Assessment of the degree of the financial condition of the organization based on the grouping of assets and liabilities


Balance sheet liquidity is defined as the extent to which an organization’s liabilities are covered by its assets, the term for which transformation into money corresponds to the term for repayment of liabilities.The liquidity of assets is the speed (time) of converting assets into cash. The less time it takes for a given type of asset to become cash, the higher its liquidity. The analysis of balance sheet liquidity is to compare assets grouped by degree of liquidity and arranged in descending order, with liabilities grouped by maturity and arranged in ascending order.Depending on the degree of liquidity, i.e. the rate of transformation into cash, the assets of the organization are divided into the following groups:the most liquid assets – the organization’s cash and short-term financial investments (securities); quickly realizable assets – accounts receivable and other assets. It would be desirable to deduct expenses not covered by funds and target financing and amounts of settlements with employees on loans received by them, since they represent immobilization of current assets;slow assets – a group of assets of Section II of the Balance Sheet Assets,

except for item “Expenses of future periods”, as well as items “Profitable investments into inventories” and “Long-term financial investments” (reduced by the number of investments into authorized capital of other companies) of Section I of the Balance Sheet Assets and accounts receivable, payments on which are expected more than in 12 months after the reporting date hard-to-realize assets – items of Section I “Non-current assets” of the balance sheet, except for items of this section, included in the previous group.At the same time, since only part of the amount reflected in the item “Long-term financial investments” is subtracted from the total of Section I of the balance sheet assets, investments in authorized capitals of other entities are taken into account in the composition of hard-to-sell assets.Balance sheet liabilities are grouped according to the urgency of their settlement: the most urgent liabilities – accounts payable, as well as loans not repaid in due time. In the composition of the most urgent liabilities, loans to workers and employees are accounted for only in the amount exceeding the value of settlements with employees on loans received by them;short-term liabilities – short term credits and loans and borrowed funds;long-term liabilities – long-term credits and loans;permanent liabilities, i.e. equity – items of Section III of the liabilities side of the balance sheet.

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