The liquidity of the balance sheet is one of the most important criteria of stability.

Date:

2020-07-03 02:11:08

Views:

709

Rating:

1Like 0Dislike

Share:

Table of contents:

Without any doubt, any financial Manager must be able to analyze the figures contained in the financial statements of the entity for which he works. The benefit of this analysis is difficult to overestimate as it is based all the work in the financial Department.

Western economists and analysts recognize as the most meaningful form of reporting the statement of profit and loss, as not that other, as profit is the most important outcome indicator of performance. In Russia, however, primacy is given to the accounting balance-sheet, which also makes sense. Analyzing its constituent indicators, it is possible to draw a conclusion about the financial stability of the firm and on the level of its liquidity. Next will be considered what characteristics of how to assess the liquidity of the balance sheet.

Domestic And foreign practice offer various options such analysis, but the most widely preparation and study of the so-called balance of liquidity. In this method, balance sheet liquidity is determined by combining in the same number of groups of indicators liability and asset, followed by a comparison of the values obtained.

Data groups are formed in order of decreasing liquidity (for assets) or in order of decreasing urgency (for liability). Every financial Manager can choose the number of groups at their own discretion, but we consider the most traditional option, where the liquidity of the balance sheet is studied by pairwise comparison of the four “basket” of assets and liabilities.

Recommended

Staff evaluation: system and methods

Staff evaluation: system and methods

Personnel Assessment allows you to identify how competent the employees involved in the enterprise, and it is the performance of their work – the most significant factor affecting the efficiency of the company. To clarify the impact of performa...

How to start your own business: important aspects.

How to start your own business: important aspects.

Many people, tired of working for someone else, are increasingly thinking about how to start your own business. Someone wants to open a salon, someone store, and someone enough and vegetable stalls. Before you throw in the pool with his head, it is i...

business activities. its essence and basic functions

Business activities. its essence and basic functions

The Entrepreneurial activity of the citizen – is undertaken at your own risk and independent activity, which aims to systematically profit through the sale of works, goods, services, use of the property. The citizen engaged in such activities, ...

Before considering the individual groups needed little to clarify the meaning of “liquidity”. This category characterizes the ability of a property with the least possible losses and in the shortest time to take the form of money. Thus, the most liquid assets, obviously, is money. And, for example, stock liquidity is determined by demand: the more people willing to buy them, the easier you will be able to sell them at normal market price.

As has been said, the money any other liquid asset, so they are included in the first group. Also could include short-term investments, doubts about the liquidity of which is missing. The second group consists of marketable assets (other current assets and short-term receivables). Third – all stocks and long-term investments (one to exclude the amount of participation in capital of other organizations). Accordingly, all other assets forming a fourth group and are recognized slowly implemented.

In the passive also formed a number of groups. Accounts payable and value of other short-term debt included in the first group, the remaining short-term commitment – in the second, but the long term – in the third one. Liabilities that are not debt, go on the formation of the fourth group.

To determine the liquidity of the balance sheet, a comparison of the sizes of the created groups. The first three groups of assets must exceed the corresponding liabilities of the group. The ratio between the fourth group is the regulatory. If these conditions are met, the financial condition of the company is at an acceptable level. If there is a deviation, it is necessary to take measures to adjust the structure of assets and liabilities.

The implementation of the process of financial management is very important to evaluate the liquidity balance. Businesses that do not monitor these indicators, the risk of being stranded, when it is not able to pay off their debtors. 


Article in other languages:

HI: https://tostpost.com/hi/business/24611-the-liquidity-of-the-balance-sheet-is-one-of-the-most-important-criter.html

PL: https://tostpost.com/pl/biznes/43037-p-ynno-bilansu-przedsi-biorstwa---jedno-z-najwa-niejszych-kryteri-w-st.html

PT: https://tostpost.com/pt/neg-cios/42670-a-liquidez-do-balan-o-da-empresa---um-dos-principais-crit-rios-de-esta.html

ZH: https://tostpost.com/zh/business/33143-the-liquidity-of-the-balance-sheet-is-one-of-the-most-important-criter.html






Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."

Comments (0)

This article has no comment, be the first!

Add comment

Related News

Cost method of pricing. The pros and cons

Cost method of pricing. The pros and cons

In today's seemingly ancient Soviet times, the pricing was simple enough, requiring economists only knowledge of the foundations of mathematics. In the absence of competition, a measure of prices did not play the role that he play...

Internal rate of return - a key indicator of investment efficiency.

Internal rate of return - a key indicator of investment efficiency.

any decision relating to investments necessarily involves assessment of effectiveness. This is understandable, since it is necessary to determine the criteria that will allow you to choose the most profitable projects. Most often,...

Classification of costs by economic elements

Classification of costs by economic elements

Cost of goods – this is an extremely important indicator. It not only is fundamental when calculating the price of a product, but is one of the indicators of the success of the business. Unreasonably high cost of production ...

Absolute liquidity balance and the conditions of its existence.

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 con...

Intermediate liquidity ratio and other liquidity ratios of the company.

Intermediate liquidity ratio and other liquidity ratios of the company.

Many enterprises in the implementation of the activities are faced with financial problems. In order to solve them, it is necessary to conduct financial diagnosis and subsequent financial recovery. In the formulation “financ...

Rules of transportation of dangerous goods should be strictly observed

Rules of transportation of dangerous goods should be strictly observed

the Rules of carriage of dangerous goods was adopted in August 1995 by the Order of Ministry of transport of the Russian Federation   No. 73. They are a must for organizations of all forms of ownership,  including to ind...