Evaluation of financial and economic situation of enterprise

The financial and economic situation – is one of the most important characteristics of the enterprise. It depends on the results of industrial, commercial and financial activity.

 

Financial condition of enterprise can be evaluated using groups of indicators:

- Indicators of liquidity and solvency;

- Profitability;

- Performance of assets;

- Financial strength and stability of enterprise.

 

Enterprise liquidity – is ability to implement assets and get money to pay its obligations quickly.

 

Indicators of liquidity describe the ability of companies to fulfill their current (short term) liabilities by current assets.

 

Solvency is an ability of enterprise to meet obligations payment timely and fully.

 

Analysis of finance and economic state of enterprises is developed to plan a strategy of enterprise for the immediate period.

Analysis is handled by calculating the following financial indicators: liquidity, turnover, financing and effectiveness.

 

Two ratios of liquidity are usually calculated:

1) General liquidity (GL) is calculated as a ratio of current assets (CA) and current liabilities (CL):

GL =

2) Current liquidity (CL) is calculated as ratio of cash (C) and accounts receivable (AR), and accounts payable (AP).

CL =

Turnover ratios are the following:

1. Ratio of inventory turnover

Кобз = → max, где

ЧВ – чистая выручка; З – запасы;

2. Ratio of accounts receivable turnover

КобДЗ = → max, где

ЧВ – чистая выручка; ДЗ – сумма дебиторской задолженности;

3. Ratio of accounts payable turnover

КобКЗ = → max, где

ЧВ – чистая выручка; КЗ – сумма кредиторской задолженности;

4. Ratio of cash turnover

КобДС = → max, где

ЧВ – чистая выручка; Д – денежные средства на счетах, наличные в кассе;

5. Ratio of assets turnover

КобА = → max, где

ЧВ – чистая выручка; А – сумма всех активов предприятия;

Effectiveness ratios include all ratios of profitability.

Ratios of financing include:

1) Financing ratio, which is calculated as ratio of own and involved equity:

Кфин = , где

СК – сумма собственного капитала; ЗК – сумма заёмного капитала;

2) Ratio of assets and involved capital. Shows, which part of assets is financed by involved capital.

Кз.а = , где

А – сумма всех активов предприятия; ЗК – сумма заёмного капитала.

 

The efficiency of the enterprise is a comprehensive assessment of the final results of use of fixed and current assets, labor and financial resources and intangible assets over time.

 

The general methodology for determination of effectiveness could be formalized as a relation:

F = E / P,

where F - efficiency;

E - effect (results);

P - costs (resources).

Approaches to determine the effectiveness of the company are the following:

1) resource when the economic result is compared with the economic assessment of production resources, which are used during production;

2) spending, while economic results are compared with current expenditures that are directly related to its achievement;

3) resource-expensive, as is evident from the title, is a certain compromise between two earlier. Resources and costs are taken into account. However, this approach should be very balanced and careful, because there is a problem of double billing, and the significant impact of production industry features.

Each of these approaches has its advantages and disadvantages, and appropriateness of their use is determined by the particular circumstances and set objectives.

 

Main factors of production efficiency increase are its technical, management improvement, improvement of production and labor, evolution of production, improve the quality of natural resources and others.