Solvency of an enterprise is its ability to meet its obligations. Due to the fact that it is advisable for each company to conduct its activities with a positive effect, it is always necessary to evaluate its capabilities. For this reason, the analysis of the solvency of the enterprise occupies a key place in assessing the effectiveness of the organization. Not a single consulting firm, not a single rating agency, not a single inspection body will forget about this indicator, which means that each organization, in order to avoid bankruptcy and maintain a competitive position at a high level, must independently conduct a solvency and liquidity analysis of the enterprise.
There are many ways to analyze the solvency of an enterprise. Both Western and domestic organizations have developed their own standards and methods for conducting this type of assessment, as well as setting regulatory values with which you can regulate and control the activities of the organization.
For Russian reality, it is more preferable to use domestic indicators, so it’s worth moving on to how an analysis of the solvency of an enterprise can be carried out. For this, there is a formula that allows you to determine if the enterprise will lose or restore solvency in the specified period.
To calculate this formula, it is necessary to calculate the current liquidity ratios for different periods, which are the ratio of current assets (TA) to current liabilities (TP). Current assets are equal to current assets, which can be seen on the items in the balance sheet, with the exception of income from future operations. Current liabilities include short-term liabilities, that is, these are liabilities to the tax authorities, for wages, for settlements with suppliers, etc. Current liabilities involve payment of liabilities within the next period, for example, a month. The liquidity of the enterprise shows whether and how much the company is able to cover short-term liabilities at the expense of its assets in the shortest possible time without attracting additional sources. The standard value of current liquidity ratios is considered to be 2.0.
Assessment of the solvency of the enterprise can be given by calculating the solvency ratio according to the formula below:
Kpl. = (Kt. (Beginning) + Y (or B) / 12 * (Kt. (End) - Kt. (Beginning))) / 2,
where q - solvency ratio;
Kt. (Beginning), Kt. (Con.) - current liquidity ratios, calculated respectively at the beginning and end of the period;
Y = 3 - applied if it is calculated whether the company will lose solvency in the next three months;
B = 6 - applied if it is calculated whether the company will restore solvency in the next six months. In this case, the loss of solvency is applied when the current liquidity is higher or equal to two. Otherwise, the restoration of solvency is calculated.
The normative value of the solvency ratio is considered to be 1 and everything that exceeds this value. In this case, it is concluded that the company will either not lose its solvency, or will restore it in the next period. When the solvency ratio is below unity, the question arises that the company is on the path to bankruptcy and should apply the reorganization procedure in order to correct the current situation. This completes the analysis of the solvency of the enterprise.
Thus, it becomes clear that the assessment of the solvency of the enterprise is a very responsible and important event, which must be carried out regularly. The more often the situation in the organization is monitored, the faster you can identify problems and cope with the crisis in the best way.