Ratio indicators reflecting liquidity include current ratio, quick ratio and cash flow debt ratio.
First, the current ratio analysis
(A) the meaning of the current ratio
Current ratio refers to the ratio of current assets to current liabilities, and its calculation formula is: (The following data are all from the financial statements of Beijing Yaxing Co., Ltd.)
Current ratio = current assets/current liabilities × 100%
Take the year-end value of Beijing Yaxing Co., Ltd. as an example;
Current ratio = 83858604/124199946×100% = 68% (rounded up, the same below).
The above ratio shows that the company's current assets are equivalent to 68% of current liabilities. Obviously, the company's solvency is low.
Whether an enterprise can repay its short-term debts on time depends on how many short-term debts it has and how many current assets it can realize to repay its debts. The more current assets, the less short-term debt and the stronger solvency. If current assets are used to pay off all current liabilities, the rest is called working capital. (Working capital = current assets-current liabilities). The more working capital, the smaller the risk of not being able to repay short-term debts, and the stronger the operating ability of enterprises, and the worse the operating ability. Therefore, the amount of working capital is not only an important indicator of the ability to repay short-term debts, but also an important indicator of the operating ability of enterprises. However, working capital is an absolute number, and if the scale gap between enterprises is large, the absolute number has limited significance compared with it; The current ratio is a relative number, which excludes the influence of different enterprise scales and is more suitable for the comparison between enterprises in different historical periods.
(2) Analysis of current ratio
The above is a qualitative analysis of the significance of current ratio. From the perspective of quantity, how much is the turnover rate of enterprises more appropriate? As far as general enterprises are concerned, "2" or 200% is more appropriate. Because a large part of current assets is inventory and a part is accounts receivable, the funds occupied by these projects are unlikely to be realized at any time for debt repayment. So after deducting these two parts, the assets will be used to pay off debts. However, because each enterprise has different current assets and different liquidity, it is theoretically impossible to determine the scientific ratio of "2" and become a unified standard. The calculated ratio can only be judged by comparing it with the level of the same industry and the historical level of the enterprise, and this comparison cannot explain the reasons for the high or low ratio in the current period. To find out the reasons, we must also analyze the specific economic content and influence of current assets and current liabilities. Generally speaking, business cycle, inventory turnover rate and accounts receivable are all important factors affecting the current ratio. In addition, from the effect of capital utilization, if too much capital is used in current assets, although it has strong liquidity, it will affect the profitability and long-term development ability of enterprises.
Second, the quick ratio analysis
(A) the meaning of quick ratio
Quick ratio refers to the ratio of quick assets to current liabilities of an enterprise on a specific date. The current ratio can be used to evaluate the overall liquidity of an enterprise, but the report users also want to obtain the liquidity ratio index further than the current ratio to observe the solvency of the enterprise, which requires a comparison between quick assets and current liabilities. Quick assets are the balance of current assets minus illiquid inventory. Its calculation formula is:
Quick ratio = (current assets-inventory)/current liabilities × 100%
Or take the year-end figures of Beijing Yaxing as an example:
Quick action ratio = (83858604-3566416)/124199946×100% = 39%.
The above ratio shows that the company's quick assets are equivalent to 39% of current liabilities, obviously, its solvency is poor.
The main reasons for excluding inventory from current assets when calculating quick ratio are:
1, slowly liquidate the inventory;
2. There may be a long-term backlog of inventory deterioration, which is difficult to sell;
3. There are often unreasonable factors in inventory valuation. Therefore, the book value can not truly reflect the actual value of inventory, and the quick ratio calculated after being excluded from current assets can truly reflect the solvency.