Initial data for factor analysis of the growth rate of equity capital jsc ForteBank for 2014-2016

Index	2014	2015	2016
Growth rate of equity capital due to profit, %	15,3	14,1	12,2
Profitability of sales, %	-1,69	-1,75	-1,23
Capital turnover	0,905	0,807	1,108
Capital Structure	1,35	1,26	1,23
The share of reinvested earnings in the total net profit	-7,6	-7,9	-7,3

Including by changing:

A) profitability of sales - 9.9-14.1 = -4.2%;

B) capital turnover - 13.6-9.9 = 3.7%;

C) capital structure - 13.2-13.6 = -0.4%;

D) the share of reinvested profit in the total net profit 12,2-13,2 = -1%.

The analysis of the main trends in the company's own capital management revealed a slowdown in the last year. The growth rate of equity capital is lower than last year, mainly due to a decline in the profitability of sales by 4.2% and a change in the capital structure of 0.4%, as well as a decrease in the share of reinvested profit. All this indicates a decrease in the financial independence of the enterprise.

The financial condition of the enterprise, its stability largely depend on the optimal structure of the sources of capital (the ratio of own and borrowed funds), the optimality of the structure of the assets of the enterprise and primarily on the ratio of fixed and circulating assets, and also on the balance of assets and liabilities of the enterprise.

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

• Coefficient of financial autonomy (or independence) - the share of equity in its total amount;

• Coefficient of financial dependence - the share of borrowed capital in the total balance sheet currency;

• Current debt ratio - the ratio of short-term financial liabilities to the total balance currency;

• Coefficient of long-term financial independence - (coefficient of financial stability) - ratio of own and long-term debt capital to the total balance sheet;

• Debt coverage ratio by own funds (solvency ratio) - equity to debt ratio;

• The leverage ratio or the financial risk ratio is the ratio of borrowed capital to own.

The higher the level of the first, fourth and fifth indicators and lower than the second, third and sixth, the more stable the financial condition of the enterprise.

Table 10

Liabilities structure

Index	Indicator level
	2014	2015	2016	The average for 2014-2016	Deviation (+, -)
Share of equity capital in the total balance sheet currency (enterprise financial autonomy ratio),%	74,5	79,4	81,6	78,5	+7,1
Share of borrowed capital (coefficient of financial dependence),%	25,5	20,3	18,4	21,4	-7,1
Coefficient of current debt	0,25	0,206	0,184	0,213	-0,066
Coefficient of long-term financial independence	0,745	0,794	0,816	0,785	+0,071
Debt coverage ratio of own capital	2,923	3,844	4,426	3,731	+1,503
Coefficient of financial leverage	0,342	0,26	0,226	0,276	-0,116

In this case (Table 10), the share of equity capital tends to increase. Over the reporting year, it increased by 7.1% compared to the value of 2003, as the growth rate of equity capital is higher than the growth rate of the loan. The leverage of the financial lever decreased by 0.116. This shows that the financial dependence of the enterprise on external investors has slightly decreased. In a market economy, a large and increasing share of equity does not at all mean an improvement in the position of the enterprise, the ability to respond quickly to changes in the business climate. On the contrary, the use of borrowed funds, indicates the flexibility of the enterprise, its ability to find loans and return them.

The most general index among the considered are the leverage coefficients. All other indicators in one way or another determine its magnitude.

The balance of inflows and outflows of money is possible provided that the assets and liabilities are balanced in terms of their use and cycle times. Hence, the financial balance of assets and liabilities of the balance is the basis for assessing the financial stability of the enterprise, its liquidity and solvency. Below, the financial equilibrium of the assets and liabilities of the analyzed enterprise has been estimated (Table 11).

The equity in the balance sheet is reflected in the total amount in section III of the balance sheet. To determine how much it is invested in long-term assets, it is necessary to deduct long-term bank loans for investment in real estate out of the total amount of non-current assets. The share of own capital (SOC) in the formation of non-current assets is determined as follows:

(2)

The above data indicate that fixed capital is 100% created at the expense of the company's own funds.

To find out what amount of equity is used in turnover, it is necessary to subtract the sum of long-term (non-current) assets from the total amount under section III of the balance sheet assets (section I of the balance sheet asset, minus the portion that was formed due to long-term bank loans).

The amount of own working capital can also be calculated: from the total amount of current assets (section II of the balance sheet), subtract the amount of short-term financial liabilities (section V of the pass-through minus deferred income and the reserve of future expenses and payments). The difference will show what amount of current assets is formed at the expense of equity, or what will remain in the company's turnover if all the short-term debts to creditors are simultaneously paid off.

Table 11

The structure of equity in the formation of non-current assets JSC ForteBank for 2014-2016

Index	Index level
	2014	2015	2016	The average for 2014-2016	Deviation (+, -)
Non-current assets, millions tenge	1624	1512	1336,5	1490,8	-287,5
Long-term financial liabilities, millions tenge	-	-	-	-	-
Amount of equity in the formation of non-current assets, millions tenge	1624	1512	1336,5	1490,8	-287,5
Share in the formation of non-current assets,%: Long-term loans and borrowings Own capital	100	100	100	100	-

The share of own and borrowed capital in the formation of current assets is determined as follows:

Table 12

Share of own and borrowed capital in the formation of current assets in JSC ForteBank for 2014-2016

Index	Indicator level
	2014	2015	2016	The average for 2014-2016	Deviation (+, -)
Total amount of current assets	406	367,5	467,5	413,7	+61,5
Total amount of short-term liabilities.	517,5	388	332,5	412,7	-185
The amount of own working capital	-111,5	-20,5	1325	397,7	+1436,5
Share in current assets,% Own capital Borrowed capital	-27,5 127,5	-5,5 105,5	28,9 71,1	-1,4 101,4	+56,4 -56,4

At the analyzed enterprise, as of 2016, the share of equity capital in circulation increased by 10.54 percentage points compared to 2015 and by 16.54 compared to 2014, which should be assessed positively.

An important indicator that characterizes the financial condition of an enterprise and its stability is the availability of material working capital by planned (sustainable) sources of financing, which include not only its own working capital, but also short-term bank loans for inventory, advances received from customers. It is established by comparing the amount of planned sources of financing with the total amount of material current assets (stocks).

Table 13

Structure of own working capital in JSC "ForteBank" in 2014-2016

Index	Indicator level
	2014	2015	2016	The average for 2014-2016	Deviation (+, -)
The amount of own working capital	-111,5	-20,5	135	1	+246,5
Total amount of equity	1512,5	1491,5	1471,5	1491,8	-41
Coefficient of maneuverability of equity capital	-0,0737	-0,0137	0,0917	0,0014	+0,1654

As can be seen from the data given in ForteBank JSC, material current assets in 2014 were provided by planned sources of financing by 49.6%, in 2015 by 62.4%, and in 2016 by 82.4% (more than in 2014 and in 2015 by 32.8% and 20% respectively).

Table 14

The provision of material working capital by planned sources in “ForteBank” JSC for 2014-2016

Index	Indicator level
	на 01.01.14	на 01.01.15	на 01.01.16	The average for 2014-2016	Deviation (+, -)
The amount of material current assets, millions tenge	406	367,5	467,5	413,7	+61,5
Planned sources of their formation; The amount of its own working capital; millions tenge	-111,5	-20,5	135	1	+246,5
TOTAL planned sources, millions tenge	201,5	229,5	385	272	+183,5
Level of security,%	49,6	62,4	82,4	64,8	+32,8

As the above data show, at the enterprise of JSC “ForteBank” the financial condition in 2014 and 2015 was on the verge of bankruptcy (the level of availability of planned sources is 49.6% and 62.4%, respectively), but by 2016 the situation has somewhat improved (the level of security Already 82.4%).

The stability of the financial condition can be improved by:

• Acceleration of capital turnover in current assets, as a result of which there will be a relative reduction in the ruble turnover;

• Reasonable reduction in inventories and costs (up to the standard);

• Replenishment of own working capital due to internal and external sources.

The reasons for the change in the amount of own working capital (net current assets) are established by comparing the amount at the beginning and the end of the year for each source of formation of constant capital (section III and IV of the balance sheet) and for each item of non-current assets (section I of the balance sheet). The table shows that for the reporting period (2016) the amount of its working capital increased by 284 million tenge compared to 2014. This was due to a reduction in the amount of capital investment in fixed assets.

The main conclusions on the assessment of the solvency of the company “ForteBank” JSC: the company is in 2014-2016 at the limit of bankruptcy, but with the implementation of the new financial policy, the situation has somewhat improved, so the share of own capital increased by 7.1%, the leverage of the financial lever decreased by 0.116, The share of borrowed funds in the formation of current assets amounted to 58.1%, own 41.9%.

 One of the indicators characterizing the financial position of an enterprise is its solvency, that is, the ability to timely pay off its payment obligations in cash in cash.

 Solvency assessment by balance is carried out on the basis of the liquidity characteristics of current assets, which are determined by the time necessary to turn them into cash. The less time is required to collect this asset, the higher its liquidity.

 The liquidity of the enterprise is a more general concept than the liquidity of the balance sheet. Liquidity of the balance assumes the search for payment means only at the expense of internal sources (sale of assets). But an enterprise can attract borrowed funds from outside if it has an appropriate image in the business world and a sufficiently high level of investment attractiveness. Absolute stability of the financial state, if the reserves are less than the sum of the planned sources of their formation.

Analysis of the liquidity of the balance sheet is the comparison of assets for the asset, grouped by the degree of diminishing liquidity, with short-term obligations on liabilities, which are grouped according to the urgency of their repayment.

The first group (A 1) includes absolutely liquid assets, such as cash and short-term financial investments.

The second group (A 2) includes quickly sold assets: finished goods, goods shipped and accounts receivable. The liquidity of this group of current assets depends on the timeliness of the shipment of products, the processing of bank documents, the speed of payment documents in banks, the demand for products, its competitiveness, the solvency of customers, forms of settlements,

A much longer period will be needed to convert production stocks and work in progress into finished products, and then into cash. Therefore, they are assigned to the third group of slowly sold assets (A 3).

The fourth group (A 4) is hard-to-sell assets, which include fixed assets, intangible assets, long-term financial investments, unfinished construction.

Accordingly, the liabilities of the enterprise are divided into four groups:

L 1 - the most urgent liabilities (accounts payable and bank loans, the maturity dates of which have come),

L 2 - medium-term liabilities (short-term bank loans),

L 3 - long-term bank loans and loans,

L 4 - own (joint-stock) capital, which is constantly at the disposal of the enterprise.

The balance is considered to be absolutely liquid if:

A1 L1, A2 L2, A3 L3, A4 L4 (3)

The study of the ratios of these groups of assets and liabilities for several periods will allow establishing trends in the structure of the balance sheet and its liquidity.

To assess the solvency in the short term, the following indicators are calculated: current liquidity ratio, absolute liquidity ratio, quick liquidity ratio (Table 15). Current ratio (total debt coverage ratio) is the ratio of the total amount of current assets, including inventories and work in progress, to the total amount of short-term liabilities. It shows the extent to which current assets cover working liabilities:

(4)

Excess of current assets over short-term financial obligations provides a reserve for compensation of losses that the enterprise may incur upon placement and liquidation of all current assets, except for cash. The larger the value of this stock, the greater the confidence of creditors that the debts will be repaid. Usually, the coefficient satisfies the coefficient more than 2. In the example of ForteBank JSC, the average value of 2014-2016 is only 1.03, and in 2016 it increased by 0.64 compared to 2014 and amounted to 1.4. Although this indicator is still very small, there is still a tendency to increase.

Table 15

Liquidity indicators of "ForteBank" JSC in 2014-2016

Index	As at 01.01.14	As at 01.01.15	As at 01.01.16	The average for 2014-2016	Deviation (+,-)
Coefficient of current liquidity	0,76	0,93	1,40	1,03	+0,64
Absolute liquidity ratio	0,05	0,03	0,01	0,03	-0,04
Coefficient of quick liquidity	0,61	0,78	0,90	0,76	+0,29

Analysis of the solvency and liquidity of the enterprise ForteBank JSC revealed the current liquidity ratio increased by 0.281, mainly due to changes in the amount of current liabilities (+0.291), the quick liquidity ratio within the norm in 2014 was 0.9 (at a rate of 0.7-1 , 0), the absolute liquidity ratio this indicator is quite small, and for 2014 - 2016 decreased by 0.04. In general, we can conclude that while the company's liquidity is unsatisfactory, although most of the indicators have a positive trend. It is necessary to take a number of measures in the field of management of the company's current assets.