Financial condition


The financial condition of the enterprise is characterized by indicators that reflect the formation and use of financial resources. In the market

economy, financial condition reflects the final results of the work of an enterprise. These results are of interest for managers and owners of an

enterprise and for business partners, state, financial, tax authorities, etc:for the managers of the enterprise, and primarily financial managers, it is

important to assess the effectiveness of decisions, resources used and financial results obtained;owners, including shareholders, want to know what

will be the return on the funds invested in the enterprise, the profitability of the enterprise, as well as the level of economic risk;creditors and

investors are interested in the repayment of issued loans and implementation of investment projects;suppliers are interested in the evaluation of

payment for the goods supplied, etc.As a toolkit for financial analysis relative indicators of the financial condition of an enterprise or financial

coefficients is widely used, which express the ratio of one absolute indicator to another. The following financial ratios are calculated at an

enterprise:liquidity ratios;ratios of business activity (turnover);Profitability ratios;Solvency ratios or capital structure;coefficients of market

activity.Liquidity ratios determine the company’s ability to pay short-term liabilities during the reporting period.

The most important among them for financial management are:current liquidity ratio,absolute liquidity ratio,the coefficient of own working

capital.The coefficients of business activity determine how effectively the company uses resources. In financial management, turnover ratios are

calculated from this group. The most important of them are:asset turnover ratio,accounts receivable turnover coefficient,turnover of

inventories,turnover of inventories and the duration of the business cycle.Profitability ratios reflect the profitability of the enterprise. Profitability

characterizes the profit received from each ruble of funds invested in production or other financial operations. In financial management, the main

profitability ratios considered are:return on assets,return on sales,return on assets, return on sales and return on equity.Capital structure ratios, or

solvency ratios, characterize the degree of protection of creditors and investors with long-term investments in the enterprise. They reflect the

company’s ability to repay long-term debts. Among the coefficients of this group are distinguished:coefficient of autonomy,coefficient of financial

dependency.The coefficients of the market activity.


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