What factors characterize the capital structure of the enterprise. The most common financial indicators. The ratio of coverage of assets own working capital
Bulletin of Chelyabinsk State University. 2009. No. 2 (140). Economy. Vol. 18.P. 144-149.
S. N. Ushaeva
performance indicators of the capital structure of the company
The circle of questions concerning the optimization of the capital structure of the company, which should ensure its minimum price, the optimal level of financial leverage and maximizing the value of the company, is highlighted. As indicators of the effectiveness of the capital structure, the coefficients for assessing profitability and financial stability are considered. The mechanism of the impact of financial leverage on the level of return on equity and the level of financial risk is described.
Keywords: capital, capital structure, capital structure efficiency indicators, financial leverage, firm value, equity and borrowed capital, profitability, financial stability.
At the present stage of development of the economic system, economic entities face a number of tasks that require optimal solutions. One of these tasks remains the determination of an effective capital structure that meets the requirements of both the economic situation as a whole (the dynamism and uncertainty of external influences due to the influence of globalization and the expansion of the range of possible risk-related options for the application of available resources), and the firm’s leadership on a certain stage of its development (the competitive environment assumes the effective functioning of only economic entities capable of not only attracting resources, but also determining their ratio that would be optimal in the given conditions). So optimal
the capital structure involves ensuring the financial stability of the company, its current liquidity and solvency, as well as the required return on invested capital.
Ensuring current liquidity and solvency is associated with the optimization of working capital, which guarantee the continuity of the processes of production and circulation of goods (liquidity). The lower the net working capital, the higher the efficiency (profitability, turnover), but the higher the risk of insolvency.
Ensuring an effective capital structure depends on the ratio of own and borrowed funds, which is formed when choosing sources of financing (see. Figure). Decisions of managers to use loans associated with the action of financial leverage
Sources of financing the activities of the company and directions for their use
(financial leverage); by increasing the share of borrowed funds, it is possible to increase the return on equity, but at the same time the financial risk will increase, that is, the threat of being dependent on lenders in case of a shortage of money for settlements on loans. This is a risk of loss of financial stability. The condition under which it is advisable to attract borrowed funds is to exceed the interest rate for the loan by the existing return on assets of the company.
In this case, the risk is justified by the increase in return on invested equity. In this regard, the task of management is to optimize the capital structure through evaluating and comparing the cost of various sources of financing, taking into account profitability.
The ability of an enterprise to generate the necessary profit in the course of its business activities determines the overall efficiency of the use of assets and invested capital, characterizes the coefficients for assessing profitability (profitability). To conduct this assessment, the following key indicators are used.
1. The profitability ratio of all used assets, or the coefficient of economic profitability (P). It characterizes the level of net profit generated by all assets of the enterprise that are in its use on the balance sheet. The calculation of this indicator is carried out according to the formula
where ChPO - the total amount of net profit of the enterprise received from all types of economic activity in the period under review; Ar - the average value of all used assets of the enterprise in the period under review (calculated as the average chronological).
2. The coefficient of return on equity, or the coefficient of financial profitability (Rsk), characterizes the level of profitability of equity invested in the company. To calculate this indicator, the following formula is used:
Rsk SKsr "1)
where ChPO is the total net profit of the enterprise received from all types of business
activities in the period under review; SKr - the average amount of equity of the enterprise in the period under review (calculated as the average chronological) [Ibid.].
3. The profitability ratio of product sales, or the coefficient of commercial profitability (PP), characterizes the profitability of the operating (production and commercial) activities of the enterprise. The calculation of this indicator is carried out according to the following formula:
where ChPrp - the amount of net profit received from the operating activities of the enterprise in the period under review; OR - the total volume of sales in the period under review [Ibid. S. 59].
4. The profitability ratio of current costs (RT) characterizes the level of profit received per unit of costs for the implementation of the operational (industrial and commercial) activities of the enterprise. To calculate this indicator, use the formula
where ChPrp - the amount of net profit received from the operating (industrial and commercial) activities of the enterprise in the period under review; And - the sum of the costs of production (circulation) of the enterprise in the period under review [Ibid.].
5. The return on investment (Ri) characterizes the profitability of the investment activity of the enterprise. The calculation of this indicator is carried out according to the following formula:
where NPI is the amount of net profit received from the investment activity of the enterprise in the period under review; IR - the sum of the investment resources of an enterprise invested in real and financial investment objects [Ibid].
Management of current liquidity / solvency generally includes making decisions on the liquidity of the assets of the company and the sequence of payment of debts; separate these concepts
can be as follows: current liquidity characterizes the potential ability to pay off its short-term obligations, solvency - the ability to actually realize this potential. A sign of solvency, as you know, is the presence of money in the company's current account and the absence of overdue payables, and liquidity is assessed by comparing the positions of current assets and current liabilities.
In the financial equilibrium scheme, current liquidity lies on the opposite margin of balance — this illustrates the inevitability of a choice between profitability and risk. The smaller the share of liquid assets in the total amount of working capital, the greater the profit, but the higher the risk. Achieving high profitability by channeling resources to one of the most profitable areas of activity can lead to a loss of liquidity, namely, to interrupt the production and circulation of goods at other stages and lengthen the financial cycle. At the same time, excessive linking of financial resources (for example, in stocks) also lengthens the financial cycle and means a relative outflow of funds from more profitable current activities. It is clear that “thrifty”, cautious management of profitability is inferior to management in those firms where managers coordinate the financial cycle mobilely and flexibly and put the principle of “time is money” at the forefront.
Structural liquidity and financial stability are fundamental pillars of management. In a broad sense, financial stability is the ability of a company to maintain a targeted structure of funding sources. The owners of the company (shareholders, investors, shareholders, etc.) prefer a reasonable increase in the share of borrowed funds. Lenders prefer firms with a high share of equity, with greater financial independence. Managers are called upon to find a reasonable balance between the interests of owners and creditors, observing the developed financing rules, and the analysis of the balance sheet structure serves as a tool for such management decisions.
As you know, in the liabilities of the analytical balance sheet stand out: equity,
borrowed capital - long-term and short-term. The requirement for a vertical capital structure (a condition of financial stability) is that own sources of financing exceed borrowed ones: SK\u003e ZK.
Structural liquidity also depends on investment decisions within the framework of asset management: according to a hedged approach to financing, each category of assets must correspond to obligations of one kind or another. For example, in the process of forming property, one should remember the so-called “golden rule” of financing, which describes the requirement for a horizontal balance structure: the amount of equity should cover the value of non-current assets: SK\u003e VNA. In addition to directly comparing balance sheet positions, analytical ratios are used to analyze the implementation of financing rules. These include: autonomy ratio, financing ratio, debt ratio, long-term financial independence ratio, equity ratio.
To identify the level of financial risk associated with the structure of sources of capital formation of the enterprise, and accordingly, the degree of its financial stability in the process of future development allow the coefficients to assess the financial stability of the enterprise.
1. The autonomy coefficient (AC) shows the extent to which the volume of assets used by the enterprise is generated from equity and how much it is independent of external sources of financing. The calculation of this indicator is carried out according to the following formulas:
where SK - the amount of equity of the enterprise on a specific date; ChA - the value of the net assets of the enterprise at a certain date; K - the total amount of capital of the enterprise on a certain date; And - the total value of all assets of the enterprise at a certain date.
2. The financing ratio (CF), which characterizes the amount of borrowed funds per unit of equity, that is, the degree of dependence of the enterprise on external sources of financing.
where AP - the amount of borrowed capital (average or at a certain date); SK- the amount of equity capital of the enterprise (average or at a certain date) [Ibid.].
3. Debt ratio (KZ). It shows the share of borrowed capital in the total amount used. The calculation is carried out according to the following formula:
where ZK is the amount of borrowed capital attracted by the enterprise (average or at a certain date); To - the total amount of capital of the enterprise (average or at a certain date) [Ibid. S. 53].
4. The coefficient of long-term financial independence (KDN). It shows the extent to which the total volume of assets used is generated by the company's own and long-term borrowed capital, i.e., it characterizes the degree of its independence from short-term borrowed sources of financing. This indicator is calculated by the formula
where SK - the amount of equity capital of the enterprise (average or at a certain date); ЗК - the amount of borrowed capital attracted by the company on a long-term basis (for a period of more than one year); A - the total value of all assets of the enterprise (average or at a certain date) [Ibid].
5. The coefficient of maneuverability of equity capital (KMsk) shows what is the share of equity capital invested in current assets in the total amount of equity capital (that is, what portion of equity capital is in its highly turnoverable and highly liquid form). The calculation of this indicator is carried out according to the following formula:
where SOA - the sum of own current assets (or own working capital); SK - the total amount of equity of the enterprise [Ibid].
These ratios are interrelated: for example, if the ratio of non-current assets with equity is more than one, then the company has no problems with liquidity and financial stability - short-term debt is less than current assets, and the current ratio is more than one.
Not only the current financial condition, but also the investment attractiveness of the company and its development prospects depend on the financial balance. The optimal capital structure ensures financial stability, maximizes the level of financial profitability, minimizes the level of financial risks, as well as its cost. Violation of the financial balance causes financial difficulties, can lead to insolvency and bankruptcy. To monitor financial equilibrium, managers should regularly analyze reporting data using the proposed indicators, which helps answer questions: what is the current state and are there any certain “imbalances” caused by certain incorrect or risky decisions, and timely correct this process.
So, one of the main tasks of capital formation - optimization of its structure, taking into account a given level of its profitability and risk - is solved by different methods. One of the main mechanisms for implementing this task is financial leverage.
Financial leverage characterizes the company's use of borrowed funds, which affects the change in the rate of return on equity. In other words, financial leverage is an objective factor that arises with the emergence of borrowed funds in the amount of capital of an enterprise and allows it to receive additional profit on equity.
The indicator reflecting the level of additionally generated profit on equity with a different share of borrowed funds is called the effect of financial leverage. It is calculated using the following formula:
EFL _ (1 - SNp) X (КВРа - PC) X SK, (12)
where EFL - the effect of financial leverage, consisting in the increase in the rate of return on equity,%; C - becoming
income tax expressed as a decimal fraction; KVRa - gross profitability ratio of assets (ratio of gross profit to average value of assets),%; PC - the average amount of interest on a loan paid by an enterprise for the use of borrowed capital,%; ЗК - the average amount of borrowed capital used by the enterprise; SK - the average amount of equity capital of the enterprise.
In the formula for calculating the effect of financial leverage, three main components can be distinguished:
1) the tax corrector of financial leverage (1 - SNP), which shows the extent to which the effect of financial leverage is manifested in connection with a different level of profit taxation;
2) the differential of financial leverage (KVR - PC), characterizing the difference between the coefficient of gross margin of assets and the average interest on a loan;
3) the coefficient of financial leverage ZK L
I, which characterizes the amount of borrowed
capital used by the enterprise, per unit of equity.
The selection of these components allows you to purposefully control the effect of financial leverage in the financial process of the enterprise.
The tax corrector of financial leverage is practically independent of the enterprise, as the income tax rate is established by law. At the same time, in the process of managing financial leverage, a differentiated tax corrector can be used in the following cases: a) if differentiated tax rates of profit are established for various types of activities of the enterprise; b) if for certain types of activities the company uses tax benefits on profits; c) if individual subsidiaries of the enterprise operate in the free economic zones of their country, where the preferential tax treatment of profits applies; d) if individual subsidiaries
enterprises operate in countries with a lower level of taxation of profits.
In these cases, by influencing the sectoral or regional structure of production (and, consequently, the composition of profits by the level of its taxation), it is possible to lower the average tax rate for profits and increase the effect of the tax corrector on financial leverage on its effect (ceteris paribus).
The main condition for achieving the positive effect of financial leverage is its differential. This effect is manifested only when the level of gross profit generated by the assets of the enterprise exceeds the average interest for the loan used (a value that includes not only its direct rate, but also other unit costs of attracting it, insurance and servicing), i.e. when the differential of financial leverage is a positive value. The greater the positive value of the differential of financial leverage, the higher, other things being equal, will be its effect.
Due to the high dynamism of this indicator, it requires constant monitoring in the process of managing the effect of financial leverage. This dynamism is due to several factors.
First of all, during a period of worsening financial market conditions (primarily, a decrease in the supply of free capital), the cost of borrowed funds can increase sharply, exceeding the level of gross profit generated by the assets of the enterprise.
In addition, the decrease in the financial stability of the enterprise in the process of increasing the share of borrowed capital leads to an increase in the risk of bankruptcy, which forces lenders to increase the interest rate for the loan, taking into account the inclusion of premiums for additional financial risk. At a certain level of this risk (and, accordingly, the general interest rate for a loan), the differential of financial leverage can be reduced to zero (at which the use of borrowed capital will not give an increase in return on equity) and even acquire a negative value (at which the return on equity will decrease, so as part of the net profit it generates will go to service
used borrowed capital at high interest rates). Finally, during a period of worsening commodity market conditions, the volume of sales of products is reduced, and, accordingly, the gross profit of the enterprise from operating activities. In these conditions, the differential value of financial leverage can become negative even at constant interest rates for loans due to a decrease in the gross margin of assets.
The formation of a negative value of the differential of financial leverage for any of the above reasons always leads to a decrease in the rate of return on equity. In this case, the use of borrowed capital by the enterprise has a negative effect.
The financial leverage ratio is the lever that multiplies (changes proportionally to the multiplier or coefficient) the positive or negative effect obtained due to the corresponding value of its differential. If the differential is positive, any increase in the financial leverage ratio will cause an even larger increase in the return on equity ratio, and if the differential is negative, the increase in the financial leverage ratio will lead to an even higher rate of decrease in the return on equity. In other words, an increase in the financial leverage ratio multiplies an even greater increase in its effect (positive or negative depending on the positive or negative value of the differential of financial leverage). Similarly, a decrease in the financial leverage ratio will lead to the opposite result, reducing even more its positive or negative effect.
Consequently, with a constant differential, the financial leverage ratio can be the main generator of both an increase in the amount and level of return on equity, and the financial risk of loss of this profit. Similarly, at a constant coefficient of financial leverage
positive or negative dynamics of its differential can generate both an increase in the amount and level of profit on equity, and the financial risk of its loss.
Knowledge of the mechanism of the impact of financial leverage on the level of profitability of equity and the level of financial risk allows you to purposefully manage both the value and structure of capital of the enterprise.
The financial leverage mechanism is most effectively used in the process of optimizing the capital structure of an enterprise. The optimal capital structure is such a ratio of the use of own and borrowed funds, which ensures the most effective proportionality between the financial profitability coefficient and the financial stability coefficient of the enterprise, i.e., its market value is maximized.
List of references
1. Blank, I. A. Financial strategy of the enterprise / I. A. Blank. Kiev: Elga, Nika Center, 2004. 720 p.
2. Fox, M. I. Review of models of the theory of capital structure and analysis of their solvency / M. I. Lisitsa // Finance and credit. 2007. No. 9. P. 48-55.
3. Perevozchikov, A. G. Determination of the capital structure based on industry indicators from the collections of financial statistics / A. G. Perevozchikov // Finance and Credit. 2006. No. 8. S. 16-18.
4. Stanislavchik, E. Ensuring financial equilibrium as a tactic of company management / E. Stanislavchik, N. Shumskaya // Problems of theory and practice. 2006. No. 12. P. 43-51.
5. Sysoeva, EF A comparative analysis of approaches to the problem of optimizing the capital structure / EF Sysoeva // Finance and credit. 2007. No. 25. S. 55-59.
6. Sysoeva, EF Capital structure and financial stability of the organization: practical aspect / EF Sysoeva // Finance and credit. 2007. No. 22. S. 24-29.
7. Sysoeva, EF Financial resources and capital of the organization: reproductive approach / EF Sysoeva // Finance and credit. 2007. No. 21. P. 6-11.
The indicators of capital structure are intended to show the degree of possible risk of bankruptcy of an enterprise in connection with the use of borrowed financial resources. Indeed, if the company does not use borrowed funds at all, then the risk of bankruptcy of the company is zero. With an increase in the share of borrowed capital, the risk of bankruptcy increases, so does the volume of the company's obligations. This group of financial ratios is primarily of interest to existing and potential creditors of the company. The company's management and owners evaluate the company as a continuously operating business. Lenders have a twofold approach. Lenders are interested in financing the activities of a successfully operating enterprise, the development of which will meet expectations. Along with this, they should take into account the possibility of a negative development of events and the possible consequences of non-payment of debt and liquidation of the company. Lenders do not receive any benefits from the successful operation of the company: they simply pay interest on time and pay off the capital amount of the debt. Therefore, they should carefully analyze the risks that exist to pay off debts in full, especially if a loan is provided for a long term. Part of this analysis is to determine how significant the debt recovery requirement is if the company is in significant difficulty.
As a rule, the debts of ordinary creditors are repaid after paying taxes, paying off wage arrears and satisfying creditors' claims for secured loans that are provided for specific assets, for example, building or equipment. Assessing the liquidity of a company allows you to judge how secure a regular lender is. The group of financial ratios discussed below helps determine the company's dependence on borrowed capital (how the company uses financial leverage) and compare the positions of creditors and owners. A separate group is formed by financial indicators characterizing the company's ability to service debt using funds received by the company from its continuous operations.
In accordance with the previously considered concept of financial leverage, the successful use of borrowed funds contributes to an increase in the profits of the owners of the enterprise, since they own profits earned on these funds in excess of interest paid, which leads to an increase in the company's own capital.
From the point of view of the lender, the debt in the form of interest payments and repayment of the principal (capital) amount of the debt should be paid to him even if the profit received is less than the amount of payments due to him. Owners of the company through its management must satisfy the claims of creditors, which can adversely affect the company's equity.
The positive and negative impact of financial leverage increases in proportion to the amount of borrowed capital used by the enterprise. The lender's risk increases with the owners' risk.
Debt to asset ratios represent the initial and broadest assessment that can be made by seeking to assess the lender's risk. This indicator is calculated by the formula:
The calculation according to this formula is made for a point in time, and not for a period. This ratio determines the share of “other people's money” in the total amount of claims against the company's assets. The higher this ratio, the greater the likely risk for the lender.
The calculation results for SVP for three time points are shown below:
These data indicate that about 50 percent of the sources of financial resources received by the enterprise from borrowed sources. The question arises: is it good or bad? There is no single answer to this question. It all depends on the preferences of the owners of the company and its management, specifically on their attitude to risk. Managers striving to avoid the risk of bankruptcy by all means will seek to reduce this indicator and attract additional financial resources by issuing new shares. Managers and owners of the company who have a commitment to risk, on the contrary, will increase the share of liabilities, seeking to increase profits due to positive financial leverage. But here there is a contradiction with potential sources of borrowed funds. In fact, an increase in the share of borrowed resources in the capital structure of a company leads to an increase in risk not only for the company itself, but also for its potential lenders. And if the company does not have the opportunity to demonstrate its respectable “credit history”, then it will not be able to count on receiving an additional loan. A situation arises in which the managers of the enterprise would like to receive additional credit, thereby increasing the indicator in question, and who will give them. At the same time, there are very respectable companies that have demonstrated their high credit reliability, and lenders willingly lend money to these companies, despite the high value of the ratio of debt to total assets. An example of such a company is General Motors Inc., which has a value of the indicator at the level of 90%.
SVP is not one of the “creditworthy” enterprises due to its short life, and therefore the value of the ratio of debt to total assets of 50 percent can be considered critical for this enterprise in the sense that it is unlikely to be able to expect a new loan. A slight decrease in this indicator in the XY year was the result of a significant decrease in accounts payable.
However, it cannot be stated unequivocally that the given indicator is an absolutely correct assessment of how much the company can pay off its debts. The fact is that the carrying amount of assets does not always correspond to the real economic value of these assets or even their residual value. In addition, this ratio does not give us any idea of \u200b\u200bhow the amount of profit received by the company can change, which may affect the payment of interest and repayment of the capital amount of the debt.
The ratio of debt to capitalization is an indicator that is formed using the ratio of long-term debt to the amount of capitalization. This indicator gives a more accurate picture of the company's risk when using borrowed funds. By capitalization we mean the total amount of liabilities of the enterprise with the exception of its short-term obligations. The calculation of this indicator is carried out according to the formula:
By definition, capitalization includes the sum of long-term claims against the assets of the company, both by lenders and owners, but does not include current (short-term) liabilities. The total amount corresponds to what we call net assets if no adjustments have been made, such as excluding deferred taxes from the calculation. If deferred tax is not excluded, then calculating this indicator for SVP leads to the following results:
If we exclude the amount of deferred taxes, then the coefficient will be respectively equal: 23.73%, 19.34% and 16.63%. There is a decrease in the ratio of debt to capitalization due to the repayment of part of a long-term bank loan.
Much attention is paid to this ratio, since many loan agreements for this company, whether it is a closed private company or open joint-stock company, contain certain conditions governing the maximum share of borrowed capital of the company, expressed as the ratio of long-term debt and capitalization.
A similar characteristic, but expressed in the form of a different relationship, is an indicator of the ratio of borrowed and own capital. This indicator is directly related to the previous one and can be calculated directly with its help. In fact, let D be the sum of long-term debt, E be the amount of equity capital of the company, and y be the ratio of debt to capitalization, i.e. y \u003d D / (D + E). If we now use z \u003d D / E to denote the ratio of debt to equity, then it is easy to obtain that z \u003d y / (1 - y). We will calculate the ratio of debt to equity
This indicator easily interprets the state of capital structure. The potential lender clearly sees that, for example, as of 01.01.XZ, the long-term debt of the enterprise is about 21 percent of the amount of equity. Provided that the company has a sufficiently high liquidity (i.e., the ability to pay off its short-term debts), an additional loan may be provided. Note that having only the value of the first of the indicators considered in this group, we could not draw such a conclusion, since there long-term debts were not separated from short-term ones.
The ratio of debt to equity estimates the share of borrowed financial resources used and is calculated as the ratio of the total debt, including current liabilities and all types of long-term debt, and the total equity of the company. This ratio shows in another form the relative shares of the requirements of the lenders and owners and is also used to characterize the company's dependence on borrowed capital. For SVP, this indicator has the following meanings:
The existence of various options for indicators of the structure emphasizes how carefully the rules of financial analysis and the conditions governing the provision of a particular loan are developed. But the ratios give only the first general idea of \u200b\u200bthe ratio of risk and reward when using borrowed funds. The next step are indicators of debt service.
The second group of indicators that we analyze in the framework of this methodology are capital structure indicators (financial stability ratios), which reflect the ratios of own and borrowed funds in the sources of financing of the organization, i.e. characterize the degree of its financial independence from creditors. To construct a recognition technique for the hidden stage of the crisis, the following indicators were identified (Table 4.4):
1) The share of equity in working capitalor equity ratio(K 9), calculated as the ratio of equity in circulation to the entire value of current assets. The indicator characterizes the ratio of own and borrowed working capital and determines the degree of security of the economic activity of the organization with its own working capital necessary for its financial stability.
2) Autonomy ratio(K 10), or financial independence calculated as the quotient of dividing equity capital by the amount of the organization’s assets, and determining the share of the organization’s assets that are covered by equity (provided by own sources).
The remaining share of assets is covered by borrowed funds. The indicator characterizes the ratio of own and borrowed capital of the organization.
3) The ratio of total liabilities to total assets(K 11) - an indicator reflecting the share of assets that is financed by long-term and short-term loans.
Table 4.3
Solvency indicators
|
№ p / p |
Index |
Conv. reference |
Index calculation formula |
Calculation formula coefficient |
Value range |
Number value signal |
|
The growth index (decrease) of the ratio A 2 / P 2 |
K 2 \u003d (p. 230 + p. 240) / p. 690 of form No. 1 | |||||
|
0.8≤I 1<0,9 | ||||||
|
0.7≤I 1<0,8 | ||||||
|
0,5≤I 1<0,7 | ||||||
|
The index of growth (decrease) in the degree of solvency of the total |
K 2 \u003d (DO + KO) / W cf m K 2 \u003d (p. 690 + p. 590 of form No. 1) / W cf m | |||||
|
1,1 | ||||||
|
1,2 | ||||||
|
Index of growth (decrease) in the debt ratio of bank loans and borrowings |
K 3 \u003d (DO + H) / W cf m K 3 \u003d (p. 590 + p. 610 form No. 1) / W cf m | |||||
|
1,1 | ||||||
|
1,2 | ||||||
|
Index of growth (decrease) in the debt ratio to other organizations |
K 4 \u003d Short circuit / W cf M K 4 \u003d (p. 621 + p. 62 + + p. 623 + p. 627 + + p. 628 of form No. 1) / In cf. m | |||||
|
1,1 | ||||||
|
1,2 | ||||||
|
The index of growth (decrease) in the fiscal system debt ratio |
K 5 \u003d ST / W cf m K 5 \u003d (p. 625 + p. 626 form No. 1) / V cp m | |||||
|
1,1 | ||||||
|
1,2 | ||||||
|
The index of growth (decrease) in domestic debt ratio |
K 6 \u003d S / W cf m K 6 \u003d (p. 624 + p. 630 + + p. 640 + p. 650 + + p. 660 of form No. 1) / In p. M | |||||
|
1,1 | ||||||
|
1,2 | ||||||
|
Solvency growth (decrease) index on current liabilities |
K 7 \u003d KO / V av m K 7 \u003d p. 690 form No. 1 / V av m | |||||
|
1,1 | ||||||
|
1,2 | ||||||
|
Growth (decrease) index of coverage of current liabilities with current assets |
K 8 \u003d OA / KO K 8 \u003d p. 290 / p. 690 form No. 1 | |||||
|
0.8≤I 8<0,9 | ||||||
|
0.7≤I 8<0,8 | ||||||
|
0,5≤I 8<0,7 | ||||||
Table 4.4
Capital structure indicators
|
№ p / p |
Index |
Conv. reference |
Calculation formula index |
Calculation formula coefficient |
Value range |
Number value signal |
|
Index of growth (decrease) in the ratio of equity |
K 9 \u003d SK-VA / OA K 9 \u003d (p. 490-p. 190) / p. 290 form No. 1) | |||||
|
0.8≤I 9<0,9 | ||||||
|
0.7≤I 9<0,8 | ||||||
|
0,5≤I 9<0,7 | ||||||
|
The growth (decrease) index of the autonomy coefficient |
K 10 \u003d SC / (VA + OA) K 10 \u003d p. 490 / (p. 190 + p. 290 of form No. 1) | |||||
|
0.9≤I 10<1 | ||||||
|
0.8≤I 10<0,9 | ||||||
|
0.7≤I 10<0,8 | ||||||
|
0,5≤I 10<0,7 | ||||||
|
Index of growth (decrease) in the ratio of total liabilities to total assets |
K 11 \u003d (DO + KO) / (VA + OA) K 11 \u003d (p. 590 + p. 690) / (p. 190 + p. 290 form No. 1) | |||||
|
1 | ||||||
|
1,1 | ||||||
|
1,2 | ||||||
|
1,5 | ||||||
|
Index of growth (decrease) in the ratio of long-term liabilities to assets |
K 12 \u003d DO / (VA + OA) K 12 \u003d p. 590 / (p. 190 + p. 290 form No. 1) | |||||
|
1 | ||||||
|
1,1 | ||||||
|
1,2 | ||||||
|
1,5 | ||||||
|
The index of growth (decrease) in the ratio of total liabilities to equity |
K 13 \u003d (DO + KO) / SK K 13 \u003d (p. 590 + p. 690) / p. 490 form No. 1 | |||||
|
1 | ||||||
|
1,1 | ||||||
|
1,2 | ||||||
|
1,5 | ||||||
|
Index of growth (decrease) in the ratio of long-term liabilities to non-current assets |
K 14 \u003d DO / VA K 14 \u003d p. 590 / p. 190 of form No. 1 | |||||
|
1 | ||||||
|
1,1 | ||||||
|
1,2 | ||||||
|
1,5 | ||||||
Designations to table 4.4: SK - capital and reserves of the organization; VA - non-current assets.
4) Long-term liabilities to assets ratio(K 12) shows the proportion of assets financed by long-term loans.
5) The ratio of total liabilities to equity(K 13) - the ratio of credit and own sources of financing.
6) The ratio of long-term liabilities to non-current assets(K 14) shows what proportion of fixed assets is financed from long-term loans.
3. The third group is performance indicators for the use of working capital, profitability and financial result,assessing the velocity of circulation of funds invested in current assets. They in this methodology are supplemented by the working capital ratios in production and in calculations, the values \u200b\u200bof which characterize the structure of current assets (Table 4.5):
1) The ratio of working capital (K 15 ) it is calculated by dividing the current assets of the organization by the average monthly revenue and characterizes the volume of current assets expressed in the average monthly income of the organization, as well as their turnover. This indicator estimates the velocity of the funds invested in current assets.
2) Working capital ratio in production (TO 16 ) calculated as the ratio of the value of working capital in production to the average monthly revenue. Working capital in production is defined as cash in inventory, including VAT minus the value of goods shipped.
The coefficient characterizes the turnover of inventory of the organization. Its values \u200b\u200bare determined by the industry specifics of production, characterize the effectiveness of production and marketing activities of the organization.
3) Working capital Ratio in the calculations (K 17 ) determines the velocity of circulating assets of the organization, not involved in direct production. First of all, it characterizes the average terms of settlements for products shipped but not yet paid, that is, it determines the average terms for which the working capital in payments is withdrawn from the production process. Also, he can give an idea of \u200b\u200bhow liquid the products manufactured by the organization are, and how effectively its relations with consumers are organized, characterizes the probability of doubtful and uncollectible receivables and their cancellation as a result of underpayment of payments, that is, the degree of commercial risk.
4) Return on working capital (K 18 ) reflects the efficiency of the use of working capital. The index determines how much profit falls on one ruble invested in current assets.
5) Return on sales (K 19 ) reflects the ratio of profit from the sale of products and income received in the reporting period (Table 4.5).
Table 4.5
Performance indicators for the use of working capital, profitability and financial result
|
№ p / p |
Index |
Conv. reference |
Calculation formula index |
Formula calculation coefficient |
Value range |
Number signal value |
|
Index of growth (decrease) in the ratio of working capital |
K 15 \u003d OA / B sr m K 15 \u003d page 290 of form No. 1 / B sr m | |||||
|
0.9≤I 15<1 | ||||||
|
0.8≤I 15<0,9 | ||||||
|
0.7≤I 15<0,8 | ||||||
|
0,5≤I 15<0,7 | ||||||
|
Index of growth (decrease) in the working capital ratio in production |
K 16 \u003d OSB / V m; K 16 \u003d (p. 210 + p. 220-p. 215 of form No. 1) / V m | |||||
|
0.9≤I 16<1 | ||||||
|
0.8≤I 16<0,9 | ||||||
|
0.7≤I 16<0,8 | ||||||
|
0,5≤I 16<0,7 | ||||||
|
Index of growth (decrease) in the working capital ratio in the calculations |
K 17 \u003d OSR / W cf m K 17 \u003d (p. 290-p. 210 + p. 215 of form No. 1) / W cf. | |||||
|
0.9≤I 17<1 | ||||||
|
0.8≤I 17<0,9 | ||||||
|
0.7≤I 17<0,8 | ||||||
|
0,5≤I 17<0,7 | ||||||
|
Index of growth (decrease) in return on working capital |
K 18 \u003d P / OA K 18 \u003d p. 160 of form No. 2 / p. 290 of form No. 1 | |||||
|
0.9≤I 18<1 | ||||||
|
0.8≤I 18<0,9 | ||||||
|
0.7≤I 18<0,8 | ||||||
|
0,5≤I 18<0,7 | ||||||
|
Index of growth (decrease) in sales profitability |
K 19 \u003d P pr / V K 19 \u003d p.050 / p.010 of form No. 2 | |||||
|
0.9≤I 19<1 | ||||||
|
0.8≤I 19<0,9 | ||||||
|
0.7≤I 19<0,8 | ||||||
|
0,5≤I 19<0,7 | ||||||
|
Index of growth (decrease) in average monthly production per employee |
K 20 \u003d V Wed m / SR K 20 \u003d V Wed m / p. 760 of form No. 5 | |||||
|
0.9≤I 20<1 | ||||||
|
0.8≤I 20<0,9 | ||||||
|
0.7≤I 20<0,8 | ||||||
|
0,5≤I 20<0,7 | ||||||
Average monthly output per employee (K 20 ) determines the efficiency of use of labor resources of the organization and the level of labor productivity, and also characterizes the financial resources for conducting business activities and fulfillment of obligations reduced to one employee of the analyzed organization (Table 4.5).
Designations for table 4.5:
OSB - working capital in production;
OCP - current assets in the calculations;
P - profit after payment of all taxes and deductions;
P ol - profit from sales; In - the revenue of the organization;
SCR - the average number of employees of the organization.
4. The last group of indicators included in the methodology is indicators of the effectiveness of the use of non-current capital and investment activity,characterizing the efficiency of use of fixed assets of the organization and determining how the total amount of available fixed assets (machinery, equipment, buildings, structures, vehicles) corresponds to the scale of the organization’s business.
We have used the following indicators (Table 4.6):
1) Non-current capital efficiency, or return on assets (TO 21 ), which is determined by the ratio of average monthly revenue to the value of non-current capital and characterizes the efficiency of use of fixed assets of the organization.
Less than the industry average, the value of this indicator characterizes insufficient workload of the equipment if the organization during the period under review did not acquire new expensive fixed assets.
While a very high value of this indicator may indicate a complete load of equipment and lack of reserves, as well as a significant degree of physical and moral depreciation of obsolete production equipment.
2) Coefficient of investment activity (K 22 ), characterizing investment activity and determining the amount of funds allocated by the organization for the modification and improvement of property, as well as financial investments in other organizations.
Strong deviations of this indicator in any direction may indicate an incorrect organization development strategy or insufficient management control over management activities.
3) The profitability Ratio of non-current assets (K 23 ), demonstrating the ability of the organization to provide a sufficient amount of profit in relation to fixed assets.
4) Return on investment (K 24 ), showing how many monetary units the organization needed to get one monetary unit of profit. This indicator is one of the most important indicators of competitiveness.
Designations to table 4.6:
NA - intangible assets;
OS - fixed assets.
Table 4.6
Non-current capital efficiency and investment activity
|
№ p / p |
Index |
Conv. reference |
Index calculation formula |
Coefficient calculation formula |
Value range |
Number value signal |
|
Capital productivity growth (decrease) index |
K 21 \u003d V Wed m / VA K 21 \u003d B Wed m / page 190 of form No. 1 | |||||
|
0.9≤I 21<1 | ||||||
|
0.8≤I 21<0,9 | ||||||
|
0.7≤I 21<0,8 | ||||||
|
0,5≤I 21<0,7 | ||||||
|
Index of growth (decrease) in the coefficient of investment activity |
K 22 \u003d (VA-ON-OS) / VA K 2 \u003d (p. 130 + p. 135 + P. 140) / p. 190 of form No. 1 | |||||
|
0.9≤I 22<1 | ||||||
|
0.8≤I 22<0,9 | ||||||
|
0.7≤I 22<0,8 | ||||||
|
0,5≤I 22<0,7 | ||||||
|
Index of growth (decrease) in the profitability ratio of non-current assets |
K 23 \u003d P / VA K 23 \u003d p. 160 of form No. 2 / p. 190 of form No. 1 | |||||
|
0.9≤I 23<1 | ||||||
|
0.8≤I 23<0,9 | ||||||
|
0.7≤I 23<0,8 | ||||||
|
0,5≤I 23<0,7 | ||||||
|
Index of growth (decrease) in the rate of return on investment |
K 24 \u003d P / (SK + DO) K 24 \u003d p. 160 of form No. 2 /( pp. 490+p. 590 of form No. 1) | |||||
|
0.9≤I 24<1 | ||||||
|
0.8≤I 24<0,9 | ||||||
|
0.7≤I 24<0,8 | ||||||
|
0,5≤I 24<0,7 | ||||||
After assigning to each signal about the threat of a hidden crisis (s i, i \u003d 1..n, where n is the number of indicators selected for analysis) of a numerical value, it is proposed to aggregate the data in a table of the following form:
Table 4.7
Numerical values \u200b\u200bof crisis threat signals
|
№ p / p |
Crisis Alert |
Signal numerical value |
Such tables need to be built for each group of indicators.
It is further proposed to introduce two intermediate indicators (S is the counter of true conditions, and F is the counter of the total strength of the signals about the threat of a hidden crisis), which are calculated according to the following algorithm:
To calculate the magnitude of the threat of a hidden crisis for each group of indicators or for the organization as a whole, it is proposed to use the following formula:
where M is the scale of the signals about the threat of a hidden crisis;
n is the number of analyzed indicators for the group or for the whole organization.
The magnitude of the crisis threat signals characterizes the crisis in terms of breadth of coverage and gives an idea of \u200b\u200bthe number of areas covered by the hidden crisis, or in which the development of the crisis is possible in the near future.
The intensity of the crisis threat is proposed to be calculated by the formula:
(4.39)
where I ′ is the intensity of the signals about the threat of a hidden crisis;
r is the dimension of the scale of numerical values \u200b\u200bof the signals (here r \u003d 5).
The intensity of the crisis threat signals characterizes the crisis by depth of coverage and gives an idea of \u200b\u200bthe level of threat of the development of a hidden crisis.
The scale and intensity of the crisis threat signals is proposed to be assessed on the following scale (Table 4.8):
Table 4.8
Linguistic assessment of the magnitude and intensity of crisis threat signals
|
№ p / p |
The numerical value of the indicator |
Linguistic score indicator |
Forecast |
|
|
extremely low |
Potential |
|||
|
Hidden crisis |
Nascent |
|||
|
Developing |
||||
|
extremely high |
Progressive |
|||
Values \u200b\u200babove 40% allow us to conclude that there is a hidden crisis in the organization.
With values \u200b\u200bof indicators less than 40%, the probability of a hidden crisis is small, the state is characterized as a potential crisis with the subsequent possible development of a hidden crisis.
1) The methodology developed and presented by us allows us to recognize the earliest stages of the crisis, including the stages of the latent crisis, which are characterized by the absence of visible symptoms of the development of crisis phenomena and cannot be diagnosed by standard methods;
2) When constructing the methodology, a system of indices was used that allows you to evaluate the performance of the organization in dynamics, which gives a more objective assessment of the development of crisis phenomena in the organization and allows you to take into account even minimal deviations in its work;
3) The linguistic scale of assessments of signals about the threat of the crisis allows us to draw not only a conclusion about the presence or absence of a hidden crisis, but also to calculate the magnitude and intensity of the crisis;
4) The developed methodology allows us to assess the crisis both in terms of breadth and depth of coverage, which allows us to develop a set of appropriate measures to localize and overcome the hidden crisis in the organization.
Analysis of capital structure and long-term solvency
An internal analysis of the capital structure is associated with the assessment of alternative financing options for the enterprise. Funds supporting the activities of the enterprise are usually divided into own and borrowed.
The equity capital of the enterprise is the value (monetary value) of the property of the enterprise wholly owned by it.
Borrowed capital is capital that is attracted by the company from the outside in the form of loans, financial assistance, amounts received on bail, and other external sources for a specific period, on certain conditions, under any guarantees.
The capital structure used by the enterprise determines many aspects of not only financial, but also operational and investment activities, and has an active impact on the final result of these activities. It affects the indicators of return on assets and equity, financial stability and liquidity ratios, forms the ratio of profitability and risk in the process of enterprise development.
The solvency of the company is one of the most important indicators that helps to characterize the financial condition of the company in the modern economy, if the company is insolvent, then no one will want to deal with it. Solvency of an enterprise means the ability to repay it on time and in full its debt obligations. Depending on what obligations of the enterprise are taken into account, distinguish between short-term and long-term solvency. The long-term solvency ratio (K) characterizes the financial condition of the enterprise for a long period and is necessary for the early detection of signs of bankruptcy. It is calculated as the ratio of borrowed capital (DZ) to equity (SC)
Analysis of capital structure as a basis for assessing long-term financial stability and solvency
The analysis of long-term financial stability is based on an assessment of the effectiveness of the capital structure. Under the structure of capital refers to the ratio of own and borrowed sources of capital. Here, special attention should be paid not to the entire mass of obligations, but to the ratio with the equity of long-term borrowed funds, since short-term obligations are intended primarily for financing current activities.
Assessment of long-term financial stability is most important from the point of view of business development prospects. At the same time, modern economic realities do not allow Russian organizations to actively attract various long-term financial instruments to finance their business, such as mortgages, leasing, long-term bonds, pension obligations, etc. due to the lack of relevant legislation on these issues. Evidence of this situation is the state of the section “Long-term liabilities” of the balance sheet of most Russian organizations and the list of articles in this section. Long-term liabilities in the balance sheet are represented only by loans and borrowings and, therefore, we can conclude that in this regard, this area of \u200b\u200banalysis cannot be fully implemented, and, therefore, the possibility of assessing the business prospects of such organizations in the long term is underestimated.
Virtually no organization can do with its own sources. There are a large number of reasons for this and, above all, it is obvious that borrowed sources are used to physically increase capital in order to increase income and profits.
It is necessary to compare the advantages and disadvantages of using own and borrowed sources of financing in order to better understand their nature and the features of their influence on the structure and cost of capital. In fact, all sources used in business are involved. Investor resources are attracted as equity. Equity varies depending on the legal form of its involvement in business - sole, partner (share) and joint-stock. Loans and borrowings, as well as many financial instruments, are used as borrowed capital.
Organizations bear the costs of servicing their own and borrowed capital. The costs of servicing equity are dividends paid to shareholders and participants. Costs of servicing borrowed capital are interest.
The positive aspects of using equity are:
Stability - equity (Xob) is characterized by stability, taking into account the principle of a functioning organization;
Optional dividend payout. The requirement to pay dividends is not always mandatory in comparison with the requirement to repay loans and interest on them.
The negative aspects of using equity are:
Uncertainty in the payment of dividends - the uncertainty factor manifests itself in the process of operational financial planning, since it is difficult to predict the amount of dividends for distribution before determining the amount of net profit;
The payment of dividends from net profit means, firstly, double taxation and, secondly, disadvantage in comparison with the system of payment of interest on loans.
The positive aspects of borrowed capital include:
A method of relative insurance against inflation. Modern society lives in conditions of constant inflation. In these conditions, from an economic point of view, it is advantageous to use borrowed sources of financing, because, even insuring against inflation, the debtor always gives cheaper money than he takes. In this property of inflation, one of the key problems in the management of receivables and payables;
Stability of payments - stability of interest payments is convenient from the point of view of operational financial planning, since it minimizes the uncertainty and risk factor in planning cash flows;
The inclusion of interest expenses in expenses that reduce profit before tax, which allows to increase tax expenses and reduce income tax.
The negative aspects of using borrowed capital include a general increase in financial, credit and business risk in general, since there is always the risk of the inability to pay interest on time or pay the amount of debt, which can lead to a partial or complete loss of business.
When analyzing the use of borrowed sources of financing, it is always necessary to consider various aspects of the effectiveness of their use:
It is more profitable to use loans with longer terms - this allows you to save in each payment period as a whole on the costs of servicing the loan, as well as on tax payments;
If the cost of paying interest on loans is lower than the profit that came from investing borrowed funds, it is more profitable to use borrowed sources;
- if the cost of paying interest on loans is higher than the profit that was obtained from investing borrowed funds, it is more profitable for the organization to lend its own funds and thereby increase the income of the organization.
Financial stability is expressed by a whole system of analytical coefficients, allowing a diversified assessment of the capital structure according to the balance sheet. These ratios reflect different aspects of financial stability, and only their combined assessment allows us to draw general conclusions. Organizations, taking into account the specifics of activity, establish standard values \u200b\u200bof financial stability ratios and, during the analysis, compare standard values \u200b\u200bwith actual ones. This allows you to build a system with respect to objective evaluation criteria. In this case, the normative values \u200b\u200bcan be both external and internal.
Solvency ratios (capital structure)
The solvency of an enterprise is understood as its ability to pay off long-term obligations. This definition is confirmed by the composition of solvency ratios, which are based on the ratio of long-term assets to each other and to the total liabilities. Since long-term liability items represent equity and borrowed capital, the ratios of this group may also be called “capital structure ratios”. Unfortunately, in Russian practice, the concept of solvency of enterprises is mistakenly identified with the concept of their liquidity. Solvency indicators characterize the degree of protection of creditors and investors with long-term investments in enterprises from the risk of non-return of invested funds.
The group of solvency ratios (or capital structure) includes the following ratios:
1) coefficient of ownership;
2) the ratio of borrowed funds;
3) coefficient of dependence;
4) percentage coverage ratio.
1. Equity ratio:
K \u003d Equity / Total balance x 100%
The equity ratio characterizes the share of equity in the sources of financing of the enterprise. It also reflects the balance of interests between investors and lenders. A high proportion of equity in the structure of long-term liabilities ceteris paribus provides a stable financial position of the enterprise. Allowed values: in the Western financial department it is believed that the value of this coefficient must be maintained at a level exceeding 50%.
2. The ratio of borrowed capital:
K \u003d Borrowed capital / balance sheet x 100%
The leverage ratio reflects the share of borrowed capital in the sources of financing the activities of the enterprise. This ratio in its value is the inverse of the coefficient of ownership. Allowed values: in the Western financial management it is believed that the value of this coefficient must be maintained at a level below 50%.
3. The coefficient of dependence:
K \u003d Borrowed capital / Equity x 100%
Allowed values: in the Western financial management it is considered that a high coefficient value is undesirable. This ratio characterizes the dependence of the company on external loans. The higher the value of the indicator, the more long-term liabilities of a given enterprise, the more risky its position. Large external debt, including interest payments, means the potential danger of a cash shortage, which, in turn, can lead to bankruptcy of the enterprise.
4. Percentage coverage ratio:
K \u003d Profit before interest and taxes / Interest expense (times)
The interest coverage ratio characterizes the degree of protection of creditors from the risk of default on interest on loans placed. The ratio shows how many times during the reporting period, the company earned funds to pay interest on loans. This indicator also reflects the allowable level of reduction in the share of profit aimed at paying interest. Allowed values: the higher the coefficient value, the better.
The following is a list of financial indicators most commonly used in financial analysis. These indicators are divided into five groups, reflecting various aspects of the financial condition of the enterprise:
- Liquidity ratios
- Capital structure indicators (stability ratios)
- Profitability ratios
- Business ratios
- Investment criteria
Recommended ranges of values \u200b\u200bare also given for some indicators. The ranges most often mentioned by Russian experts are taken as such ranges. However, it should be remembered that the permissible values \u200b\u200bof indicators can differ significantly not only for different industries, but also for different enterprises of the same industry, and a complete picture of the financial condition of a company can be obtained only by analyzing the totality of financial indicators taking into account the characteristics of its activities. Therefore, the given values \u200b\u200bof indicators are purely informational in nature and cannot be used as a guide to action. The only thing that can be noticed is that if the values \u200b\u200bof the indicators differ from the recommended ones, then it is advisable to find out the reason for such deviations. I. Liquidity Ratios - Liquidity Ratios
Liquidity indicators characterize the company's ability to satisfy claims of holders of short-term debt obligations.
1. The absolute liquidity ratio
Shows what proportion of short-term debt can be covered by cash and cash equivalents in the form of marketable securities and deposits, i.e. almost completely liquid assets.
2. Quick ratio (Acid test ratio, Quick ratio)
The ratio of the most liquid part of current assets (cash, receivables, short-term financial investments) to short-term liabilities. It is usually recommended that the value of this indicator be greater than 1. However, real values \u200b\u200bfor Russian enterprises are rarely more than 0.7 - 0.8, which is recognized as acceptable.
3. Current Ratio
It is calculated as the quotient of the division of current assets into short-term liabilities and shows whether the enterprise has enough funds that can be used to repay short-term liabilities. According to international (and Russian) practice, the liquidity ratio should be in the range from one to two (sometimes up to three). The lower limit is due to the fact that working capital should be at least enough to pay off short-term obligations, otherwise the company will be in danger of bankruptcy. The excess of working capital over short-term liabilities by more than three times is also undesirable, as it may indicate an irrational structure of assets.
It is calculated by the formula: 
Recommended Values: 1 - 2
4. Net working capital (Net working capital), in monetary units
The difference between the current assets of the enterprise and its short-term liabilities. Net working capital is necessary to maintain the financial stability of the enterprise, since the excess of current assets over short-term liabilities means that the company can not only repay its short-term liabilities, but also has reserves for expanding its activities. The optimal amount of net working capital depends on the features of the company, in particular on its scale, volume of sales, speed of inventory turnover and receivables. The lack of working capital indicates the inability of the enterprise to timely repay short-term liabilities. A significant excess of net working capital over optimal demand indicates the irrational use of enterprise resources. For example: issuing shares or obtaining loans in excess of real needs.
The capital structure indicators reflect the ratio of own and borrowed funds in the sources of financing of the company, i.e. characterize the degree of financial independence of the company from creditors. This is an important characteristic of enterprise sustainability. To assess the capital structure, the following relationships are used:
5. The coefficient of financial independence (Equity to Total Assets)
It characterizes the dependence of the company on external loans. The lower the ratio, the more loans the company has, the higher the risk of insolvency. A low value of the coefficient also reflects the potential danger of an enterprise having a cash shortage. The interpretation of this indicator depends on many factors: the average level of this coefficient in other sectors, the company's access to additional debt sources of financing, and the features of current production activities.
It is calculated by the formula: 
Recommended Values: 0.5 - 0.8
6. Total liabilities to total assets (Total debt to total assets)
Another option for representing the company's capital structure. Demonstrates how much of a company's assets is financed through loans.
7. Long-term debt to assets (Long-term debt to total assets)
Demonstrates how much of an enterprise’s assets is financed by long-term loans.
It is calculated by the formula: 
8. Total liabilities to equity (Total debt to equity)
The ratio of credit and own sources of financing. As well as TD / TA, this is another form of presentation of the financial independence ratio.
9. Long-term liabilities to fixed assets (Long-term debt to fixed assets)
Demonstrates how much fixed assets are financed from long-term loans.
It is calculated by the formula: 
10. Interest coverage earned, times
It characterizes the degree of protection of creditors from non-payment of interest on loans and demonstrates: how many times during the reporting period, the company earned funds to pay interest on loans. This indicator also allows you to determine the acceptable level of decline in profit used to pay interest.
Profitability ratios show how profitable a company is.
11. The rate of return on sales (Return on sales),%
Demonstrates the share of net profit in the company's sales.
It is calculated by the formula: 
12. Return on shareholders ’equity,%
Allows you to determine the efficiency of use of capital invested by the owners of the enterprise. Typically, this indicator is compared with a possible alternative investment in other securities. Return on equity shows how many monetary units of net profit each unit invested by the owners of the company earned.
It is calculated by the formula: 
13. The return on current assets (Return on current assets),%
Demonstrates the ability of the enterprise to provide a sufficient amount of profit in relation to the working capital of the company. The higher the value of this coefficient, the more efficiently used working capital.
It is calculated by the formula: 
14. The profitability ratio of non-current assets (Return on fixed assets),%
Demonstrates the company's ability to provide a sufficient amount of profit in relation to fixed assets of the company. The higher the value of this coefficient, the more efficiently the fixed assets are used.
It is calculated by the formula: 
15. The rate of return on investment (Return on investment),%
Shows how many monetary units the company needed to get one monetary unit of profit. This indicator is one of the most important indicators of competitiveness.
It is calculated by the formula:
. Activity ratios - Business Odds
Coefficients of business activity allow you to analyze how efficiently the company uses its funds.
16. The coefficient of working capital turnover (Net working capital turnover), times
It shows how efficiently the company uses investments in working capital and how it affects sales growth. The higher the value of this coefficient, the more efficiently the company uses net working capital.
It is calculated by the formula: 
17. Fixed assets turnover ratio (Fixed assets turnover), times
Return on assets. This coefficient characterizes the efficiency of the enterprise using the available fixed assets. The higher the value of the coefficient, the more efficiently the company uses fixed assets. A low level of capital productivity indicates an insufficient sales volume or a too high level of capital investments. However, the values \u200b\u200bof this coefficient are very different from each other in different industries. Also, the value of this coefficient strongly depends on the methods of depreciation and the practice of valuing assets. Thus, the situation may arise that the rate of fixed assets turnover will be higher in an enterprise that has worn-out fixed assets.
It is calculated by the formula: 
18. Total assets turnover - Asset turnover ratio, times
It characterizes the effectiveness of the company using all available resources, regardless of the sources of their attraction. This coefficient shows how many times a year a complete cycle of production and circulation takes place, bringing the corresponding effect in the form of profit. This ratio also varies greatly by industry.
It is calculated by the formula: 
19. Stock turnover ratio (Stock turnover), times
Reflects the speed of inventory. To calculate the coefficient in days, 365 days must be divided by the coefficient value. In general, the higher the inventory turnover rate, the less funds are associated in this least liquid asset group. The increase in turnover and the reduction of stocks in the presence of significant debt in the company's liabilities are especially relevant.
It is calculated by the formula:
20. Accounts receivable turnover ratio (Average collection period), days.
Shows the average number of days required to collect a debt. The smaller this number, the faster the receivables are converted into cash, and therefore the liquidity of the current assets of the enterprise increases. A high value of the ratio may indicate difficulties in recovering funds from accounts receivable.
It is calculated by the formula: 
V. Investment ratios -
Investment criteria.21. Earnings per share (Earning per ordinary share)
One of the most important indicators affecting the market value of a company. Shows the share of net profit (in monetary units) per one ordinary share.
It is calculated by the formula:
22. Dividends per share (Dividends per ordinary share)
Shows the amount of dividends allocated to each ordinary share.
It is calculated by the formula: 
23. The ratio of stock prices and profits (Price to earnings), times
This ratio shows how many monetary units the shareholders agree to pay for one monetary unit of the company's net profit. It also shows how quickly investments in company stocks can pay off.
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