Balance Sheet - General Information on Financial Health, Liquidity and Solvency of an Economic Entity

Abstract

In analyzing the balance sheet several indicators can be calculated with normal empirically pre-determined values so popular that can provide some information on the general state of the entity, thereby drawing of conclusions and directions for action. Purposes of calculating these indicators is to determine: the liquidity of the entity, which measures the ability to honor its obligations at maturity; the solvency of the entity, which measures its ability to repay debt in the medium and long term; the profitability of the entity that measures the entity's ability to gain, to produce profit, to be cost effective. Some elements of financial soundness, solvency and liquidity are calculated as it follows.

Keywords

• financial soundness
• liquidity
• solvency
• balance sheet