The ratio of debt and equity working capital. The ratio of debt and equity capital. Ii. current assets

Refers to the coefficients of financial stability of the enterprise.

Debt to equity ratio - what shows

The ratio of borrowed and own funds - shows how much borrowed money falls on 1 ruble. own funds.

Debt to equity ratio - formula

General formula for calculating the coefficient:

Calculation formula according to the old balance sheet

Debt to equity ratio - value

The economic meaning of the ratio of borrowed and own funds is to determine how many units of borrowed funds financial resources accounts for a unit of sources of own funds.

The level of this coefficient above 1 indicates the potential danger of a lack of own money, which may cause difficulties in obtaining new loans.

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The guarantee of survival and the basis for the stable position of the enterprise is its financial stability, i.e. the organization's ability to timely from its own funds cover the costs invested in fixed and working capital, intangible assets, and pay off its obligations. The nature of its relationship with business partners - suppliers, buyers, commercial banks, potential investors, shareholders. Financial stability reflects the financial condition of the enterprise, in which it is able, through the rational management of material, labor and financial resources, to create such an excess of income over expenses, at which a stable inflow of funds is achieved, allowing the enterprise to ensure its current and long-term solvency, as well as to meet investment expectations owners.

Financial stability can be quantitatively assessed in two ways:

· From the standpoint of the structure of sources of funds;

· From the standpoint of costs associated with servicing external sources.

Accordingly, two groups of indicators are distinguished, conventionally called capitalization ratios and service ratios for external sources of financing (coverage).

In the group of capitalization ratios, first of all, the ratio of borrowed and own funds is distinguished. However, this indicator provides only a general assessment of financial stability.

The ratio of debt and equity capital equal to the ratio of the sum of long-term and short-term liabilities to the equity of the organization. It shows how much borrowed money falls on each ruble of own funds invested in the assets of the enterprise. The growth of this indicator indicates an increase in the dependence of the company on borrowed capital, i.e. a slight decrease in financial stability. The recommended value of the indicator is less than 0.3.

Long-term + Short-term

obligations obligations

Ksoot.ZiSK \u003d –––––––––––––––––––––––––––––– (1)

Equity

Autonomy ratio (financial independence or concentration of equity capital) is equal to the share of own sources of financing as a result of the company's balance sheet and shows specific gravity own funds in the total amount of funding sources. An increase in the ratio means an increase in financial independence. The value of this indicator is more than 0.5.

Equity

Ka \u003d –––––––––––––––––––– (2)

Equity in working capital calculated as the difference between the organization's own capital and its non-current assets.

The presence of equity in circulation (own circulating assets) is one of the important indicators financial stability of the organization. The lack of equity in the organization's turnover indicates that all the organization's circulating assets, as well as, possibly, some of the non-current assets (in the case of a negative indicator value) are formed at the expense of borrowed funds (sources).

SKOS \u003d Own - Non-circulating (3)

capital assets

Equity ratio is calculated as the ratio of own funds in circulation to the total amount of working capital.

The indicator characterizes the ratio of own and borrowed working capital and determines the degree of provision of the organization's economic activities with its own working capital, necessary for its financial stability. The recommended value is more than 0.1.

Own - Non-circulating

capital assets

Coss \u003d –––––––––––––––––––––––– (4)

Working capital

Equity capital flexibility ratio is defined as the ratio of equity in working capital to the amount of equity. The ratio shows how much of it is used for financing current activities, i.e. invested in working capital, and what part is capitalized. The value of this indicator can vary significantly depending on the industry sector of the enterprise.

Own - Non-circulating

capital assets

Kman \u003d ––––––––––––––––––––––––––– (5)

Equity

Long-term borrowing ratio characterizes the share of long-term loans and borrowings raised to finance the activities of the enterprise, along with own funds, in the total capital of the organization, which is understood as the total value of long-term sources of funds. The growth of this indicator in dynamics is in a certain sense a negative trend, meaning that enterprises are increasingly dependent on external investors.

long term duties

Kdpzs \u003d –––––––––––––––––––––––––– (6)

Own + Long Term

capital liability

As a rule, the owners of the enterprise (shareholders, investors and other persons who have made a contribution to the authorized capital) prefer a reasonable growth in the dynamics of the share of borrowed funds. On the contrary, lenders (suppliers of raw materials and supplies, banks providing short-term loans, and other counterparties) prefer commercial organizations with a high share of equity capital, with greater financial autonomy.

Financial stability ratio is determined by formula (7) and shows what part of the asset is financed from sustainable sources. The value of this indicator is considered normal if it exceeds 0.6.

Own + Long Term

capital liability

Kfu \u003d –––––––––––––––––––––––––––– (7)

The capitalization ratios characterizing the structure of long-term liabilities are logically supplemented by indicators of the second group, called the ratios of servicing external sources of financing, and which make it possible to assess whether the organization is able to maintain the existing structure of sources of funds. Raising borrowed funds is associated with the burden of constant financial expenses, which should at least be covered by current income. Fixed finance costs in terms of interest on loans and borrowings should be weighed against profit before interest and taxes. The corresponding indicator is called the interest coverage ratio. Obviously, it must be more than one, otherwise the enterprise cannot fully settle with external investors for current obligations.

If, in the denominator, to the interest expense, add expenses for financial lease, then the corresponding indicator is called the coefficient of coverage of fixed financial costs.

Currently, these indicators can be calculated only within the framework internal analysissince according to regulations the main part of the interest on the loan is written off to the cost price and is included in the item "Cost of sales of goods, products, works, services" in the form No. 2 "Profit and loss statement".

1.3 Indicators of the company's solvency and liquidity

Refers to the coefficients of financial stability of the enterprise.

Debt to equity ratio - what shows

Debt to equity ratio - shows how much borrowed money falls on 1 ruble. own funds.

Debt to equity ratio - formula

General formula for calculating the coefficient:

Calculation formula according to the old balance sheet

Debt to equity ratio - value

The economic meaning of the ratio of borrowed and own funds is to determine how many units of borrowed financial resources are per unit of sources of own funds.

The level of this ratio above 1 indicates the potential danger of a shortage of own funds, which may cause difficulties in obtaining new loans.

Was this page helpful?

Also found about the ratio of borrowed and own funds

Financial soundness standards of Russian enterprises: sectoral characteristics
Methodological approach to the analysis of solvency Therefore, for the convenience of analysis, we will consider the inverse indicator - the ratio of own and borrowed funds Ksootn - the ratio of the equity and borrowed funds of the IC
Analysis of the capital structure and profitability of the leading Russian oil and gas enterprises Autonomy ratio n 1 n 2 0.67 0.66 -0.01 6 Equity to borrowed funds ratio n 3 n 1 0.5 0.52 0.02 7. Coefficient
Assessment of the market and financial stability of the enterprise While maintaining the minimum financial stability of the organization, the ratio of borrowed and own funds should be limited from above by the value of the ratio of the cost of mobile funds
Features of financial analysis at agricultural enterprises Sosnovka -0.16 2.02 0.20 0.06 -0.004 4 The ratio of borrowed and own funds shows how many units of borrowed funds the company attracted for each
Topical issues and modern experience of analyzing the financial condition of organizations - part 4 Also, in the studied organization, there is an excess of borrowed funds over its own, as evidenced by the ratio of own and borrowed funds The financial independence ratio confirms the previous conclusion that the organization
Current assets and financial condition of enterprises Minimum value of the coefficient 0.5 Coefficient of the ratio of borrowed and own funds Кз с П4 П5 П3, 6 where П3, П4,
How to assess the financial stability of an enterprise? Financial sustainability standards for enterprises in the construction industry and agriculture For the construction industry, the greatest classifying ability is the debt-to-equity ratio of 77.1% and the maneuverability ratio of its own working capital 75.8% 4.
On the standard values \u200b\u200bof the coefficients in the formation of the rating assessment of the financial and economic condition of the enterprise Indicators of financial stability & bullet the ratio of borrowed and own funds Kszss P1 P2 P3 P4 0.04 0.04 0.17 0.75
The financial stability of the organization and the criteria for the structure of liabilities The negative moment should be considered a decrease in the value of the maneuverability ratio at the end of the period by 31.8%. The ratio of borrowed and own funds shows that an economic entity is largely financed for
Financial analysis of the enterprise - part 5 The autonomy ratio in 2005 increased compared to 2004 and exceeds the permissible rate of 0.5, which means that the company no longer needs borrowed funds.
Selection of risk factors for bankruptcy of an enterprise based on the principal component method Long-term borrowing ratio 0.881 -0.150 -0.181 -0.145 0.075 Debt to equity ratio -0.580 0.687 0.057 0.152 0.234 Net profit -0.551 0.195
Classification of organizations by the level of their financial condition The autonomy coefficient 0.5 for a decrease in the indicator by 0.05 is removed by 1 point The ratio of the ratio of own and borrowed funds is less than 0 7 for a decrease in the indicator by 0.07 is removed
Topical issues and modern experience in analyzing the financial condition of organizations - part 8 II The ratio of equity and borrowed funds K4 Is one of the characteristics of the financial stability of the enterprise and
Financial analysis of the enterprise - part 4 The autonomy ratio in 2003 decreased compared to 2002 and in 2004 increased slightly compared to 2003 but still did not reach the permissible norm of 0.5, which means that the enterprise needs borrowed funds According to the results of the obtained ratio coefficients borrowed and own funds 2002 2004
Assessment of the borrower's creditworthiness (Sberbank of Russia methodology) K4 Equity to borrowed funds ratio 0.445 0.625 0.18 1 1 0.2 K5 Profitability of products
Analysis of the financial condition of agricultural enterprises in the Altai Territory and the ways of their financial recovery The most important for assessing the financial condition of agricultural enterprises is the ratio of borrowed and own funds, since the higher its value, the greater
Formation of the statement of financial results as a function of production resource management Coefficient of the ratio of borrowed and own funds of the organization 1.601 1.218 1.035 -0.566 -0.183 Coefficient of long-term borrowing
Comparative analysis of Russian and foreign approaches to the analysis of the financial condition of the organization Ratio of the ratio of borrowed and own funds Ratio of financing ZK SK 13 Shows how borrowed and
Assessment of the efficiency of using the company's own and borrowed capital Ratio of accounts payable and other liabilities 0.049 0.073 0.064 5 Ratio of borrowed and own funds 2.002 1.794 1.855 6 Ratio of mobile and immobilized

The debt-to-equity ratio refers to the indicators that analyze the financial stability of the company. It provides information on how much borrowed funds are per unit of equity capital. Read on for how to count and analyze it.

The economic meaning of the ratio of debt and equity capital

Based on the analysis of the ratio of own and borrowed funds, it is possible to understand the structure of the company's capital - how much of its own and borrowed funds to carry out current activities. The more own funds, the higher the financial stability, and accordingly, on the contrary, the predominance of borrowed capital tells us about a possible unsatisfactory financial condition.

Ratio users

The results of calculating the ratio of borrowed and own funds carry important and necessary information about counterparties to suppliers, which present long payment delays. Typically it is large companies, who have a significant number of buyers of their goods, works, services. The more and more often the supplier company provides the organization with deferred payments for the delivered goods or work performed, the greater the risks of non-receipt or late receipt of funds. The indicator of the ratio of debt and equity funds reveals the capital structure of the counterparty and serves as a kind of guarantor of payment of deferred payments.

When a company grows its own funds and decreases the amount of borrowed capital, this indicates a fairly rapid improvement financial stability of the company and growth own assets... If the growth rate of borrowed capital is higher than the growth rate of equity capital, the situation in the structure is no longer so positive, since despite the growth of the company's own assets, the amount of borrowed capital increases faster, which means that the financial stability indicator still decreases.

To calculate the ratio of debt and equity capital should be divided by the amount of equity capital of the enterprise. In other words, the coefficient shows how much of the organization's borrowed funds per 1 ruble of equity capital.

Debt capital is all funds and other assets raised from outside (for example, a loan or credit). In other words, these are all short-term and long-term obligations of the company.

You should be aware that raising debt capital is beneficial for the organization, since the costs of raising debt capital (for example, interest on loans and borrowings) are included in cost of manufactured products or services provided. Thus, the organization reduces the tax base for income tax, and, accordingly, the tax itself. However, this rule applies within reasonable limits. If the share of borrowed capital is large in comparison with its own, investing in such an organization becomes risky.

How to find out how much of the organization's own and borrowed funds? Let's turn to the financial statements, or rather, to the balance sheet. For the balance lines, the formula will be as follows:

In the event that management, investors or other interested parties need information about the ratio indicator for an earlier period, you should use the formula according to the old form of the Balance Sheet.

Standard values

If the ratio is equal to 1, it means that the amount of borrowed funds corresponds to the amount of equity capital. This is a value that is extremely rare in practice. The most common cases when the indicator is less than 1 is presented in the table:

Table 1. Standard values coefficient

Indicator value	Description of the financial condition of the organization
0\u003e ZK / SK ratio\u003e 0.5	Sustainable financial position, the organization practically does not use the effect of financial leverage due to the small amount of borrowed capital
0.5\u003e ZK / SK coefficient\u003e 0.7	The most ideal ratio of the amount of debt and equity capital, the financial position is also considered stable
ZK / SK ratio\u003e 0.7	Unstable financial position, the amount of borrowed capital practically corresponds to the amount of equity. In practice, this means that most companies with such a ratio are close to bankruptcy and are considered insolvent.

As an example of the calculation, let us take the data of the balance sheet of the organization OJSC "Khleb". The company is engaged in the production and wholesale and retail sale of bakery products, pasta, cereals.

table 2... Balance sheet data

Indicator name
ASSETS
I. NON-CURRENT ASSETS
Intangible assets
Research and development results
Intangible search assets
Tangible search assets
Fixed assets
Profitable investments in material assets
Financial investments
Deferred tax assets
Other noncurrent assets
Total for Section I
II. CURRENT ASSETS

Value added tax on acquired valuables
Accounts receivable
Financial investments (excluding cash equivalents)
Cash and cash equivalents
Other current assets
Total for Section II
BALANCE
PASSIVE
III. CAPITAL AND RESERVES 6
Authorized capital (share capital capital, authorized capital, contributions of comrades)
Own shares purchased from shareholders
Revaluation of non-current assets
Additional capital (without revaluation)
Reserve capital

Total for Section III
IV. LONG TERM DUTIES
Borrowed funds
Deferred tax liabilities
Estimated liabilities
Other liabilities
Total for Section IV
V. SHORT-TERM COMMITMENTS
Borrowed funds
Accounts payable
revenue of the future periods
Estimated liabilities
Other liabilities
Total for Section V
BALANCE

Let's calculate the indicator for 2017:

For 2016, the calculation of the indicator will look like this:

The reporting presents data for two reporting periods. Calculation of the indicator for two periods gives us an estimate of the indicator in dynamics. The calculation results show us that the company's financial position was stable in both 2016 and 2017. The amount of borrowed capital decreases, the company practically does not use the effect of financial leverage (taking into account the specifics of the company's activities, this is an insignificant factor). The company has enough own funds to carry out its current activities, which makes it possible to reduce short-term debt and eliminate long-term debt (in other words, the company stopped using long-term borrowed funds in 2017).

Conclusion

The formula for calculating the ratio of debt and equity is simple and based on the data of the balance sheet of the organization. It allows you to quickly obtain the necessary assessment of the financial stability of the company and analyze the structure of the balance sheet for the ratio of debt and equity capital.

The ratio of debt and equity - refers to the ratio of the financial stability of the enterprise. Shows how much borrowed money falls on 1 UAH. own funds. It is also called the girring coefficient. It is equal to the ratio of the value of the company's obligations to the value of its own funds.

Exceeding one in the value of the girring coefficient means that for the business the borrowed capital of the organization is the main source of financing. A high giring indicates a high risk.

The debt-to-equity ratio (Kz / s) is calculated using the formula:

Kz / s \u003d (P3 + P4) / P3

where P3 - long-term liabilities;

P4 - short-term liabilities;

P3 - capital and reserves.

Otherwise it is (Total for section III Long-term liabilities + Total for section IV Short-term liabilities - deferred expenses - Deferred income) / (Total for section I Equity + Deferred income + Deferred expenses).

The more the coefficient exceeds 1, the greater the dependence of the company on borrowed funds. The permissible level is often determined by the operating conditions of each enterprise, primarily by the rate of turnover of working capital. Therefore, it is additionally necessary to determine the rate of turnover of material circulating assets and accounts receivable for the analyzed period. If accounts receivable turn over faster than current assets, which means a rather high intensity of cash flow to the enterprise, i.e. 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 the ratio of own and borrowed funds can much exceed 1.

The higher this ratio, the more loans the company has and the more risky the situation, which may ultimately lead to bankruptcy. The high level of the ratio also reflects the potential danger of a cash deficit in the organization.

Thus, the ratio of borrowed and own funds reflects the general condition of the enterprise, determines its financial stability, i.e. shows how much an enterprise can perform

The interpretation of this indicator depends on many factors, in particular, such as: the average level of this ratio in other industries; the company's access to additional debt financing sources; stability of the company's economic activity. Recommended value should not exceed one.

High dependence on external loans can significantly worsen the position of the organization in the event of a slowdown in the rate of implementation, since the cost of paying interest on borrowed capital is classified as conditionally constant, i.e. such expenses that, other things being equal, do not decrease in proportion to the decrease in the volume of sales.

In addition, a high debt-to-equity ratio may lead to difficulties in obtaining new loans at the average market rate. This coefficient plays crucial role when deciding on the choice of funding sources.

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