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05-18-2011, 07:17 AM
Short-term solvency indicators on business amendments
<div style=basis, but also business owners, operators and other stakeholders evaluate the overall strength of the scale of enterprise. However, the short-term solvency indicators currently used in the calculation process, did not take full account of corporate assets, liabilities, property, quality, and on the accounting measurement attributes, the enterprise seems to be rather rough assessment of solvency, there are some limitations sex. This paper reflects on the existing short-term solvency of major financial companies index to make a study to ensure that their businesses can more objectively reflect the ability of short-term debt. This paper from China Union WWW.LWLM.COM collected.
First, the limitations of the existing short-term liquidity indicators
the main short-term solvency of the existing common indicators are: current ratio, quick ratio, cash ratio. The current ratio is current assets to current liabilities ratio, which indicates the number of corporate debt for every dollar liquidity for the repayment guarantee, reflecting the company can be transformed into cash in the short term liquidity the ability to repay current liabilities due; general, flow The higher the ratio, reflecting the stronger corporate short-term solvency, the interests of creditors the more it can be guaranteed. Quick ratio is the enterprise liquid assets to current liabilities ratio, the so-called liquid assets is current assets minus illiquid and volatile inventory, prepaid expenses, current assets pending the balance of net losses; speed Fixed rates are lower than the current ratio can be more fully and reliably evaluate the mobility of corporate assets and short-term solvency. Cash ratio is the class of corporate cash assets to current liabilities ratio, cash asset classes,abercrombie roma (http://www.abercrombie-roma.org), including enterprises owned by the monetary funds and securities held (ie, the balance sheet in the short-term investments), which is net of liquid assets the balance of accounts receivable; This indicator reflects the company's ability to directly pay current liabilities.
short-term solvency indicators are used although in general, revealed the company's solvency, but the calculation does not take full account of the process of corporate assets, liabilities, properties, quality and accounting on properties, and also does not consider the impact of balance-sheet items, reflect the solvency of enterprises there are some limitations.
(l) does not take full account of the differences in property corporate assets. According to the definition of liquid assets, liquid assets in a year or one operating cycle gradually consumed or converted to cash. But now for more than one year or one operating cycle is still not consumed or converted to cash, such as the recovery of overdue accounts receivable outstanding for more than a year, the backlog of inventory, accounting and remains as current assets on the balance sheet presented to makes the current ratio is calculated based on the lack of an objective; Similarly, the liquid assets as current assets, strong liquidity part, still including the overdue accounts receivable,abercrombie roma (http://www.abercrombie-roma.org), making the quick ratio has been exaggerated to some extent overestimated. As for the advance payment,Personal Financial Services as the core retail banking business _1368 (http://thegopauls.com/displayimage.php?pos=-1197), pending current assets and prepaid expenses and other: not available or has been the nature of the flow; or the assets damaged or no longer exists in fact; or the beneficiary of a deferred to a future expenditure. Therefore, in calculating the current ratio must be removed from the liquid assets.
(2) does not fully consider the quality of corporate assets. For a business, if a higher proportion of its non-performing assets, the poor quality of corporate assets, the corresponding solvency will be greatly affected. At present, the current ratio in the calculation of non-performing assets is not considered when the solvency of the enterprise. In fact, many companies there are lots of non-performing assets, such as accounts receivable not yet recovered more than three years, long-term backlog of goods and materials, because of its poor asset quality, the real value of assets was significantly lower than book value.
(3) business assets not fully consider the impact of measurement attributes. According to the principle of historical cost accounting, the assets of enterprises, in addition to relevant national regulations to adjust the method allowed, in principle, should be made at that time when the actual cost. But in general, business inventories in the realizable value of finished products is higher than its cost, short-term investments in the realizable value of securities often deviate from its entry value, and the present in the calculation of current ratio, quick ratio not considered during the measurement properties of such assets.
(4) does not fully consider the properties of corporate liabilities. Current liabilities in the
(5) does not consider short-term liabilities on the solvency of enterprises. Liabilities have great uncertainty, the future depends on whether the occurrence of changes in related factors, such as notes payable discount, external guarantees, pending litigation matters. Therefore, in calculating the short-term liquidity indicators, must affect the liability occurred in analysis and prediction of relevant factors, estimated the likelihood of contingent liabilities; and in accordance with the likelihood of contingent liabilities, estimated liabilities may increase in current liabilities, but in the calculation of short-term liquidity indicators do not consider this effect.
Second, the short-term liquidity indicators based on the above analysis
amended, in order to overcome the limitations of enterprise key solvency indicators, I believe that in the calculation of short-term liquidity indicators must be considered in the process of corporate assets, liabilities, property, quality, and its properties, and also consider the possible impact of balance-sheet items to ensure solvency indicators is not overvalued.
1. Liquidity ratios amendments. Deducted in the current assets: (l) a year or more than one operating cycle of uncollected accounts receivable, inventory backlog; (2) prepaid expenses; (3) current assets to be processed; (4) for purchase or invest in long-term assets Prepayments. Add: (l) current assets to be processed in net loss is probable that the responsible insurer to give a certain degree of damages or compensation,abercrombie roma (http://www.abercrombie-roma.org), and pending the residual value of the asset itself; (2) stock, securities, realizable value in excess of book value section. Current liabilities are liabilities that will have to be considered or discounted notes receivable, pending litigation, which may form a part.
revised current ratio is calculated as:
Current ratio = (current assets - a year or more than one operating cycle of uncollected accounts receivable to the pressure produced Inventories net current assets of a pending loss of a deferred expenses or investments of a long-term assets for the purchase of prepaid accounts pending ten net loss in current assets is probable that the responsible insurer to give a
<div style=basis, but also business owners, operators and other stakeholders evaluate the overall strength of the scale of enterprise. However, the short-term solvency indicators currently used in the calculation process, did not take full account of corporate assets, liabilities, property, quality, and on the accounting measurement attributes, the enterprise seems to be rather rough assessment of solvency, there are some limitations sex. This paper reflects on the existing short-term solvency of major financial companies index to make a study to ensure that their businesses can more objectively reflect the ability of short-term debt. This paper from China Union WWW.LWLM.COM collected.
First, the limitations of the existing short-term liquidity indicators
the main short-term solvency of the existing common indicators are: current ratio, quick ratio, cash ratio. The current ratio is current assets to current liabilities ratio, which indicates the number of corporate debt for every dollar liquidity for the repayment guarantee, reflecting the company can be transformed into cash in the short term liquidity the ability to repay current liabilities due; general, flow The higher the ratio, reflecting the stronger corporate short-term solvency, the interests of creditors the more it can be guaranteed. Quick ratio is the enterprise liquid assets to current liabilities ratio, the so-called liquid assets is current assets minus illiquid and volatile inventory, prepaid expenses, current assets pending the balance of net losses; speed Fixed rates are lower than the current ratio can be more fully and reliably evaluate the mobility of corporate assets and short-term solvency. Cash ratio is the class of corporate cash assets to current liabilities ratio, cash asset classes,abercrombie roma (http://www.abercrombie-roma.org), including enterprises owned by the monetary funds and securities held (ie, the balance sheet in the short-term investments), which is net of liquid assets the balance of accounts receivable; This indicator reflects the company's ability to directly pay current liabilities.
short-term solvency indicators are used although in general, revealed the company's solvency, but the calculation does not take full account of the process of corporate assets, liabilities, properties, quality and accounting on properties, and also does not consider the impact of balance-sheet items, reflect the solvency of enterprises there are some limitations.
(l) does not take full account of the differences in property corporate assets. According to the definition of liquid assets, liquid assets in a year or one operating cycle gradually consumed or converted to cash. But now for more than one year or one operating cycle is still not consumed or converted to cash, such as the recovery of overdue accounts receivable outstanding for more than a year, the backlog of inventory, accounting and remains as current assets on the balance sheet presented to makes the current ratio is calculated based on the lack of an objective; Similarly, the liquid assets as current assets, strong liquidity part, still including the overdue accounts receivable,abercrombie roma (http://www.abercrombie-roma.org), making the quick ratio has been exaggerated to some extent overestimated. As for the advance payment,Personal Financial Services as the core retail banking business _1368 (http://thegopauls.com/displayimage.php?pos=-1197), pending current assets and prepaid expenses and other: not available or has been the nature of the flow; or the assets damaged or no longer exists in fact; or the beneficiary of a deferred to a future expenditure. Therefore, in calculating the current ratio must be removed from the liquid assets.
(2) does not fully consider the quality of corporate assets. For a business, if a higher proportion of its non-performing assets, the poor quality of corporate assets, the corresponding solvency will be greatly affected. At present, the current ratio in the calculation of non-performing assets is not considered when the solvency of the enterprise. In fact, many companies there are lots of non-performing assets, such as accounts receivable not yet recovered more than three years, long-term backlog of goods and materials, because of its poor asset quality, the real value of assets was significantly lower than book value.
(3) business assets not fully consider the impact of measurement attributes. According to the principle of historical cost accounting, the assets of enterprises, in addition to relevant national regulations to adjust the method allowed, in principle, should be made at that time when the actual cost. But in general, business inventories in the realizable value of finished products is higher than its cost, short-term investments in the realizable value of securities often deviate from its entry value, and the present in the calculation of current ratio, quick ratio not considered during the measurement properties of such assets.
(4) does not fully consider the properties of corporate liabilities. Current liabilities in the
(5) does not consider short-term liabilities on the solvency of enterprises. Liabilities have great uncertainty, the future depends on whether the occurrence of changes in related factors, such as notes payable discount, external guarantees, pending litigation matters. Therefore, in calculating the short-term liquidity indicators, must affect the liability occurred in analysis and prediction of relevant factors, estimated the likelihood of contingent liabilities; and in accordance with the likelihood of contingent liabilities, estimated liabilities may increase in current liabilities, but in the calculation of short-term liquidity indicators do not consider this effect.
Second, the short-term liquidity indicators based on the above analysis
amended, in order to overcome the limitations of enterprise key solvency indicators, I believe that in the calculation of short-term liquidity indicators must be considered in the process of corporate assets, liabilities, property, quality, and its properties, and also consider the possible impact of balance-sheet items to ensure solvency indicators is not overvalued.
1. Liquidity ratios amendments. Deducted in the current assets: (l) a year or more than one operating cycle of uncollected accounts receivable, inventory backlog; (2) prepaid expenses; (3) current assets to be processed; (4) for purchase or invest in long-term assets Prepayments. Add: (l) current assets to be processed in net loss is probable that the responsible insurer to give a certain degree of damages or compensation,abercrombie roma (http://www.abercrombie-roma.org), and pending the residual value of the asset itself; (2) stock, securities, realizable value in excess of book value section. Current liabilities are liabilities that will have to be considered or discounted notes receivable, pending litigation, which may form a part.
revised current ratio is calculated as:
Current ratio = (current assets - a year or more than one operating cycle of uncollected accounts receivable to the pressure produced Inventories net current assets of a pending loss of a deferred expenses or investments of a long-term assets for the purchase of prepaid accounts pending ten net loss in current assets is probable that the responsible insurer to give a