What determines the ratio of own funds to borrowed funds. Borrowed funds. The ratio of own and borrowed funds. Equity capital

The financial condition of enterprises, its stability largely depend on the optimality of the structure of capital sources (the ratio of own and borrowed money) and on the optimality of the structure of the assets of the enterprise and, first of all, on the ratio of fixed and circulating assets, as well as on the balance of the assets and liabilities of the enterprise on a functional basis.

Therefore, first it is necessary to analyze the structure of the sources of the enterprise and assess the degree of financial stability and financial risk... For this purpose, the following indicators are calculated:

financial autonomy ratio (or independence) - the share of equity in its total balance sheet. The recommended value is above 0.5.

TO autonomy =

At the beginning of the reporting period = = 0.72 at the beginning of the year

At the end of the reporting period = = 0.65 at the end of the year

Since the minimum value of this coefficient is taken at the level of 0.6, it can be concluded that Spectr LLC is completely financially independent (having sold part of the property formed at its own expense, the company will be able to pay off its debentures), but the outlined downward trend indicates a slight increase in the risk of financial difficulties.

financial dependence ratio - the share of borrowed capital in the total balance sheet.

TO financial independence =

At the beginning of the reporting period = = 0.28

At the end of the reporting period = = 0.35

current debt ratio - the ratio of short-term financial liabilities to the total balance sheet;

TO tech. arrears =

At the beginning of the reporting period = = 0,18

At the end of the reporting period = = 0.26

Since by the end of the year this indicator slightly increased (by 0.08), we can say that the company is financially stable in this period of time.

long-term financial ratio regardless sti (or coefficient financial sustainability) - the ratio of equity and long-term borrowed capital to the total balance sheet currency.

At the beginning of the reporting period = = 0.82

At the end of the reporting period = = 0.74

debt coverage ratio by own cap thaw (solvency ratio) - the ratio of equity to debt.

At the beginning of the reporting period = = 2.5

At the end of the reporting period = = 1.9

The lower normal value of this coefficient is 1. We see that the share of sources own funds decreased, and the share of debt, in particular accounts payable, increased. The dynamics of this indicator is negative (the ratio decreased by 0.6 by the end of the analyzed period), this characterizes the lack of financing during the year: accounts payable to suppliers increased (by 5400 thousand rubles).

financial leverage ratio or ratio financial risk - the ratio of borrowed capital to equity.

At the beginning of the reporting period = 0.39

At the end of the reporting period = 0.53

The higher the level of the first, fourth and fifth indicators and the lower the second, third and sixth, the more stable the financial condition of the enterprise. In our example, the share of equity decreased by 7%, and the leverage increased by 14%. This indicates that the financial dependence of the company on external investors has increased significantly.

The assessment of changes that have occurred in the capital structure can be different from the perspective of investors and the enterprise. For banks and other lenders, the situation is more reliable if the share of clients' equity capital is higher. This eliminates financial risk. Enterprises, as a rule, are interested in attracting borrowed funds for two reasons:

interest on servicing borrowed capital is treated as an expense and is not included in taxable profit;

interest expenses are usually lower than the profit received from the use of borrowed funds in the company's turnover, as a result of which the return on equity capital increases

In a market economy, a large and ever-increasing share of equity capital does not at all mean an improvement in the position of an enterprise, the ability to quickly respond to a change in the business climate. On the contrary, the use of borrowed funds indicates the flexibility of the enterprise, its ability to find loans and repay them, i.e. about trust in him in the business world.

The most generalizing indicator among the above is the financial leverage ratio. All other indicators to one degree or another determine its value.

Change in the value of the financial leverage ratio (leverage) at the enterprise level depends on the share of borrowed capital in the total amount of assets, the share of fixed capital in the total amount of assets, the ratio of working capital to fixed capital, the share of own working capital in the formation of current assets, as well as on the share of own working capital in the total the amount of equity capital (equity capital flexibility ratio):

Initial data for calculating the influence of factors:

Indicators	For the beginning of the year	At the end of the year
Financial Leverage Ratio
Share of borrowed capital in assets
Share of fixed capital in total assets
Working capital accounted for per ruble of fixed capital
Share of equity capital in the formation of current assets
Equity capital flexibility ratio

We will calculate the influence of these factors by the method of chain substitution:

TO l. 0 = 0.29: 0.63: 0.58: 0.23 x 0.12 = 0.41,

TO f l conv1 = 0.35: 0.63: 0.58: 0.23 x 0.12 = 0.50,

TO l.usl2 = 0.35: 0.56: 0.58: 0.23 x 0.12 = 0.56,

TO f.l.usl3= 0.35: 0.56: 0.78: 0.23 x 0.12 = 0.42,

TO f.l.usl4 = 0.35: 0.56: 0.78: 0.21 x 0.12 = 0.46,

TO l. 1 = 0.35: 0.56: 0.78: 0.21 x 0.14 = 0.53.

The overall increase in the financial risk ratio for the reporting period is 0.12 (0.53 - 0.41), including due to changes in:

the share of borrowed capital in the total balance sheet currency:

0,50 - 0,41=+0,09;

share of fixed capital in the total amount of assets:

0,56 - 0,50 =+0,06;

ratio of current assets to fixed assets:

0,42 - 0,56 = - 0,14;

the share of own working capital in the formation of current assets:

0,46 - 0,42 = +0,04;

equity capital flexibility ratio:

0,53 - 0,46 = +0,07.

As can be seen from the above data, the main role in the increase in the financial leverage ratio was played by such factors as the change in the share of borrowed capital in the total balance sheet currency (by 9%), the share of fixed capital in the total amount of assets (by 6%), the share of equity capital in the formation current assets (by 4%) and the equity capital flexibility ratio (by 7%).

Financial Leverage Ratio is not only an indicator of financial stability, but also has a great impact on the increase or decrease in the value of the profit and equity capital of the enterprise.

This ratio shows how much borrowed funds the company attracted for 1 ruble. own funds invested in assets.

3. Investment ratio - the ratio of borrowed and own funds - is another form of presentation of the ratio of financial independence

Profitability ratios. In addition to the already considered profitability ratios, when analyzing financial condition other modifications that characterize various aspects of the enterprise's activities are also calculated.

1. Coefficient of return on sales: the share of net profit in the volume of sales of the enterprise

2. Ratio of return on equity capital allows you to determine the efficiency of the use of capital invested by the owners of the enterprise. Return on equity shows how many monetary units of net profit each unit invested by the owners of the company earned

3. The coefficient of profitability of current assets is the ability of the enterprise to ensure a sufficient amount of profit in relation to the used working capital of the company. The higher the value of this coefficient, the more efficiently the circulating assets are used.

4. The profitability ratio of non-current assets demonstrates the company's ability to provide a sufficient amount of profit in relation to the company's fixed assets. The higher the value of this ratio, the more efficiently fixed assets are used.

5. The rate of return on investment shows how many monetary units the company needed to obtain one monetary unit of profit. This indicator is one of the most important indicators of competitiveness:

Business activity ratios allow you to analyze how effectively a company uses its funds. Among these factors, such indicators are considered as capital productivity, when it comes to non-current assets, turnover working capital, as well as the turnover of all capital.

3 Assessment of the financial condition of the enterprise and the ways of its improvement (on the example of LLC "BETONIT")

3.1 Analysis of the structure of assets and liabilities of the balance

For general characteristics property of the enterprise on the basis of the balance sheet data of LLC "BETONIT" as of January 01, 2009, we will study their presence, composition and structure, as well as the changes that have occurred in them (Table 2).

Table 2 - Overall score balance sheet asset and its main sectionsLLC "BETONIT", thousand rubles

Name of balance sheet items of the organization	Indicators of the structure of the asset in the currency (total) of the balance
	at the beginning of the period	at the end of the period	increase (+), decrease (-)
	absolute value	absolute value	absolute value
Outside current assets(p. 190)
Fixed assets (p. 110)
Intangible assets (page 120)
Profitable investments in material assets (p. 130)
Investments in non-current assets (line 140)
Other non-current assets (line 150)
Current assets
Inventories and costs (page 210)
raw materials, materials and other values, animals for raising and fattening (the sum of lines 211 and 212)
work in progress (distribution costs) (p. 213)
other supplies and costs (page 214)
Taxes on acquired assets (p. 220)
Finished goods (p. 230)
Goods shipped, work performed, services rendered (p. 240)
Accounts receivable (page 250)
Financial investments (p. 260)
Cash (page 270)
Other current assets (line 280)
Balance (p. 390)

2.4. Analysis of financial calculated indicators (ratios).

2.4.3. Financial stability indicators.

Analysis of the control and regulation of debt relations is primarily in the comparison of balance sheet items, on the basis of this, the amount of financing of the firm's activities with attracted resources is determined. After that, on the basis of the profit and loss statement, indicators are displayed, which reflect the multiple coverage of costs associated with financing with borrowed funds, operating profit. When assessing the quality and safety of the company's obligations, the two types of coefficients mentioned complement each other.

Leverage ratio(debt ratio, total debt to total assets), also called the share of borrowed capital or the ratio of borrowed funds to equity in percentage terms (debt indicators). It is used to judge the extent to which an enterprise is independent of borrowed capital.

In 1992 800/1680 = 48%

In 1993 1100/2000 = 55%

Liabilities, or total debt of a company, includes short-term and long-term liabilities. The larger the share of equity capital, the more reliable the safety cushion that protects creditors from losses in the event of a liquidation of the company. Therefore, lenders give preference to a low leverage ratio. The owners, on the contrary, are interested in a more powerful financial "leverage" - a means to increase their income. Issue of new shares (if the so-called preemptive, subscription right) does not apply (preemptive right) allows existing shareholders to maintain proportionality of representation. authorized capital in the absence of an institution preemptive right fragmentation occurs share capital unfavorable for existing shareholders) would mean a decrease in the property share and voting rights of existing shareholders.

If the ratio under consideration is high, as in the case of JSC Kovoplast, where it is 55% (this means that more than half of all financial resources have been formed by creditors), and the industry average is correspondingly lower, it will be difficult for the company to find additional sources, if only it will not preliminarily increase equity capital. Lenders will not want to provide the firm with new loans or will demand an increase in the interest rate (for bonds, this is a coupon).

In 1992, the share of borrowed funds was lower, but still close to half of the total capital.

Debt to equity ratio(debt to equity ratio). This ratio is often used in financial analysis.

In 1992 800/880 = 0.9

In 1993, 1100/900 = 1.2

The degree of information content of the ratio under consideration and the above ratio of the share of borrowed funds are the same. Both indicators increase with an increase in the proportion of debt (liabilities) in financial structure enterprises. But nevertheless, the degree of dependence of the enterprise on borrowed funds is expressed more clearly in the ratio of the ratio of borrowed and own funds. It shows which funds the company has more - borrowed or own. The more the coefficient exceeds 1, the greater the dependence of the company on borrowed funds. The permissible level of dependence is determined by the working conditions of each enterprise and, first of all, by the rate of turnover of working capital. Therefore, in addition to calculating the coefficient, it is necessary to determine the rate of turnover of material circulating assets and accounts receivable for the analyzed period. If accounts receivable turnover faster than material working capital, this means a fairly high intensity of receipt Money to the accounts of the enterprise, that is, as a result - an increase in own funds. Therefore, with a high turnover of material working capital and an even higher turnover of accounts receivable, the ratio of borrowed and own funds can significantly exceed 1. The ratio of the share of borrowed funds increases linearly and reaches 100%, while the ratio of borrowed funds to equity increases exponentially and has no limit.

In JSC "Kovoplast" the rate of turnover of material circulating assets more speed turnover of receivables (see section 4.4) both in 1992 and in 1993. This indicates a low intensity of cash flow to the company's accounts, as a result - a decrease in equity and an increase in the ratio of borrowed funds to equity, which happened in 1993.

Interest coverage, or times-interest-earned (TIE), is defined as the result of dividing pre-tax profit (EBIT) by interest paid.

In 1992 264/47 = 5.6

In 1993 266/66 = 44

The considered ratio shows how many times the operating profit can be reduced before the company is unable to fulfill its obligations to pay interest (In 1992, 5.6 times, and in 1993, 4 times).

Failure to comply with these obligations may lead to the fact that lenders will offer a tender announcement.

The numerator of the reduced fraction is operating profit, or net profit before taxes and interest (EBIT). Since interest is an expense that is not included in the tax base, taxation does not affect the ability of an enterprise to pay interest.

The interest coverage ratio at Kovoplast only reinforces the conclusion drawn after analyzing the leverage ratio. This indicator not too high, and therefore does not contribute to the creation of a sufficiently reliable airbag for lenders. The company will face certain difficulties if it tries to attract additional financial resources.

Coverage ratio fixed costs (fixed charge coverage) is displayed similarly to the previous indicator, except that in addition to interest, it also includes lease (rent) contributions: In recent years, leasing has become widespread in some industries (and now this ratio is used more often than the interest coverage ratio). Fixed costs include interest and long-term rent payments. The coefficient is calculated as follows:

In 1992, 292/75 = 4

294/94 = 3.1 in 1993

The fixed cost coverage ratio of Kovoplast declined in 1993, giving creditors the impression that the ratio is insufficient. Kovoplast may face problems related to long-term financing when management tries to attract additional resources by increasing the company's liabilities (debts).

Cash coverage ratio(cash flow coverage ratio). Kovoplast has preference shares worth CZK 20 million. CZK, which oblige him to pay dividends annually in the amount of CZK 8 million. CZK. at the same time the company has to pay CZK 20 million every year. CZK (capital amount) from their bonds (sinking fund).

The numerator of the fraction shows depreciation charges that are not cash expense. The denominator is dividends from preferred shares and capital contributions; both those and others are "increased" - here their indicators are given before taxation, since these expenses relate to items that are included in the taxable base. The total amount before tax is calculated as follows: the indicator reflecting the value after tax is divided by the expression (1 - T), where T is the tax rate expressed as a decimal fraction. This action is called an “increase” (or reverse increase) in net worth after tax.

Preferred dividends and a redemption fund must be generated from after-tax profits. Dividing by the expression (1-T) increases the total item (after tax), showing the pre-tax amount required to obtain the corresponding total amount (after tax). For example: to pay dividends on preferred shares in the amount of CZK 8,000,000. CZK at 40% tax rate, the company must produce:

8000000 / (1 - T) Czech. crowns, i.e. 8000000 / (1-0.4) = 13333333 Czech. CZK profits before tax.

266 + 28 + 100 66 + 28 +8/(1-0,4) + 20/(1-0,4)

=	= 394/141 = 2,8

The ratio of coverage of cash expenses shows the multiple coverage of the operating cash flow of the financial needs of the enterprise. In this case, almost three times the coverage.

Financial stability reflects the financial condition of the organization, in which it is capable of through rational management of material, labor and financial resources create such an excess of income over expenses, at which a stable cash flow is achieved, allowing the company to ensure its current and long-term solvency, as well as to meet the investment expectations of the owners.

The most important issue in the analysis of financial stability is assessment of the rationality of the ratio of equity and debt capital.

Financing a business with equity capital can be carried out, firstly, by reinvesting profits and, secondly, by increasing the capital of the enterprise (issuing new securities). The conditions limiting the use of these sources to finance the activities of the enterprise are the policy of distribution of net profit, which determines the amount of reinvestment, as well as the possibility of an additional issue of shares.

Financing from borrowed sources presupposes the observance of a number of conditions that ensure a certain financial reliability of the enterprise. In particular, when deciding on the advisability of attracting borrowed funds, it is necessary to assess the existing structure of liabilities at the enterprise. A high share of debt in it can make it unreasonable (dangerous) to attract new borrowed funds, since the risk of insolvency in such conditions is excessively high.

By attracting borrowed funds, the company receives a number of advantages that, under certain circumstances, can turn into its reverse side and lead to a deterioration in the financial condition of the company, bringing it closer to bankruptcy.

Financing of assets from borrowed sources can be attractive insofar as the lender does not make direct claims regarding the future income of the enterprise. Regardless of the results, the creditor has the right to claim, as a rule, for the agreed amount of the principal and interest on it. For borrowed funds received in the form of a vendor credit, the latter component can be both explicit and implicit.

The availability of borrowed funds does not change the structure of equity capital from the point of view that debt obligations do not lead to "dilution" of the owners' share (unless there is a case of debt refinancing and its repayment with the company's shares).

In most cases, the amount of liabilities and their maturity dates are known in advance (exceptions are, in particular, in cases of guarantee liabilities), which facilitates financial planning of cash flows.

At the same time, the presence of costs associated with the payment for the use of borrowed funds displaces enterprises. In other words, in order to achieve break-even work, the company has to provide more sales. Thus, an enterprise with a large share of borrowed capital has little room for maneuver in the event of unforeseen circumstances, such as a drop in demand for products, a significant change in interest rates, an increase in costs, and seasonal fluctuations.

In an unstable environment financial situation this can be one of the reasons for the loss of solvency: the company is unable to provide a greater inflow of funds necessary to cover the increased costs.

The presence of specific obligations may be accompanied by certain conditions that restrict the freedom of the enterprise in the disposal and management of assets. The most common example of such limiting conditions is pledges. A high proportion of existing debt may result in the lender's refusal to provide a new loan.

All these points must be taken into account in the organization.

The main indicators characterizing the capital structure include the coefficient of independence, the coefficient of financial stability, the coefficient of dependence on long-term debt capital, the coefficient of financing, and some others. The main purpose of these ratios is to characterize the level of financial risks of an enterprise.

Here are the formulas for calculating the listed coefficients:

Independence coefficient = Equity / Balance currency * 100%

This ratio is important for both investors and creditors of the enterprise, since it characterizes the share of funds invested by the owners in the total value of the property of the enterprise. It indicates to what extent an enterprise can reduce the valuation of its assets (reduce the value of assets) without harming the interests of creditors. Theoretically, it is believed that if this ratio is greater than or equal to 50%, then the risk of creditors is minimal: having sold half of the property formed at its own expense, the company will be able to pay off its debt obligations. It should be emphasized that this provision cannot be used as general rule... It needs to be clarified taking into account the specifics of the enterprise and, above all, its industry affiliation.

Financial stability ratio = (Equity + Long-term liabilities) / Balance currency * 100%

The value of the coefficient shows the proportion of those sources of financing that the company can use in its activities for a long time.

Long-term debt capital dependence ratio = Long-term liabilities / (Equity + Long-term liabilities) * 100%

When analyzing long-term capital, it may be advisable to assess the extent to which long-term borrowed capital is used in its composition. For this purpose, the coefficient of dependence on long-term sources of financing is calculated. This ratio excludes current liabilities from consideration and focuses on stable sources of capital and their ratio. The main purpose of the indicator is to characterize the extent to which the company depends on long-term loans and borrowings.

In some cases, this indicator can be calculated as the reciprocal, i.e. as the ratio of debt and equity. The indicator calculated in this form is called the coefficient.

Financing ratio = Equity / Debt capital * 100%

The coefficient shows what part of the enterprise's activities is financed from its own funds, and what part - from borrowed funds. A situation in which the value of the financing ratio is less than 1 (most of the property of the enterprise is formed at the expense of borrowed funds) may indicate the danger of insolvency and often complicates the possibility of obtaining a loan.

Immediately, you should be warned against literal understanding of the recommended values for the indicators considered. In some cases, the share of equity capital in their total volume may be less than half, and, nevertheless, such enterprises will maintain a sufficiently high financial stability. This primarily concerns enterprises whose activities are characterized by a high turnover of assets, stable demand for products sold, well-established supply and distribution channels, and low fixed costs (for example, trade and intermediary organizations).

Capital-intensive enterprises with long period turnover of funds with a significant share of target assets (for example, enterprises of the machine-building complex), the share of borrowed funds in 40-50% can be dangerous for financial stability.

The coefficients characterizing the capital structure are usually considered as characteristics of the enterprise's risk. The larger the share of debt, the higher the need for funds required to service it. In the event of a possible deterioration in the financial situation, such an enterprise has a higher risk of insolvency.

Proceeding from this, the given coefficients can be considered as tools for searching for "problem points" in the enterprise. The lower the share of debt, the less the need for an in-depth risk analysis of the capital structure. A high proportion of debt makes it necessary to consider the main issues related to the analysis: the structure of equity capital, the composition and structure of debt capital (taking into account that the balance sheet data may represent only a part of the company's liabilities); the ability of the enterprise to generate the cash required to meet existing liabilities; profitability of activities and other factors essential for the analysis.

When assessing the structure of sources of property of an enterprise, special attention should be paid to the method of their placement in the asset. This reveals the inextricable connection between the analysis of the passive and active parts of the balance.

Example 1. The structure of the balance sheet of enterprise A is characterized by the following data (%):

Enterprise A

At first glance, the assessment of the structure of sources in our example indicates a fairly stable position of enterprise A: a larger volume of its activities (55%) is financed from its own capital, a smaller one - from borrowed capital (45%). However, the results of the analysis of the placement of funds in the asset raise serious concerns about its financial stability. More than half (60%) of the property is characterized by a long term of use, which means a long payback period. The share of current assets is only 40%. As you can see, for such an enterprise, the amount of current liabilities exceeds the amount of current assets. This allows us to conclude that part of the long-term assets was formed at the expense of the organization's short-term liabilities (and, therefore, one can expect that their maturity will come before these investments pay off). Thus, undertaking A has chosen a dangerous, albeit very common, method of investing funds, which may result in problems of loss of solvency.

So, the general rule of ensuring financial stability: long-term assets should be formed from long-term sources, own and borrowed... If the company does not have borrowed funds, attracted on a long-term basis, fixed assets and other non-current assets must be formed at the expense of equity capital.

Example 2. Enterprise B has the following structure of economic assets and sources of their formation (%):

Enterprise B

Assets	Share	Passive	Share
Fixed assets	30	Equity	65
Unfinished production	30	Short-term liabilities	35
Future expenses	5
Finished products	14
Debtors	20
Cash	1
BALANCE	100	BALANCE	100

As you can see, the share of equity capital prevails in the liabilities of enterprise B. At the same time, the amount of borrowed funds attracted on a short-term basis is 2 times less than the amount of current assets (35% and 70% (30 + 5 + 14 + 20 + 1) of the balance sheet, respectively). However, like enterprise A, more than 60% of assets are difficult to sell (provided that finished products in the warehouse, if necessary, it can be fully sold, and all buyers-debtors will pay off their obligations). Consequently, with the existing structure of placing funds in an asset, even such a significant excess of equity capital over borrowed capital may turn out to be dangerous. Perhaps, in order to ensure the financial stability of such an enterprise, the share of borrowed funds should be reduced.

Thus, enterprises whose volume of hard-to-sell assets in the composition of working capital is significant should have a large share of equity capital..

Another factor affecting the ratio of own and borrowed funds is the structure of the company's costs. Enterprises for which the share of fixed costs in the total costs is significant should have a larger amount of equity capital.

When analyzing financial stability, it is necessary to take into account the rate of turnover of funds. An enterprise with a higher turnover rate can have a large share of borrowed sources in total liabilities without a threat to its own solvency and without increasing the risk for creditors (for an enterprise with a high capital turnover it is easier to ensure cash flow and, therefore, pay off its obligations). Therefore, such enterprises are more attractive to lenders and lenders.

In addition, the ratio of the cost of raising borrowed funds (Cd) and the return on investment in the organization's assets (ROI) directly affects the rationality of liability management and, consequently, financial stability. The relationship of the considered indicators from the standpoint of their impact on the return on equity is expressed in the known ratio used to determine the impact:

ROE = ROI + D / E (ROI - Cd)

where ROE is the return on equity; E - equity capital, D - borrowed capital, ROI - return on investment, Сd - cost of attracting borrowed capital.

The meaning of this ratio is, in particular, that as long as the return on investment in an enterprise is higher than the price of borrowed funds, the return on equity will grow the faster the higher the ratio of borrowed and own funds. However, as the share of borrowed funds grows, the profit remaining at the disposal of the enterprise begins to decline (an increasing part of the profit is directed to interest payments). As a result, the return on investment falls, becoming less than the cost of raising borrowed funds. This, in turn, leads to a drop in the return on equity.

Thus, by managing the ratio of equity and debt capital, the company can influence the most important financial ratio - return on equity.

Options for the ratio of assets and liabilities

Option number 1

The presented scheme of the ratio of assets and liabilities allows us to talk about a safe ratio of equity and debt capital. Two main conditions are met: equity capital exceeds non-current assets; current assets are higher than short-term liabilities.

Option 2

The presented scheme of the ratio of assets and liabilities, despite the relatively low share of equity capital, also does not cause concern, since the share of long-term assets of this organization is not high and equity capital fully covers their value.

Option number 3

The ratio of assets to liabilities also demonstrates the excess of long-term sources over long-term assets.

Option number 4

At first glance, this variant of the balance sheet structure indicates a lack of equity capital. However, the presence long-term liabilities allows you to fully form long-term assets at the expense of long-term sources of funds.

Option number 5

This structure option may raise serious concerns about the financial soundness of the organization. Indeed, it can be seen that the organization in question does not have enough long-term sources for the formation of non-current assets. As a result, it is forced to use short-term borrowed funds to form long-term assets. Thus, it can be seen that short-term liabilities have become the main source of the formation of both current assets and, in part, non-current assets, which is associated with increased financial risks of the activities of such an organization.

At the same time, it should be emphasized that the final conclusions regarding the rationality of the structure of the liabilities of the analyzed organization can be made on the basis of integrated analysis factors that take into account industry specifics, the rate of turnover of funds, profitability and a number of others.

Financial Soundness Analysis: What is it?

Financial stability- an integral part of the overall stability of the enterprise, the balance of financial flows, the availability of funds that allow the organization to maintain its activities for a certain period of time, including servicing received loans and producing products.

The main indicators of the financial stability of the organization

Index	Description of the indicator and its normative value
Autonomy ratio	Equity to total equity ratio. Generally accepted normal value: 0.5 or more (optimal 0.6-0.7); however, in practice it is highly industry-specific.
Financial Leverage Ratio	The ratio of debt to equity.
Coefficient of provision with own circulating assets	The ratio of equity to current assets. Normal value: 0.1 or more.
	The ratio of equity and long-term liabilities to the total amount of capital. Normal value for the industry: 0.7 or more.
Equity capital flexibility ratio	The ratio of own circulating assets to sources of own funds.
Property mobility coefficient	The ratio of working capital to the value of the entire property. Characterizes the industry specificity of the organization.
Working capital mobility ratio	The ratio of the most mobile part of current assets (cash and financial investments) to the total value of current assets.
	The ratio of own circulating assets to the value of inventories. Normal value: 0.5 or more.
Short-term debt ratio	The ratio of short-term debt to total debt.

The main indicator that affects the financial stability of an organization is the share of borrowed funds. It is usually believed that if borrowed funds account for more than half of a company's funds, then this is not a very good sign for financial stability; for various industries, the normal share of borrowed funds may fluctuate: for trading companies with high turnover, it is much higher.

In addition to the above ratios, the financial stability of an enterprise reflects the liquidity of its assets in comparison with liabilities by maturity: the current liquidity ratio and the quick liquidity ratio.

Autonomy ratio

Autonomy ratio(financial independence ratio) characterizes the ratio of equity capital to the total amount of capital (assets) of the organization. The coefficient shows how independent the organization is from creditors.

Capitalization ratio

Capitalization ratio(capitalization ratio) is an indicator that compares the size of the long-term accounts payable with aggregate sources of long-term financing, including, in addition to long-term accounts payable, the organization's own capital. The capitalization ratio makes it possible to assess the adequacy of the organization's source of financing its activities in the form of equity capital.

Supply ratio

Supply ratio Is an indicator of the financial stability of an organization, which determines the extent to which inventories the organization is covered by its own working capital.

Asset coverage ratio

Asset coverage ratio (asset coverage ratio) measures the organization's ability to pay off its debts with existing assets. The ratio shows what part of the assets will go to cover debts.

Investment coverage ratio

Investment coverage ratio Is a financial ratio showing what part of an organization's assets is financed from sustainable sources: own funds and long-term liabilities.

Interest coverage ratio

Interest coverage ratio(interest coverage ratio, ICR) characterizes the organization's ability to service its debt obligations. The indicator compares earnings before interest and taxes (EBIT) for certain period time (usually one year) and interest on debt obligations for the same period.