2.1. Liquidity ratios
Analysis of liquidity - describes the possibility of the enterprise to fulfill its current liabilities with its current assets. The company is liquid if its current assets exceed current liabilities.
The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. It is expressed as follows:
indicator for 2009
indicator for 2010
indicator for 2011
If the value is less than 1:1, it means the presence of high financial risk. Low liquidity may indicate problems with marketing. Ratio of 2:1 is considered optimal in theory, although some areas of business it can vary from 1.2 to 2.5. Very high ratio (3:1) is not very good. It may mean that the company has in its subordination of more than it can effectively use. This indicates worsening performance of all assets.
Company has low liquidity because there are low current ration.
Picture 1. Current ration`s changes in 2009 – 2011 years
Quick ratio, this parameter characterizes the ability of the enterprise to meet its current obligations with fast liquidity assets. Theoretically, the normal ratio is 1:1.
indicator for 2009
indicator for 2010
indicator for 2011
A company has a Quick ratio less than 1 that means it cannot currently pay back its current liabilities.
Picture 2. Quick ratio`s changes in 2009 – 2011 years
Absolute liquidity ratio (solvency) - index, which characterizes the portion of short-term financial liabilities of the enterprise that can be paid by first-class liquid assets (cash and cash equivalents), the ability of the enterprise to immediately repay its short-term payables. The theoretical optimum value of this indicator is about 0,2-0,25.
indicator for 2009
indicator for 2010
indicator for 2011
Absolute liquidity ratio in 2009 has low value, but in 2010 and 2011 enterprise can be considered as liquid because ratio exceeds the required rate.
Picture 3. Absolute liquidity ratio`s changes in 2009 – 2011 years
2.2. Turnover ratio
Turnover ratio - the system of indicators of financial activity of enterprises, which describes how quickly formed a rotating capital during his business.
Fixed assets turnover ratio is the ratio of sales (on the profit and loss account) to the value of fixed assets (on the balance sheet). It indicates how well the business is using its fixed assets to generate sales.
indicator for 2009
indicator
for 2010
indicator for 2011
Fixed assets turnover ratio demonstrates the effectiveness of fixed assets of the company.
Picture 4. Fixed assets turnover ratio`s changes in 2009 – 2011 years
Equity capital ratio - a computation that indicates the financial strength of a company. The ratio is equal to the fixed assets of a company divided by its equity capital. Equity capital is the amount of money invested in a company by its shareholders. If the ratio is greater than 1, some of the company's assets have been financed by debt.
indicator for 2009
indicator for 2010
indicator for 2011
This ratio shows the efficiency of equity companies.
Picture
6.
Equity
capital
ratio`s
changes in 2009 – 2011 years
Receivable Turnover Ratio is one of the accounting activity ratios, a financial ratio. This ratio measures the number of times, on average, receivables are collected during the period. A popular variant of the receivables turnover ratio is to convert it into an Average Collection Period in terms of days.
indicator for 2009
indicator for 2010
indicator for 2011
In this case, the more speed the faster the company gets its money from debtors.
Picture 7. Receivable turnover ratio`s changes in 2009 – 2011 years
This parameter can be calculated during the collection, in the time during which the receivables turned to cash. This period is 221 days (365:5.4) in 2009, 244 days (365:5.9) in 2010 and 223 days (365:4.2) in 2011 year.
Turnover ratio of inventory is a measure of the number of times inventory is sold or used in a time period such as a year. The equation for inventory turnover equals the cost of goods sold divided by the average inventory. Inventory turnover is also known as inventory turns, stockturn, stock turns, turns, and stock turnover.
indicator for 2009
indicator for 2010
indicator for 2011
A high inventory turnover ratio indicated that the product is selling well.
Picture 8. Inventory turnover ratio`s changes in 2009 – 2011 years
Dividing the number of days in reporting period (year or quarter) to turnover ratio of inventory, determine the number of days required for one revolution of stocks. According to the company, this figure is 268 days (365:4.6) in 2009 year, 285 days (365:2.9) in 2010 year and 221 days (365:2.5) in 2011 year.
Period of circulation of money is the period during which the company is experiencing difficulties in working capital.
Period of circulation of money = Average collection period + Average period of inventory warehousing – Average period of calculation of creditors
indicator for 2009
indicator for 2010
indicator for 2011
According to figures momentum funds are reduced, reflecting the increased turnover of funds, which positively affects businesses.