Liquidity shows how much the enterpriseis able to timely transfer assets into cash. In other words, liquidity is the rate of sale of a company's property at market value or the ability of a commodity to turn into money.
Assets are highly liquid (short-termfinancial investments and cash), quickly realized (urgent accounts receivable), slowly realized (accounts receivable exceeding 12 months and other current assets), as well as hard-to-implement (non-negotiable). The category of assets is determined depending on the factor that shows how quickly and easily for the property you can get its full value.
The definition of liquidity of the enterprise impliesuse of such a concept as the liquidity ratio. A number of such coefficients are used in the calculation. the liquidity ratios show how quickly an enterprise is able to realize a certain portion of the property, in order to pay off short-term debt.
The liquidity ratio (current) may beis calculated as the ratio of current current assets to current liabilities. Under the current working assets should be understood as the amount of current assets, if you subtract from it long-term receivables, that is, payments for which will become an urgent need not earlier than 1 year. This liquidity ratio shows the ability of an enterprise to repay its own short-term liabilities if current assets are realized. The ratio of current liquidity must be equal to or exceed the normative value of 2.
The quick liquidity ratio determinesthe ratio of highly liquid assets to short-term liabilities assumed by the enterprise. In this case, highly liquid assets should be understood as cash on hand at the enterprise, as well as on a bank account or short-term investments of financial assets. This includes urgent receivables. This ratio should be equal to or higher than the standard value of 1. This liquidity ratio makes it clear the capabilities of the enterprise in the aspect of calculating short-term debts in the event of difficulties in selling finished products. Calculation of liquidity ratios is a primary task for understanding the situation in the enterprise.
Another liquidity ratio isabsolute coefficient. It is calculated as the ratio of cash to short-term financial investments and short-term liabilities. The norm for this coefficient is 0.2. coefficient It indicates the capabilities of the enterprise in terms of settlement of current liabilities, without the use of selling products and collecting receivables. The above factors give the possibility of a conclusion about how liquid the enterprise is. If the coefficients are characterized by indicators that are much lower than the normative ones, this indicates that the enterprise is not able to settle on time in its current obligations, which means that it is characterized by a large financial risk for creditors. If the values of the coefficients significantly exceed the normative indicators, the capital is irrationally allocated to the enterprises.
Thus, each liquidity ratioshould be calculated accordingly and comply with the normative indicators - in this case the enterprise works in a balanced manner, is able to repay its obligations to creditors and does not face bankruptcy. Otherwise, urgent measures should be taken to stabilize the situation.