How to calculate solvency ratio

The solvency of the enterprise is its ability to timely pay for its obligations and debts at the current moment in time, both short-term and long-term. When analyzing solvency, assets are considered as collateral for the company's debts, i.e. property, after the sale of which it will pay for its obligations.

Instruction manual

1

Speaking about the solvency of the organization, they imply its liquidity, i.e. the possibility of selling the assets of the company and paying off debts. This is a broader and more accurate view of solvency. In a narrower sense, solvency is the availability of sufficient funds in an enterprise to pay off current payables in the near future.

2

When analyzing the solvency of an enterprise, three main ratios are calculated. The first of them - the current solvency ratio - allows you to evaluate the organization’s ability to repay its debts and shows how much working capital per ruble of short-term liabilities. The normative value for this coefficient is 2. The value of the coefficient below the established norm indicates the risk of untimely settlement of the enterprise to pay off current obligations.

3

Quick solvency ratio is defined as the ratio of the amount of receivables, short-term financial investments and cash to short-term liabilities of the company. Those. when calculating this coefficient, stocks are deducted from the value of the assets of the enterprise. And this is quite logical: they not only have less liquidity, but also in the case of their quick sale, the sale price may be lower than the cost of their manufacture or acquisition. The approximate value for this coefficient is 1.

4

The most stringent criterion for the solvency of an enterprise is the absolute solvency ratio. It is calculated as the ratio of cash to short-term liabilities of the company and shows how much of the debt can be repaid immediately from existing cash. The standard value for this ratio is 0.25.

current solvency ratio