Bìznes Inform (Apr 2023)
The Methods for Analyzing the Liquidity and Solvency of Enterprise
Abstract
Stable and efficient functioning of the enterprise and its development in the current transformational economic conditions is provided by liquidity and solvency, which require constant analyzing in the indicated economic conditions. The article analyzes the definitions of scholars regarding the essence of the concepts of «liquidity» and «solvency» of enterprise. It is determined that in the scientific literature there are no uniform universal definitions of these categories. It is also noted that these concepts are different in meaning, but interrelated. The following types of solvency are considered: current (short-term), which characterizes the current state of settlements at the enterprise on the basis of financial flows and provides coverage of current liabilities of the enterprise; prospective solvency, which analyzes the ability of the enterprise in the medium and long term to pay its obligations on time. It is specified that the essence of liquidity is disclosed in accordance with its functions, among which are the following: mobility, stability, attractiveness, control, and regulatory. It is also noted that in the scientific literature there is no general methodology for assessing liquidity and solvency. The article allocates the most popular methodical approaches to evaluating and studying these concepts in order to highlight problems and advantages in practical application. Taking into account the theoretical aspects of the assessment process, the following elements are allocated: object, subject, purpose of assessment, evaluation criteria, information base, methods, and assessment result. Among the methods for assessing the liquidity and solvency of an enterprise, the most commonly used are: coefficient method, which is based on the calculation of relative liquidity indicators; method with the inclusion in the analysis process, along with relative indicators, of the absolute indicator of current assets or an indicator of the amount of capital of the enterprise; solvency assessment method in accordance with the compiled payment calendar, which shows cash inflows in accordance with the sources of their formation, as well as reflects term liabilities for a certain time; method of analyzing balance liquidity, which consists in comparing assets that are grouped by degree of their liquidity and placed in descending order of liquidity, with liabilities on the credit side, which are grouped by maturity and placed in ascending order of these terms; method of analyzing the solvency and liquidity of the enterprise, including together external and internal analysis.
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