Indicators for calculating the degree of financial stability and financial risk


Liquidity and Solvency Analysis Liquidity and solvency are the signal indicators in which the financial condition of the enterprise is manifested. Most

authors, depending on the characterized subject of analysis, allocate the following types of liquidity: assets, balance sheet, enterprise. Let us consider

each of these categories in more detail.The liquidity of assets of an enterprise is the ability of assets to transform into cash, and the degree of liquidity

is determined by the duration of the period during which the transformation can be carried out.The less time it takes for this type of asset to acquire

monetary form, the higher its liquidity.Balance sheet liquidity is the ability of a business entity to turn assets into cash and repay its payment

obligations, or, more precisely, it is the degree of coverage of the company’s debt obligations by its assets, the term of which transformation into cash

corresponds to the term of repayment of payment obligations.The enterprise’s liquidity is its ability to pay its liabilities in due time and in full.


The concept of solvency is close to liquidity, but it is not always correct to talk about the identity of these definitions.Solvency is the ability of an

enterprise to make timely payments on its term obligations.Liquidity is a broader concept than solvency. Liquidity characterizes both the current state

of settlements and the future. An enterprise may be solvent on the reporting date but have unfavorable opportunities in the future, and vice

versa.Balance sheet liquidity analysis consists in comparing assets grouped by degree of decreasing liquidity with liabilities grouped by degree of

maturity.The first group (A1) includes liquid assets, such as cash and short-term financial investments.The second group (A2) includes quickly

realizable assets: finished goods, shipping goods, and accounts receivable. The liquidity of this group of current assets depends on the timeliness of

shipment of products, execution of bank documents, speed of payment document turnover in banks, on-demand for products, its competitiveness, the

solvency of buyers, forms of settlements, etc.The third group (A3) of slowly realizable assets includes production inventories, unfinished

production.The fourth group (А4) is hard-to-realize assets, which include fixed assets, intangible assets, long-term financial investments, unfinished construction.

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