42. Financial analysis of the company's activities

Financial analysis is based on the study of financial indicators of entrepreneurial activity of firms.

Indicators can reflect general ideas about the state of the company and can highlight the most significant values ​​that have a great impact on the performance of the company.

There are many criteria that are used in the process of financial analysis of a firm. The most commonly used economic criteria are: asset liquidity, which includes the coverage ratio and maturity ratio; profitability, profitability, payback, capital turnover rate, stability criterion.

The liquidity of assets provides the firm with confidence in its solvency by regulating the rapid conversion of the firm's assets into cash. If a firm is short of cash, it can sell its liquid assets to pay off debts.

The level of liquidity is assessed using two ratios: the coverage ratio and the maturity ratio.

The coverage ratio is the ratio of the firm's current assets to the firm's short-term liabilities.

The term ratio is the ratio of highly liquid assets subject to quick sale and short-term liabilities of the firm. Profitability is one of the main factors for the successful operation of the company, as well as an important criterion for the financial condition of the company.

Profitability characterizes the ratio of the amount of profit of the company, which is received for a certain period of time, and the cost of production and other types of funds used by the company in order to obtain this profit.

The Russian economy uses several specific indicators of profitability. These include:

1) return on assets (property of the company);

2) return on equity of the company;

3) profitability of sales;

4) profitability of current costs;

5) return on invested capital;

6) profitability of production;

7) profitability of the firm's fund.

The rate of capital turnover is an indicator of the rate of use of funds invested in the business activities of the company. To determine the value of the indicator of the rate of capital turnover, the ratio of the volume of profit from the sale of goods and the value of the firm's assets in monetary terms is used.

The criterion of stability or reliability of the company shows how reliably the company is provided with its own resources and what is its dependence on external sources of financing. The value of this indicator is determined using the ratio of external investment to the firm's own cash resources.

Authors: Egorova E.N., Loginova E.Yu.

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