2 coefficient of borrowed ratio. Evaluation of the rationality of the ratio of its own and borrowed capital in the analysis of financial stability. The coefficient of financial sustainability
The use of permanent money infants to the activities and functioning of the company in the form of capital investments is a mandatory element of ensuring any financial activity in the market conditions. In order to introduce new technological solutions, revising existing technologies, the conquest of new niches on the market for the company is always a necessary element are finance and capital, investment.
Concept of capital
Under the concept of capital companies, they understand the amount of its financial resources, due to which the entrepreneurial, investment and financial activity of the company is possible.
In the practice of the enterprise, capital is reflected in the balance of the balance sheet in the form of equity and the Company's obligations to the counterparties.
Capital is classified by several types:
- cash capital;
- real capital.
Monetary capital takes into account the amount of all funds in the turnover of the firm and participating in the production process. It is divided into its own and borrowed.
Under the real capital of the company understand the material and internal capital, which is a form of ownership, expressed in natural units. This includes the main and working capital.
You can list a number of factors that have a certain impact on the choice of sources of financing of the company:
- the market on which the company works;
- the size of the firm and the directions of its activities;
- used technologies in the production process;
- applied taxation system;
- state impact;
- work with banks;
- image of the company.
Capital Structure
The basis of the formation of the capital structure of the company is the features of its functioning on the market. The total indicators of the company are very dependent on the rationality of the capital structure. It is also able to influence the indicators of profitability and efficiency of funds, the liquidity of the company and its solvency, on the level of risk.
The capital structure implies the ratio of all available sources of its own and borrowed capital. Simply put, this is the ratio of our own and borrowed capital.
Equity
Own capital includes all the property that the company is in terms of a monetary indicator, for example, in rubles. This is the total assessment of the production potential of the company at a market price at the time of its acquisition when taking into account the amount of wear. As equity, you can understand the difference in assets of the company in monetary terms and obligations.
The composition of the capital is formed on the basis of certain sources. These include: authorized capital, individual contributions of founders, profits from the enterprise activities. The main among them is the authorized capital.
Own capital can be classified to nested and accumulated profits. The first of them represents a total amount of funds that was obtained by introducing in the form of investments to the development and formation of the company. This includes statutory and additional capital, as well as reserves.
Under the accumulated profit understand the entire amount of profit, which was earned by the company for the periods (past and current). From the amount of profit it is necessary to calculate taxes and dividends.
Borrowed capital
The borrowed capital of the enterprise is certain funds attracted by the enterprise, which were aimed at the functioning of the company or on its defined goals. These funds can be taken for a certain period and under certain conditions. These funds include loans and loans, financial assistance provided by other companies or state, the amount of security and other sources of funds provided on the basis of any return guarantees.
Capital is classified for long-term and short-term. The long-term commitments of the company are associated with a period of more than 1 year. Short-term - up to 1 year.
Comparison of own and borrowed capital
When comparing two types of capital, it is possible to draw conclusions for the main differences:
- own capital gives the right to participate in the activities of the company, and the borrowing excludes such a law;
- the change in the share of one of the types of capital in the overall structure has an impact on the financial sustainability of the firm. Thus, the growth of the share of loans entails the growth of the company's debt and reduces its stability. This ratio is manifested by calculating the coefficient of structural relationship between borrowed and own capital according to the formula, which will be considered further;
- in the event of bankruptcy, borrowed capital has a primary right in obtaining funds;
- the owner's income in the situation of borrowed capital does not depend on the dynamics of the company's profits, and the income of the owners from their own capital, on the contrary, depends.
Capital is recognized as a more "cheap" source of financing, which is related to its widespread use in the practice of companies. However, the high proportion of such capital in the structure reduces the financial sustainability of the firm, which can lead it to bankruptcy. It is necessary for the optimal relationship between loans and its own means.
The structure of its own and borrowed capital can be estimated through the calculation of the coefficients. These indicators include:
- coefficient of own capital concentration;
- financial independence coefficient;
- the ratio ratio of its own and borrowed capital shows the relationship between structural shares.
Concentration of equity
The first coefficient is calculated by the formula:
KSK \u003d K / K * 100%,
where to C - own capital, t. r.;
K - the total capital of the company, t. R.
As part of this indicator, the share of equity in the structure is determined. The standard of this coefficient is 60%, which means that the proportion of equity should be at least 60%.
Financial independence
The second coefficient is calculated by the formula:
To FN \u003d SK / A \u003d p. 1300 / p. 1700,
where SC - own capital, t. r.
A - assets of the company, t. R.
You can talk about the duality of the nature of this indicator:
- on the one hand, the increase in this coefficient leads to an increase in the company's financial independence with an increase in equity;
- on the other hand, the growth of the coefficient entails a decrease in the profitability of equity.
The coefficient of financial independence of the enterprise shows the proportion of company assets that can be covered by the company's own capital. The rest of the proportion is covered by borrowed means. A positive is the growth of the growth of this indicator, which means the growth of the probability of repayment of debts by the company at its own expense. This situation means the growth of financial independence.
The regulatory value of this coefficient exceeds 0.5. A high meaning is indicated about the presence of a company, in which all its obligations it can be covered by the necessary means independently, that is, without lenders. This situation also indicates the independence of the company from creditors.
If the coefficient is close to 1, then this means that the enterprise is developing slow pace, there are restraining mechanisms. If the company is trying to abandon the funds raised, then it loses the possibility of additional increase in profits and receive income through the expansion of production.
The ratio of shares in the structure of capital
The last ratio of the ratio of its own and borrowed capital is the most significant in the calculations. It is defined as follows:
To C \u003d to with / k z \u003d p. 1300 / (p. 1500 + p. 1400),
where k z - borrowed capital, t. r.
To C - own capital, t. R.
The indicator reflects the presence of own funds in comparison with borrowings. Otherwise, it can be called a financial lever (leverge). This coefficient is very important in financial calculations and assessing the financial activities of the firm. The ratio ratio of borrowed and equity and the formula for its calculation characterize the degree of risk of a company, its sustainability and profitability.
The financial lever appears when the company begins to attract borrowed funds in the absence of its own business and expansion of business. The calculation of this indicator allows the firm to determine the point that should not be transmitted when using credit funds in order not to get into financial dependence on them and do not come to bankruptcy.
Borrowed funds are not always negative, on the contrary, in due size they make a profit, as they make it possible to finance the increasing volume of the company and expanding its activities, receiving additional profits on the basis of changes. The financial sustainability of the company depends on the amount of borrowed funds. Since with its essential exceeding the company falls into cable dependence on creditors, and this is the path to bankruptcy.
Options for using the coefficient of the ratio of own and borrowed capital:
- a positive coefficient in which the profit from loans is higher than the fee for them;
- neutral coefficient in which the profit from loans is equal to the board for them;
- negative coefficient in which the fee for the content of loans is higher than the income from them.
The last option is negative for the enterprise and requires optimization of the capital structure.
QUESTIONS OF OPTIMIZATION OF THE STRUCTURE
With the optimal structure of the company's capital, such a ratio of its parts is observed, in which it is possible to ensure a rational combination between the coefficient of financial profitability and financial sustainability of the firm. In such a situation, the maximum cost of the company in the market occurs. The optimization process ensures the adaptation of the firm to the new environmental conditions in order to survive it.
Provide companies clear indications about how to optimize capital is quite difficult, since there is no universal recipe due to the impact on a company of a number of factors. It is possible to formulate the criteria for optimization in the form of postulates:
- sufficient level of profitability and risk of the company;
- reducing the WACC indicator (weighted average capital value);
- the cost of the company's value in the market.
The basic principles of optimization are the following:
- the financing structure corresponds to the overall strategy of the company;
- increasing the cost of the company at the expense of the financial lever;
- debt growth makes sense in the case of restrictions on investing the company.
Conclusion
The ratio ratio of its own and borrowed capital is very significant with the company's financial calculations, since it makes it possible to understand the proportion that the company's own and borrowed funds are. His knowledge is necessary for investors, bankers, lenders and business owners.
Each enterprise is obliged to conduct studies of its mains this allows you to organize available resources as efficiently as possible. Therefore, control of sources of funds is kept constantly.
Allows you to assess the correct structure of the coefficient ratio of borrowed and own funds. The formula of the indicator is necessarily used by analysts during the study. Based on the data obtained, there are conclusions about the financial stability of the enterprise, measures to improve profitability and sustainability are being developed.
Passive
The coefficient of the ratio of borrowed and own funds, the formula of which will be presented below, is calculated according to the liability of the company's balance sheet. It displays all financial sources that take part in the company's activities.
The balance sheet consists of equity, as well as long-term and short-term borrowed funds. Their ratio should be such that the organization can get the highest profit when using the smallest number of resources.
Own sources of property formation companies show its level of stability. But applying the company can increase its net profit and the profitability of operating activities. Therefore, a certain part of the sources of capital formation of the company should consist of investors.
Equity
The financial independence of the Organization is to organize its production activities at the expense of the owners. These are those who fully own the enterprise. They are not refundable to investors, therefore are considered free.
The company's own funds are formed from several sources. First of all, this is the authorized capital. This Fund organization forms in the process of its creation. Its size is established by law. The founder or founders make a certain part of its property in the authorized capital. According to its contribution, they have the right to the same (as a percentage) profit after paying taxes and other mandatory contributions.
Own capital includes various contributions, donations, retained earnings. And if the authorized capital is obliged to contribute to the general fund, then other influsions are optional. Having received net profit in the reporting period, the owners may decide on its entire distribution of each other. But sometimes it is more expedient to send all this amount or only a part to the development of production. This article is called retained profit.
Borrowed capital
The ratio ratio of borrowed and own funds, the formula of which will be considered further, takes into account the paid sources of financing. They may be long-term (they are at the disposal of more than a year) or short-term (subject to refund during the operation period). These are funds that the organization takes into debt among investors and creditors for a specific fee.
At the end of the term of use, the company is obliged to compensate the amount of debt and pay for the use of these capital in the form of an established percentage. The involvement of such funds is associated with a certain risk. But with the right approach, the use of paid sources of financing in their activities can give a significant increase in net profit.
Formula of calculation
In order to correctly understand the essence of the analysis of the company's balance sheet structure, it is necessary to consider the formula of the ratio of financial sources. It is also called financial independence. Its value is interesting to both analysts of the enterprise and controlling authorities or investors. The greater the company's own funds, the less the risk of capital of capital for creditors. The calculation formula for the ratio of borrowed / own means is this:
CFZ \u003d CH: CC * 100%, where ZS - borrowed funds, SC - own funds.
The higher this indicator, the more dependent enterprise from paid sources. The growth rate in the dynamics indicates a decrease in financial sustainability, risk increases for investors.
Financial lever
The calculation of the financial dependence coefficient in world literature is called financial leverage or lever. This is one of the most important indicators of the financial condition of the organization. Together with him, capital, autonomy and financial dependence are defined.
The calculation of the leverage allows you to assess the possibilities and prospects for the development of business at the expense of borrowed capital. With its help, the company forms a financial lever. This allows you to significantly increase the return on our own resources.
Financial leverage is calculated according to the above formula. Data for research is taken from the balance sheet. The borrowed capital includes long-term and reflected in passive.
Regulatory value
The financial independence of the Organization is determined if the ratio of sources is 1. This means that in the balance sheet of the balance, both articles of capital are 50%.
For some companies is considered normal if this indicator increases to 2. This is especially characteristic of large organizations. However, too much importance of financial leverage is considered to be a deviation from the norm. This means that the company organizes its activities based on borrowed capital. To pay a debt, a lot of time and money will be needed. Therefore, investors do not want to invest their funds into such enterprises. High the risk of non-return of their capital.
Too much independence ratio indicates a loss of the organization of the possibility to increase the profitability of property. Therefore, this analysis does not accept both too large and too small the value of the coefficient.
Security of own capital
Having calculated the independence of the enterprise, analysts must calculate such a number of eigen funding sources in the structure of the balance, which would bring maximum profits. If the organization attracts borrowed capital, it is simply necessary. Therefore, along with calculate the security of their own funds (autonomy):
Ka \u003d sk: WB, Gda WB - balance currency.
Its regulatory value should be at least 0.5. The optimal for most enterprises is considered to be 0.7. Western enterprises operate with a minimum value of the autonomy coefficient of 0.3-0.4. It depends on the industry, as well as the ratio of circulating and non-current assets.
Than the production is more trap (more share of non-delete property), the more long-term sources of funding requires an enterprise.
Capital price
Holding the coefficient of independence, analytics, in addition to the amount of equity, determine the cost of borrowed funds. This requires to find out the amount of interest that the company is obliged to pay for creditors at the end of the life of their property.
This uses the indicator of the weighted average price of borrowed capital. It has this kind:
CCC \u003d σ (Central Committee * DC), where k is the number of paid sources of financing, the Central Committee - the cost of each source, DC - share in the total amount of capital.
Based on the data obtained, the financial risk of the enterprise is determined.
Effect of financial leverage
The calculation of the risk coefficient is performed through an indicator of leverage. This makes it possible to evaluate the effectiveness of the organization of the balance structure. It shows a quantitative expression of the company's risk.
It includes expenses for payment not in the period of interest and the amount of debt, as well as the loss of profits in connection with the excessive involvement of borrowed funds. To determine the effect of a financial lever, this formula is applied:
EFL \u003d (1-H) * (R-P) * ZK: SC, where N is a profit tax rate, R - profitability of production activities, P is a middle rate of paying capital.
As a result, it turns out the amount of growth in profitability of equity when using paid sources. If P.< Р, то у компании рентабельность возрастает. Если же П > P, then take credit funds inexpedient.
Having considered the coefficient of the ratio of borrowed and own funds, the formula of which is necessarily applied by analysts, the balance sheet structure is determined. This allows you to determine the correct ratio of financing sources.
In the article we will analyze the ratio of the ratio of borrowed and own funds, its economic meaning and the balance sheet formula.
Relationship ratio of borrowed and own funds
Relationship ratio of borrowed and own funds - characterizes the financial stability of the enterprise, and shows how many borrowed funds are accounted for by a unit of equity. This coefficient reflects the capital structure and gives a general characteristic of financial condition and represents the ratio of the borrowed (attracted) capital of the enterprise to its own. The indicator is calculated on accounting balance - form number 1.
The formula for calculating the coefficient of the ratio of borrowed and own funds
Regulatory value of the coefficient of the ratio of borrowed and own funds
The higher the value of the coefficient the higher the risk of bankruptcy of the enterprise. High values \u200b\u200bof the ratio of borrowed and own funds (\u003e 1) are allowed if the rate of circulation of receivables is higher than the speed of the turnover of material working capital (funds are rapidly entering the enterprise), the coefficient of the ratio of borrowed and own funds may be greater than the standard. For each specific enterprise, its valid level is defined, the table below shows the values \u200b\u200bof the indicator and the characteristics of the financial condition.
One coefficient of own ratio of own and borrowed funds is not enough to assess the financial stability of the enterprise. In practice, additional indicators of financial independence are often calculated, one of the most common - the coefficient of autonomy. Read more about it in the article "
Relationship ratio of borrowed and own funds
Note 1.
This indicator is used for the most common assessment of the financial condition of the enterprise, including its financial stability. It demonstrates the ratio of borrowed and own funds of the company or how many attracted funds falls on each unit of their own capital a.
The formula for estimating this indicator has the following form:
$ CWS \u003d \\ FRAC (borrowed \\ capital) (own \\ funds \\ enterprises) $
$ CW \u003d \\ FRAC (long-term \\ and \\ short-term \\ obligations) (own \\ assets \\ enterprises) $
Regulatory value indicator
It is generally accepted that the higher the value of this coefficient, the higher the risk of bankruptcy of the company. However, it is very conditionally and, in general, the high values \u200b\u200bof this indicator are sometimes allowed. For example, if an enterprise works stably, in a developed economy, where low interest rates occur, a high level of business ethics, etc., the value of this coefficient may exceed 1 (which, however, can very often be found in Western countries). Also, the high meaning of this indicator is permissible if the duration of the ratio of receivables exceeds the turnover period (others, in words, if the money is rapidly entering the company and the company does not have a deficit of working capital).
At the same time, the regulatory value of the ratio of own and borrowed capital varies greatly depending on the industry and the specifics of the activities of a particular enterprise.
Usually this indicator is analyzed in dynamics. If the value of the coefficient is growing, it will talk about the trend towards strengthening the firm's dependence on financial injections by creditors and external investors. The increase in the meaning of this indicator also means increasing the degree of risk of investors, since if the company does not fulfill obligations to payments, will increase significantly and the likelihood of bankruptcy.
Note 2.
With certain assumptions, the recommended value of this indicator should not exceed 0.7. Many financial analysis researchers believe that the most optimal value of the coefficient should be in the range of 0.5-0.7. Be that as it may, the exceeding the value of the mark of 0.7 is often an indicator that the level of financial stability is probably far from the ideal.
Complex use of the ratio of the ratio of own and borrowed capital
For objective financial analysis and, among other things, financial sustainability analysis is not enough only to the ratio of the ratio of own and borrowed funds. This coefficient is analyzed comprehensively, in the context of other indicators of financial and economic activities. One of the most common indicators used along with the ratio ratio of own and borrowed capital is the ratio of autonomy (it is also often referred to as a financial independence ratio).
The autonomy coefficient shows the proportion of the company's own funds in the total amount of its capital assets. In other words, this indicator illustrates the degree of independence of the organization from creditors. So, if the value of the autonomy coefficient is low, it will mean that the firm is financially unstable and largely dependent on borrowed funding.
The formula of this indicator is as follows:
$ Coefficient \\ autonomy \u003d \\ FRAC (own \\ capital) (assets) $
Values \u200b\u200bfor the numerator and denominator formula are in the company's balance sheet. As is known, the value of assets should always be equal to the amount of borrowed and own capital of the company.
In Russian practice, the value of the autonomy coefficient is considered to be 0.5 or more (that is, 50-60% of equity in the total value of assets). In the practice of economically developed countries, a value of 0.3-0.4 is considered to be permissible.
Note 3.
The regulatory value of the autonomy coefficient varies greatly depending on the specifics of the industry and the peculiarities of the enterprise. Also, the ratio of non-current and current assets in the structure of the company's capital plays a major role. The more donated production, the greater the equity capital and / or sustainable liabilities (for example, long-term loans).
Refers to the coefficients of financial stability of the enterprise.
The coefficient of the ratio of borrowed and own means - which shows
Relationship ratio of borrowed and own funds - shows how much borrowed funds fall on 1 rub. own funds.
Relationship ratio of borrowed and own funds - Formula
General formula for calculating the coefficient:
The formula for calculating according to the old accounting balance
Coefficient of the ratio of borrowed and own funds - the value
The economic meaning of the coefficient of the ratio of borrowed and own funds in the definition of how many units of borrowed financial resources are accounted for by a unit of sources of equity.
The level of this coefficient above 1 indicates the potential danger of a lack of fundamental funds, which can cause difficulties in obtaining new loans.
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