
Indicators of profitability (profitability):
They allow to evaluate the effectiveness of the use by the company's management of its assets. The efficiency of work is determined by the ratio of net profit, determined by different ways, with the amount of assets used to generate that profit. This group of indicators is formed depending on the focus of the study of effectiveness. Following the goals of the analysis, the components of the indicator are formed: the amount of profit (net, operating, profit before tax) and the amount of the asset or capital that form this profit.
Capital structure indicators:
Using these indicators, it is possible to analyze the degree of risk of bankruptcy of the company in connection with the use of borrowed financial resources. With an increase in the share of borrowed capital, the risk of bankruptcy increases, because. the company's liabilities increase. This group of coefficients is primarily of interest to existing and potential creditors of the company. The management and owners evaluate the company as a continuously operating business entity, creditors have a twofold approach. On the one hand, creditors are interested in financing the activities of a successfully operating company, the development of which will meet expectations; on the other hand, lenders estimate how strong the claim for repayment of the debt will be if the company experiences significant difficulties in repaying a long-term loan.
A separate group is formed by financial indicators that characterize the company's ability to service debt using funds received from current operations.
The positive or negative impact of financial leverage increases in proportion to the amount of borrowed capital used by the company. The risk of the creditor increases together with the growth of the risk of the owners.
Debt service indicators:
Financial analysis is based on balance sheet data, which is an accounting form that reflects the financial condition of the company at a certain point in time. Whichever coefficient characterizing the capital structure is considered, the analysis of the share of borrowed capital, in fact, remains statistical and does not take into account the dynamics operating activities company and changes in its economic value. Therefore, debt service indicators do not give a complete picture of the company's solvency, but only show the company's ability to pay interest and the amount of the principal debt within the agreed time frame.
Market indicators:
These indicators are among the most interesting for company owners and potential investors. In a joint-stock company, the owner - the shareholder - is interested in the profitability of the company. This refers to the profit received due to the efforts of the company's management, on the funds invested by the owners. Owners are interested in the impact of the company's performance on the market value of their shares, especially those freely traded on the market. They are interested in the distribution of their profits: how much of it is reinvested in the company, and how much is paid to them as dividends.
The main analytical goal of analyzing financial ratios and indicators is to acquire the skills to make management decisions and understanding the effectiveness of its work.