The liquidity of the balance sheet is one of the most important criteria of stability.

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2020-07-03 02:11:08

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Without any doubt, any financial Manager must be able to analyze the figures contained in the financial statements of the entity for which he works. The benefit of this analysis is difficult to overestimate as it is based all the work in the financial Department.

Western economists and analysts recognize as the most meaningful form of reporting the statement of profit and loss, as not that other, as profit is the most important outcome indicator of performance. In Russia, however, primacy is given to the accounting balance-sheet, which also makes sense. Analyzing its constituent indicators, it is possible to draw a conclusion about the financial stability of the firm and on the level of its liquidity. Next will be considered what characteristics of how to assess the liquidity of the balance sheet.

Domestic And foreign practice offer various options such analysis, but the most widely preparation and study of the so-called balance of liquidity. In this method, balance sheet liquidity is determined by combining in the same number of groups of indicators liability and asset, followed by a comparison of the values obtained.

Data groups are formed in order of decreasing liquidity (for assets) or in order of decreasing urgency (for liability). Every financial Manager can choose the number of groups at their own discretion, but we consider the most traditional option, where the liquidity of the balance sheet is studied by pairwise comparison of the four “basket” of assets and liabilities.

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Before considering the individual groups needed little to clarify the meaning of “liquidity”. This category characterizes the ability of a property with the least possible losses and in the shortest time to take the form of money. Thus, the most liquid assets, obviously, is money. And, for example, stock liquidity is determined by demand: the more people willing to buy them, the easier you will be able to sell them at normal market price.

As has been said, the money any other liquid asset, so they are included in the first group. Also could include short-term investments, doubts about the liquidity of which is missing. The second group consists of marketable assets (other current assets and short-term receivables). Third – all stocks and long-term investments (one to exclude the amount of participation in capital of other organizations). Accordingly, all other assets forming a fourth group and are recognized slowly implemented.

In the passive also formed a number of groups. Accounts payable and value of other short-term debt included in the first group, the remaining short-term commitment – in the second, but the long term – in the third one. Liabilities that are not debt, go on the formation of the fourth group.

To determine the liquidity of the balance sheet, a comparison of the sizes of the created groups. The first three groups of assets must exceed the corresponding liabilities of the group. The ratio between the fourth group is the regulatory. If these conditions are met, the financial condition of the company is at an acceptable level. If there is a deviation, it is necessary to take measures to adjust the structure of assets and liabilities.

The implementation of the process of financial management is very important to evaluate the liquidity balance. Businesses that do not monitor these indicators, the risk of being stranded, when it is not able to pay off their debtors. 


Article in other languages:

HI: https://www.tostpost.com/hi/business/24611-the-liquidity-of-the-balance-sheet-is-one-of-the-most-important-criter.html

PL: https://www.tostpost.com/pl/biznes/43037-p-ynno-bilansu-przedsi-biorstwa---jedno-z-najwa-niejszych-kryteri-w-st.html

PT: https://www.tostpost.com/pt/neg-cios/42670-a-liquidez-do-balan-o-da-empresa---um-dos-principais-crit-rios-de-esta.html

ZH: https://www.tostpost.com/zh/business/33143-the-liquidity-of-the-balance-sheet-is-one-of-the-most-important-criter.html






Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."

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