Absolute liquidity balance and the conditions of its existence.

Any commercial firm wants to continue its activities as long as possible. This means that the financial position of the enterprise should be to some extent stable. And to conclude on the financial situation, it is necessary to conduct some analytical procedures. One of the most important among them, but it is very simple, is to assess the liquidity of the balance sheet.

The Goal of the enterprise – absolute liquidity. To determine whether the company's balance with this requirement, by balance sheet liquidity. This is the most common method of analysis in Russia and in other countries. Its meaning lies in the comparison of assets, grouped by liquidity, with liabilities grouped by maturity. Each financial Manager will be able to form groups based on research objectives or the characteristics of the company, but we consider the most traditional one, involving the division of assets and liabilities into 4 groups.

Absolute liquidity is the criterion, allowing to relate the asset to the first group. Cash have absolute liquidity, and these are equal short-term financial investments. It is desirable to identify only those KFV, doubt which no liquidity.

The Second group of assets marketable form. To them traditionally include short-term receivables, assuming that it is fast enough transformirovalsya in the form of money. In addition, this includes other current assets.

Less liquid assets is called slowly implemented, they form the third group. Obviously, here you want to list the stocks of the enterprise, as well as long-term financial investments (except investments in capital of other organizations).

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And finally, the least liquid assets are assets other non-current assets and long term receivables.

Similarly, we group the liabilities of the enterprise by ranking the groups in order of decreasing urgency. Thus, the first group will contain the most urgent liabilities which consist of accounts payable and other short-term debt.

The Second group consists of all other short-term liabilities that have not been classified in the first group.

Long-term obligations in full form the third group of liabilities that is here you can just write the result 4 section of the balance sheet.

The fourth group considered the so-called permanent liabilities, i.e. those that do not need to return. They are presented in the third section of the balance sheet and consist of capital and reserves. As you can see, to group liabilities is very simple, almost not even necessary to recalculate the results of the balance sheet.

To determine the absolute liquidity of balance of the enterprise or not, you must pairwise compare the groups. The value of the assets of each group subtract the value of the relevant group of liabilities. The conditions of absolute liquidity balance – the presence of the payment of the surplus (assets more than liabilities) by the first three pairs of payment groups and negative (liabilities more than assets) at the latest. Compliance with the latter condition is especially important due to the fact that it shows that the company are present working capital. This, in turn, is a necessary condition for financial stability.

It Should be noted that the absolute liquidity can be achieved is difficult, but strive for it is definitely worth it. The fact that the lack of more liquid assets are less liquid kompensiruet only arithmetically, but in practice use them for the repayment of term commitments will be impossible.