Evaluation of the effectiveness of the financial activities of the enterprise. Improving the efficiency of the financial activities of a trading enterprise. The financial activity of the organization as an object of comprehensive analysis
The indicator, in the most general form, reflecting the efficiency of using the funds invested in the organization, is the return on investment (ROI). And in the practice of analyzing financial statements, it is mainly used to assess the effectiveness of the organization's management, its ability to provide the necessary return on invested capital and to determine the calculation base for forecasting.
The return on investment is seen as the simplest way to measure investment management skill. The indicator is calculated by the formula
ROI = [Operating Income After Tax (NOPAT): Assets] x 100%.
At the same time, in some analytical methods, a slightly different formula can be used to determine the ROI indicator, taking into account the effect (income) from investments in the assets of owners and creditors in the numerator, and the amount of funds invested by owners and creditors in the denominator. At the same time, accounts payable (to suppliers, personnel, budget, etc.) are usually excluded from the denominator of the formula, since it cannot be considered as an investment component.
As a result, the formula for calculating the return on investment takes the form:
ROI = [Operating Income After Tax (NOPAT):: (Assets - Accounts Payable)] x 100%.
It should be noted that this indicator is becoming more widespread in the Russian practice of analysis.
The traditional tool for assessing the profitability of a particular investment project is the calculation of an indicator characterizing the internal level of return on investment (IRR).
The latter can be defined as the discount rate at which the present value of investment income exactly corresponds to the investment cost of capital. The formula for calculating the net present value of the project (NPV) has a general form:
where C, - the difference between receipts and payments from investments in the period -;
Co is the amount of investment (in the case of a one-time capital expenditure. If the investment process is extended in time, then to calculate NPV, the value of the investment of the period t is multiplied by the discount factor of the corresponding period); - - the specific period of the project; d - discount rate.
By solving the equation for the rate r, an indicator characterizing the internal rate of return on investment (IRR) is determined.
If we denote the level of profitability required by investors through y, then investment activity can be characterized as effective if the condition: r> j.
Based on the result of determining the internal level of return on investments, an assessment of their acceptability can be given. If the analyzed indicator corresponds to the level of profitability J required in specific conditions (i.e. g> j), then the investment is recognized as appropriate. Investments, the internal level of return of which is below the required level (g< j), оцениваются как неприемлемые.
This provision is fundamentally important for understanding the mechanism of the influence of the return on investment activity on the return on equity. The fact is that the assessment of the required level of return on total capital (owners and creditors) includes the reimbursement of financial costs associated with raising borrowed capital and the required level of return on equity capital, taking into account the risk of investing funds. The correspondence of the internal level of return on investments r to the required level of return j means that the implementation of investment decisions provides the necessary return on the capital invested by the owners.
Financial performance
The financial activity of the organization is related to the attraction of external sources of funds. The key characteristics of the analysis of the profitability of financial activities and its impact on the return on equity are the structure of financing and the cost of its individual components.
In the system of indicators characterizing the profitability of financial activities, it is advisable to include the return on investment (ROI), the price (cost) of borrowed capital, as well as ratios reflecting the ratio of equity and borrowed capital.
To determine the price of borrowed capital, an indicator characterizing the rate of attracting borrowed funds can be used
The relationship between the return on equity (ROE), the amount of borrowed capital (D) and the return on investment (ROI) is expressed by the following ratio used to assess the effect of financial leverage:
where E is equity capital;
Ka - the rate of raising borrowed capital (taking into account the factor of tax savings on borrowed funds).
This ratio determines the boundary of the economic feasibility of attracting borrowed funds. Its meaning lies, in particular, in the fact that as long as the return on investment is higher than the rate of borrowed funds, the return on equity will grow the faster the higher the ratio of borrowed and equity capital. But as soon as the return on investment falls below the level of the borrowed funds rate, the return on equity will begin to fall to the greater extent, the higher the share of borrowed capital in total sources.
Data on the dynamics of the considered profitability indicators are given in table. 6.7.
Table 6.7. The system of indicators of the profitability of NLMK's activities,%
All profitability indicators show a drop in comparison with the previous period. Thus, the return on equity decreased by 24.6%. The main reason for this was the reduction in net profit associated with a sharp deterioration in market conditions during the crisis year.
The drop in profitability of sales from 35.5% to 18.7% was due to a decrease in revenues, taking place against the background of a less significant reduction in costs. A significant decrease in the return on sales, as well as a significant slowdown in asset turnover, led to a decrease in the return on assets by 18.8%. The slowdown in asset turnover was primarily influenced by the slowdown in the turnover of current assets (see clause 6.3).
At the end of the analysis of the financial condition, it is useful to draw up a summary table that reflects the main ratios of the economic indicators of the analyzed organization.
A general characteristic of the effectiveness of the financial and economic activities of an enterprise can be given using indicators such as:
1) the efficiency of using fixed assets (capital productivity, capital-labor ratio, capital intensity);
2) investment efficiency (return on capital, capital intensity);
3) the efficiency of the use of labor resources (labor productivity, labor intensity);
4) the overall efficiency of economic activity (profitability, profitability);
5) the efficiency of the use of assets (the number of turnovers of inventories, the return of current assets, real estate, total assets, net working capital);
6) the efficiency of using share capital (earnings per share, dividends per share, the ratio of the market price of a share to earnings per share).
In Russian practice, the following parameters are used as the main criteria for assessing the effectiveness of financial and economic activities of enterprises:
Proceeds from the sale of products, works, services (sales volume);
Accounting and net income remaining after tax ;;
Return on costs, assets (property), investments, sales, etc .;
Financial stability;
The financial result of the owners of the enterprise.
L.V. Dontsova and N.A. Nikiforova note that in a market economy, the most important measure of the effectiveness of an organization is performance.
In order to assess the efficiency of enterprises, they usually use indicators of financial stability, profitability, solvency and business activity.
Financial stability means such a financial condition of an enterprise that ensures not only a stable excess of its income over expenses, but an increase in profits while maintaining the efficient and uninterrupted functioning of an economic entity.
Profitability is one of the main qualitative indicators of production efficiency at an enterprise, which characterizes the level of return on costs and the degree of use of funds in the process of production and sales of products. Currently, there are a large number of profitability indicators, the main of which are presented in Table 1.1.
Business activity characterizes the efficiency of the current activities of the enterprise and is associated with the effectiveness of the use of material, labor, financial resources of the enterprise and with indicators of capital turnover.
Liquidity - the ability to cover its liabilities with assets, the maturity of which corresponds to the maturity of the liabilities. Liquidity means the unconditional solvency of the organization and implies constant equality between its assets and liabilities.
Table 1.1. presents the main coefficients used to assess the effectiveness of the financial and economic activities of the enterprise.
Table 1.1
Financial ratios used in the system for analyzing and evaluating the effectiveness of the financial and economic activities of the enterprise
| Odds | Formula | What shows |
| 1. 1. Parameters of financial stability | ||
| 1.1. Financial independence ratio | K fn = SK / WB, where SK - equity capital; WB - balance currency | Share of equity capital in the balance sheet |
| 1.2. Debt ratio | К а = ЗК / SK, where ЗК - borrowed capital; SK - equity capital | The ratio between borrowed and own funds |
| 1.3. Funding ratio | K fin = SK / ZK | The ratio between equity and borrowed funds |
| 1.4. Maneuverability coefficient | K m = SOS / SK, where SOS - own circulating assets | Share of own working capital in equity capital |
| 1.5. Financial stress ratio | To f. For example. = ZK / WB | The share of borrowed funds in the currency of the borrower's balance |
| 2. Parameters of profitability (profitability) | ||
| 2.1. Return on sales,% | R pr. = (P pr / V p) × 100, where P pr - profit from sales; В п - sales proceeds | Shows how much profit falls on the ruble of products sold |
| 2.2. Net profitability,% | R h = (P h / V p) × 100 | Shows how much net profit falls on the ruble of revenue |
| 2.3. Economic profitability,% | R e = (P e / A) × 100, where P e - economic profit; A - average asset value | Shows the effectiveness of the use of all property of the organization |
| 2.4. Return on equity,% | R ck = (P h / SK) × 100, where P h is net profit; SK - average cost of equity | Shows the efficiency of using equity capital. The dynamics of the indicator affects the level of stock quotes |
| 2.5. Return on constant capital% | R pc = (P h / SK + DO) × 100, where DO is the average cost of long-term liabilities | Shows the effectiveness of the use of capital invested in the organization's activities for a long time |
| 2.6. Economic growth sustainability coefficient,% | K er = (P h - Div) / SK × 100, where Div - dividends paid to shareholders | Shows the rate at which equity capital increases due to financial and economic activities |
| 3. Parameters of solvency (liquidity) | ||
| 3.1. Absolute liquidity ratio | K al = (DS + KFV) / KO, where DS - cash, KFV - short-term financial investments; KO - short-term liabilities | What part of short-term debt the company can repay in the near future (as of the balance sheet date) |
| 3.2. Current (adjusted) liquidity ratio | K tl = (DS + KFV + DZ) / KO, where DZ - accounts receivable as of the last reporting date | Predicted payment capabilities of the enterprise in the context of timely settlements with debtors |
| 3.3. General liquidity (solvency) ratio | K l = (DS + KFV + DZ + Z) / KO, where 3 - stocks of inventories as of the last reporting date | Adequacy of current assets to cover short-term liabilities. It also characterizes the stock of financial stability of the enterprise |
| 4. Parameters of business activity | ||
| 4.1. Asset turnover ratio | К оа = ВП / А, where ВП - proceeds (net) from sales; A - average asset value for the billing period | The rate of turnover of all advanced capital (assets), i.e. the number of turns made by it during the period |
| 4.2. Equity capital turnover ratio | KO sc = VP / SK, where SK is the average cost of equity capital for the billing period | The rate of turnover of equity capital for the period |
| 4.3. Net assets turnover ratio | KO cha = VP / CHA, where CHA is the average value of net assets for the period | The rate of turnover of net assets for the period |
When assessing the effectiveness of financial and economic activities, it is necessary to distinguish between indicators and criteria. The indicators of economic efficiency give an idea of the cost of what resource costs the economic effect is achieved. It is impossible to measure the level of efficiency using one indicator, since it develops under the influence of many factors, sometimes opposing each other. Therefore, among the entire set of indicators, it is customary to single out one that most fully characterizes the level of efficiency, which has not only quantitative, but also qualitative certainty. Such an indicator in economics is usually called a criterion.
A criterion is the basis for evaluating any process. Financial processes can be assessed by applying various criteria to them. The criteria for the effectiveness of the finances of enterprises appear as a set of indicators that make it possible to answer the question of the positivity of the existing organization of financial relations, the speed and directions of their change. The efficiency of enterprise finance cannot be expressed by one indicator, since it is a complex concept that covers various aspects of organizational and managerial and proper financial and economic activities.
The system of criteria for the effectiveness of enterprise finance can be divided into financial and non-financial indicators. Financial indicators such as profit, loss, cost, profitability, targeted funds and others characterize the dynamics of changes in the efficiency of the enterprise. At the same time, the value of profit indicators, and especially profitability, indicates the prevailing general level of efficiency of the results of financial and economic activities.
To the greatest extent, the requirements for assessing the effectiveness of the financial and economic activities of an enterprise are met by such an indicator as labor productivity.
Labor productivity is efficiency, efficiency of labor costs in the production process.
The growth of labor productivity means saving labor costs (working time) for the manufacture of a unit of output or an additional amount of output per unit of time, which directly affects the increase in production efficiency.
Labor productivity (PT) is calculated using the following formula:
Fri = Production = Op / Chs, where (1.1)
Op - the volume of production, work performed, services rendered for the billing period (month, quarter, year), thousand rubles;
Emergency - the average number of personnel for the billing period, people.
Managers of foreign companies call this indicator the most important indicator.
The positive movement of labor productivity is associated with the provision of changes in the capital-labor ratio and capital productivity.
The capital-labor ratio is an indicator characterizing the equipping of employees of enterprises with basic production assets (means).
Return on assets is an indicator characterizing the level of efficiency of using the basic production assets of an enterprise.
The growth of labor productivity is usually associated with the outstripping growth in capital productivity over the movement of capital-labor ratio.
The basis for the growth of intraeconomic monetary savings and the strengthening of the finances of enterprises that are not engaged in production is the growth of turnover, or the volume of sales and purchases, and savings in distribution costs.
The growth of labor productivity, as a rule, is accompanied by a decrease in labor intensity, material consumption, energy consumption, capital intensity of production. The growth in labor productivity should not be accompanied by the same growth in wages, which, in turn, should not outstrip the growth rate of labor productivity, but lag behind them. This is the requirement to reduce the labor intensity of the products.
Very often, due to an incorrect approach to financing its costs, the company finds itself in a difficult financial situation when the company lacks its own working capital and does not have money in its accounts. The efficiency of enterprise finance largely depends on three components: formation, distribution, use of financial resources.
It is necessary to distinguish between the current and probable (future) efficiency of enterprise finances. The first is associated with intermediate results forms of manifestation of the efficiency of enterprise finances. Second, it is largely predetermined by the presence or absence of fundamental shifts in the course of the current financial work.
Distribution efficiency is a probable (expected), fundamental form of manifestation of the efficiency of enterprise finances, an important component of their financial strategy. The efficiency of financing is an intermediate, current, resultant form of manifestation of this component of the company's strategy, i.e. distribution.
Allocation and funding efficiency are important criteria for assessing the effectiveness of financial management policies.
Before proceeding directly to the topic of the article, one should understand the essence of the concept of the financial activity of an enterprise.
Financial activity at the enterprise- this is financial planning and budgeting, financial analysis, management of financial relations and monetary funds, definition and implementation of investment policy, organization of relations with budgets, banks, etc.
Financial activity solves such problems as:
- providing the enterprise with the necessary financial resources for financing its production and sales activities, as well as for the implementation of investment policy;
- seizing opportunities for efficiency the activities of the enterprise;
- ensuring timely repayment current and long-term liabilities;
- identifying optimal credit conditions to expand the volume of sales (deferral, installments, etc.), as well as the collection of generated accounts receivable;
- traffic control and redistribution financial resources within the boundaries of the enterprise.
Analysis feature
Financial indicators allow you to measure the effectiveness of work in the above areas. For example, liquidity indicators allow us to determine the possibility of timely repayment of short-term liabilities, while financial soundness ratios, which represent the ratio of equity and debt, allow us to understand the ability to meet obligations in the long term. The financial stability ratios of the second group, which show the adequacy of working capital, make it possible to understand the availability of financial resources for financing activities.
Indicators of profitability and business activity (turnover) show how the company uses the available opportunities to improve work efficiency. Analysis of receivables and payables allows you to understand the credit policy. Considering that profit is formed under the influence of all factors, it can be argued that the analysis of financial results and analysis of profitability allows you to obtain an overall assessment of the quality of the financial activities of the enterprise.
The efficiency of financial activity can be judged by two aspects:
- Results financial activities;
- The financial condition enterprises.
The first is expressed by how efficiently the company can use its existing assets, and most importantly, whether it is able to generate profit and to what extent. The higher the financial result for each ruble of invested resources, the better the result of financial activities. However, profitability and turnover are not the only indicators of a company's financial performance. An opposite and related category is the level of financial risk.
The current financial condition of the enterprise just means how much sustainable is the economic system. If the company is able to meet its obligations in the short and long term, to ensure the uninterrupted production and sales process, as well as to reproduce the expended resources, then it can be assumed that, while maintaining the current market conditions, the enterprise will continue to work. In this case, the financial condition can be considered acceptable.
If the company is able to generate high profits in the short and long term, then we can talk about effective financial performance.
In the process of analyzing the financial activities of the enterprise, both in the analysis of financial results and in the process of assessing the state, the following methods should be used:
- horizontal analysis - analysis speakers financial result, as well as assets and sources of their financing, will determine the general trends in the development of the enterprise. As a result, one can understand the medium and long term of his work;
- vertical analysis - assessment of the formed structures assets, liabilities and financial results will allow you to identify imbalances or ensure the stability of the company's current performance;
- comparison method - juxtaposition data with competitors and industry averages will help determine the effectiveness of the company's financial performance. If the company demonstrates higher profitability, then we can talk about quality work in this direction;
- method of coefficients - in the case of a study of the financial activity of an enterprise, this method is important, since its use will allow obtaining a set indicators, which characterize both the ability to demonstrate high results and the ability to maintain stability.
- factor analysis - allows you to determine the main factors that influenced the current financial position and financial performance of the company.
Analysis of the financial results of the enterprise
Investors are interested in profitability, as it allows them to assess the effectiveness of management and the use of capital that was provided by the latter for the purpose of making a profit. Other participants in financial relations, for example, lenders, employees, suppliers and customers, are also interested in understanding the profitability of the company, as this allows you to estimate how smoothly the company will operate in the market.
Therefore, the analysis of profitability allows you to understand how effectively the management implements the strategy of the firm to generate financial results. Given the large number of tools that are in the hands of the analyst when assessing profitability, it is important to use a combination of different methods and approaches in the process.
Although firms report net income, the more important metric is the total financial bottom line, as the metric that better indicates the performance of a company's stock. There are two main alternative approaches to measuring profitability.
The first approach provides for the consideration of various transformations of the financial result. Second approach- indicators of profitability and profitability. In the case of applying the first approach, such indicators as the profitability of the company's shares, horizontal and vertical analysis, assessment of the growth of indicators, consideration of various financial results (gross profit, profit before tax, etc.) are used. In the case of applying the second approach, indicators of return on assets and return on equity are used, which provide for obtaining information from the balance sheet and the statement of financial results.
These two metrics can be broken down into profit margin, leverage, and turnover to provide a better understanding of how a company generates wealth for its shareholders. In addition, indicators of margin, turnover and leverage can be analyzed in more detail and broken down into different lines of financial statements.
Analysis of financial indicators of the enterprise
It should be noted that the most important method is the method of indicators, also known as the method of relative indicators. Table 1 presents the groups of financial ratios that are best suited for analyzing performance.
Table 1 - The main groups of indicators that are used in the process of assessing the company's financial result
It is worth considering each of the groups in more detail.
Turnover indicators (indicators of business activity)
Table 2 presents the most commonly used PM ratios. It shows the numerator and denominator of each coefficient.
Table 2 - Indicators of turnover
|
Business activity indicator (turnover) |
Numerator |
Denominator |
|
Cost price |
Average inventory value |
|
|
The number of days in the period (for example, 365 days if using data for a year) |
Inventory turnover |
|
|
Average value of receivables |
||
|
Number of days in the period |
Accounts receivable turnover |
|
|
Cost price |
Average cost of accounts payable |
|
|
Number of days in the period |
Accounts payable turnover |
|
|
Working capital turnover |
Average cost of working capital |
|
|
Average cost of fixed assets |
||
|
Average asset value |
Interpretation of turnover indicators
Inventory turnover and the period of one inventory turnover ... Inventory turnover is the basis of operations for many organizations. The indicator indicates resources (money) that are in the form of reserves. Therefore, such a coefficient can be used to indicate the effectiveness of inventory management. The higher the inventory turnover ratio, the shorter the period of inventory holding in the warehouse and in production. In general, inventory turnover and the period of one inventory turnover should be estimated against industry standards.
High an inventory turnover ratio relative to industry norms may indicate a high level of inventory management performance. However, another situation is possible when this turnover ratio (and a low indicator of one turnover period) could indicate that the company does not form an adequate stock, because of which its shortage could harm revenues.
To gauge which explanation is more likely, the analyst can compare the company's earnings growth with the industry's growth. Slower growth, coupled with higher inventory turnover, may indicate insufficient inventory levels. Revenue growth at or above industry growth supports the interpretation that high turnover reflects greater efficiency in inventory management.
Short the inventory turnover ratio (and, accordingly, a high turnover period) in relation to the industry as a whole can be an indicator of the slow movement of inventories in the operational process, possibly due to technological obsolescence or a change in fashion. Again, comparing the company's sales growth to the industry, one can understand the essence of the current trends.
Accounts receivable turnover and the period of one turnover of accounts receivable . The receivables turnover period represents the elapsed time between sale and collection, which reflects how quickly a company collects funds from customers to whom it offers loans.
Although it is more correct to use credit sales in the numerator, credit sales information is not always available to analysts. Therefore, the revenue shown in the income statement is usually used as the numerator.
A relatively high ratio of accounts receivable turnover may indicate a high efficiency of commodity lending to customers and their collection of money. On the other hand, a high receivables turnover ratio may indicate that the terms of lending or debt collection are too tight, which indicates a possible loss of some sales to competitors who offer softer terms.
Relatively low accounts receivable turnover usually raises questions about the effectiveness of credit and collection procedures. As with inventory management, comparing company and industry sales growth can help the analyst assess whether sales are lost due to tight credit policies.
In addition, by comparing bad accounts receivable and actual loan losses with past experience and with peers, it is possible to assess whether low turnover reflects problems in managing commercial lending to customers. Companies sometimes provide information on the stitching of receivables. This data can be used in conjunction with turnover rates to make more accurate conclusions.
Accounts payable turnover and the period of accounts payable turnover ... The payables turnover period reflects the average number of days that a company pays its suppliers. The accounts payable turnover ratio indicates how many conventionally times a year the company covers debts to its creditors.
For the purposes of calculating these indicators, it is assumed that the company makes all its purchases using a commodity (commercial) loan. If the volume of purchases of goods is not available to the analyst, then the indicator of the cost of goods sold can be used in the calculation process.
High accounts payable turnover ratio (low period of one turnover) in relation to the industry may indicate that the company does not fully use the available credit funds. On the other hand, this may mean that the company is using a system of discounts for earlier payments.
Excessively low the turnover ratio may indicate problems with timely payment of debts to suppliers or active use of soft credit terms of the supplier. This is another example of when you should look at other metrics to make informed conclusions.
If liquidity ratios indicate that the company has sufficient cash and other short-term assets to pay liabilities, and yet the payables turnover period is high, then this would indicate lenient credit terms of the supplier.
Working capital turnover ... Working capital is defined as current assets less current liabilities. Working capital turnover indicates how efficiently a company is generating income from working capital. For example, a working capital ratio of 4 indicates that the company generates 4 rubles of income for every 1 ruble of working capital.
A high value of the indicator indicates greater efficiency (that is, the company generates a high level of income relatively less amount of attracted working capital). For some companies, the amount of working capital can be close to zero or negative, which makes this indicator difficult to interpret. The following two factors will be useful in these circumstances.
Fixed assets turnover (return on assets) ... This indicator measures how efficiently a company generates income from its fixed capital investments. As a rule, more high fixed assets turnover ratio shows a more efficient use of fixed assets in the process of generating income.
Low the value may indicate that the business is inefficient, capital intensive, or that the business is not operating at full capacity. In addition, the turnover of fixed assets can be formed under the influence of other factors not related to business efficiency.
The return on assets ratio will be lower for companies whose assets are newer (and therefore less depreciated, which is reflected in the financial statements of a higher carrying amount) compared to companies with older assets (which are more depreciated and thus recorded at a lower carrying amount (subject to the use of the revaluation mechanism).
The rate of return on assets may be unstable, since revenues can have stable growth rates, and the increase in fixed assets occurs in leaps and bounds; therefore, every annual change in the metric does not necessarily indicate an important change in the company's performance.
Asset turnover ... The All Asset Turnover Ratio measures the overall ability of a company to generate income with a given level of assets. The ratio of 1.20 will mean that the company generates 1.2 rubles of income for every 1 ruble of attracted assets. A higher ratio indicates more efficient company operations.
Since this ratio includes both fixed and working capital, ineffective working capital management can distort the overall interpretation. Therefore, it is useful to analyze working capital and return on assets separately.
Short an asset turnover ratio can indicate poor performance or a relatively high level of capital intensity of the business. The indicator also reflects strategic management decisions: for example, the decision to take a more labor-intensive (and less capital-intensive) approach to your business (and vice versa).
The second important group of indicators is the profitability and profitability ratios. These include the following coefficients:
Table 3 - Indicators of profitability and profitability
|
Indicator of profitability and profitability |
Numerator |
Denominator |
|
Net profit |
Average asset value |
|
|
Net profit |
||
|
Gross margin |
Gross profit |
|
|
Revenue from sales |
||
|
Net profit |
||
|
Average asset value |
Net profit |
|
|
Average cost of equity |
Net profit |
Profitability indicator assets shows how much profit or loss the company receives for each ruble of invested assets. The high value of the indicator indicates the effective financial performance of the enterprise.
Return on equity is a more important indicator for the owners of the enterprise, since this coefficient is used when evaluating investment alternatives. If the value of the indicator is higher than in alternative investment instruments, then we can talk about the high-quality financial activities of the enterprise.
Margin metrics provide insight into sales performance. Gross margin shows how many resources the company still has for management and sales expenses, interest expenses, etc. Operating margin demonstrates the effectiveness of the organization's operational process. This indicator allows you to understand how much the operating profit will increase with an increase in sales by one ruble. Net margin takes into account the influence of all factors.
Return on assets and equity allows you to determine how much time is needed for the company in order for the funds raised to pay off.
Analysis of the financial condition of the enterprise
Financial condition, as mentioned above, means the stability of the current financial and economic system of the enterprise. To study this aspect, you can use the following groups of indicators.
Table 4 - Groups of indicators that are used in the process of assessing the condition
Liquidity ratios (liquidity indicators)
Liquidity analysis, which focuses on cash flow, measures a company's ability to meet its short-term obligations. The core metrics in this group are a measure of how quickly assets are converted into cash. In day-to-day operations, liquidity management is usually achieved through the efficient use of assets.
The level of liquidity must be considered depending on the industry in which the company operates. The liquidity position of a particular company can also vary depending on the perceived need for funds at any given time.
Assessing the adequacy of liquidity requires an analysis of the company's historical funding needs, its current liquidity position, expected future funding needs, and options for reducing funding needs or raising additional funds (including actual and potential sources of such funding).
Large companies tend to have better control over the level and composition of their liabilities compared to smaller companies. Thus, they can have more potential sources of financing, including the capital of the owners and the funds of the credit market. Access to capital markets also reduces the required size of the liquidity buffer compared to companies without such access.
Contingent liabilities, such as letters of credit or financial guarantees, can also be relevant in assessing liquidity. The importance of contingent liabilities varies between the non-banking and banking sectors. In the non-banking sector, contingent liabilities (usually disclosed in a company's financial statements) represent potential cash outflows and should be included in assessing the company's liquidity.
Calculation of liquidity ratios
The main liquidity ratios are presented in table 5. These liquidity ratios reflect the company's position at a particular point in time and, therefore, use data at the end of the balance sheet date, and not the average balance sheet values. Indicators of current, quick and absolute liquidity reflect the company's ability to pay current liabilities. Each uses a progressively stricter definition of liquid assets.
Measures how long a company can pay for its daily cash expenses using only existing liquid assets, without additional cash flows. The numerator of this ratio includes the same liquid assets used in quick liquidity, and the denominator is an estimate of daily cash expenditures.
To obtain daily cash expenses, the total cash expenses for the period are divided by the number of days in the period. Therefore, to obtain cash expenses for the period, it is necessary to summarize all expenses in the statement of financial results, including such as: cost price; sales and administrative expenses; other expenses. However, the amount of expenses should not include non-cash expenses, for example, the amount of depreciation.
Table 5 - Liquidity indicators
|
Liquidity indicators |
Numerator |
Denominator |
|
Current assets |
Current responsibility |
|
|
Current assets - stocks |
Current responsibility |
|
|
Short-term investments and cash and cash equivalents |
Current responsibility |
|
|
Guard interval indicator |
Current assets - stocks |
Daily expenses |
|
Inventory turnover period + accounts receivable turnover period - accounts payable turnover period |
The financial cycle is a metric that is not calculated in the form of a ratio. It measures the length of time it takes for an enterprise to go from investing money (invested in activities) to receiving money (as a result of activities). During this period of time, the company must finance its investment operations from other sources (i.e. from debt or equity).
Interpretation of liquidity ratios
Current liquidity ... This indicator reflects current assets (assets that are expected to be consumed or converted into cash within one year), which are attributable to the ruble of current liabilities (liabilities occur within one year).
More high the ratio indicates a higher level of liquidity (i.e., a higher ability to meet short-term liabilities). The current ratio of 1.0 will mean that the carrying amount of current assets is exactly equal to the carrying amount of all current liabilities.
More low the value of the indicator indicates less liquidity, which implies a greater dependence on operating cash flow and external financing to meet short-term liabilities. Liquidity affects a company's ability to borrow money. The current ratio is based on the assumption that inventories and receivables are liquid (if inventory and receivables turnover are low, then this is not the case).
Quick ratio ... The quick ratio is more conservative than the current ratio because it includes only the most liquid current assets (sometimes called “quick assets”). Like the current ratio, a higher quick ratio indicates the ability to meet debt.
This indicator also reflects the fact that inventory cannot be easily and quickly converted into cash, and, in addition, the company will not be able to sell its entire stock of raw materials, materials, goods, etc. for an amount equal to its book value. especially if this inventory needs to be sold quickly. In situations where stocks are illiquid (for example, in the case of a low inventory turnover ratio), quick liquidity may be a better indicator of liquidity than the current liquidity ratio.
Absolute liquidity ... The ratio of cash to current liabilities is usually a reliable measure of the liquidity of an individual enterprise in a crisis situation. Only highly liquid short-term investments and cash are included in this indicator. However, it should be borne in mind that in a crisis, the fair value of liquid securities may significantly decrease as a result of market factors, and in this case it is advisable to use only cash and cash equivalents in the process of calculating absolute liquidity.
Guard interval indicator ... This ratio measures how long a company can continue to pay its expenses with its available liquid assets without receiving any additional cash inflow.
A safeguard score of 50 would mean the company can continue to pay its operating expenses for 50 days with fast assets without any additional cash inflows.
The higher the indicator of the guard interval, the higher the liquidity. If the company's watchband indicator is very low compared to peers or compared to the company's own history, the analyst needs to clarify whether there is sufficient cash flow to enable the company to meet its obligations.
Financial cycle ... This indicator indicates the amount of time that elapses from the moment an enterprise invests money in other forms of assets until the moment it collects money from customers. A typical operating process involves the receipt of inventory on a deferred basis, which forms accounts payable. The company then also sells that inventory on credit, resulting in an increase in receivables. After that, the company pays its invoices for the goods and services supplied, and also receives payments from customers.
The time between spending money and collecting money is called the financial cycle. More short cycle indicates more liquidity. It means that the company only needs to fund its inventory and receivables for a short period of time.
More long cycle indicates lower liquidity; this means that the company must fund its inventories and receivables over a longer period of time, and this can lead to the need to raise additional funds to build working capital.
Indicators of financial stability and solvency
Solvency ratios are generally of two types. Debt measures (the first type) focus on the balance sheet, and measure the amount of debt capital in relation to equity or the total amount of a company's funding sources.
Coverage ratios (the second type of metric) focus on the statement of financial performance, and measure the company's ability to cover its debt payments. All of these indicators can be used in assessing the creditworthiness of a company and, therefore, in assessing the quality of the company's bonds and its other debt obligations.
Table 6 - Indicators of financial stability
|
Indicators |
Numerator |
Denominator |
|
Total liabilities (long-term + short-term liabilities) |
Total liabilities |
|
|
Equity |
Total liabilities |
|
|
Debt to Equity |
Total liabilities |
Equity |
|
Financial leverage |
Equity |
|
|
Interest coverage ratio |
Profit before tax and interest |
Percentage to be paid |
|
Fixed payment coverage ratio |
Profit before tax and interest payments + lease payments + rent |
Interest payable + lease payments + rent |
In general, these indicators are most often calculated as shown in Table 6.
Interpretation of solvency ratios
Financial dependence indicator ... This ratio measures the percentage of total debt-financed assets. For example, a debt-to-asset ratio of 0.40 or 40 percent indicates that 40 percent of a company's assets are funded by debt. Typically, a higher proportion of debt means higher financial risk and thus weaker solvency.
Financial autonomy indicator ... The indicator measures the percentage of a company's equity (debt and equity) represented by equity. In contrast to the previous ratio, a higher value usually means lower financial risk and thus indicates a strong solvency.
Debt to equity ratio ... The debt to equity ratio measures the amount of debt capital in relation to equity. Interpretation is similar to the first indicator (i.e., a higher ratio value indicates weak solvency). A ratio of 1.0 would indicate equal amounts of debt and equity, equivalent to a debt-to-liability ratio of 50 percent. Alternative definitions of this ratio use the market value of shareholders' equity rather than its book value.
Financial leverage ... This metric (often referred to simply as the leverage metric) measures the amount of total assets supported by each monetary unit of equity. For example, a value of 3 for this indicator means that every 1 ruble of capital supports 3 rubles of total assets.
The higher the leverage ratio, the more borrowed funds the company has to use debt and other liabilities to fund assets. This ratio is often defined in terms of average total assets and average total capital and plays an important role in decomposing the return on equity in the DuPont methodology.
Interest coverage ratio ... This metric measures how many times a company can cover its interest payments from profit before tax and interest payments. A higher interest coverage ratio indicates a stronger solvency and solvency, providing creditors with high confidence that the company can service its debt (i.e., banking sector debt, bonds, promissory notes, debt of other enterprises) through operating profits.
Fixed payment coverage ratio ... This metric takes into account fixed costs or liabilities that lead to a steady outflow of company cash. It measures the number of times a company's profit (before interest, taxes, rent and lease) can cover interest and lease payments.
Similar to the interest coverage ratio, a higher value of the rate of fixed payments implies a strong solvency, which means that an enterprise can service its debt through its core activities. The indicator is sometimes used to determine the quality and likelihood of receiving dividends on preferred shares. If the value of the indicator is higher, then this indicates a high probability of receiving dividends.
Analysis of the financial activity of the enterprise on the example of PJSC "Aeroflot"
The process of analyzing financial activities can be demonstrated using the example of the well-known company PJSC Aeroflot.
Table 6 - Dynamics of assets of PJSC Aeroflot in 2013-2015, million rubles
|
Indicators |
Absolute deviation, +, - |
Relative deviation,% |
||||||
|
Intangible assets |
||||||||
|
Research and development results |
||||||||
|
Fixed assets |
||||||||
|
Long-term financial investments |
||||||||
|
Deferred tax assets |
||||||||
|
Other noncurrent assets |
||||||||
|
NON-CURRENT ASSETS TOTAL |
||||||||
|
Value added tax on purchased valuables |
||||||||
|
Receivables |
||||||||
|
Short-term financial investments |
||||||||
|
Cash and cash equivalents |
||||||||
|
Other current assets |
||||||||
|
CURRENT ASSETS TOTAL |
||||||||
As can be judged from the data in Table 6, during 2013-2015 there is an increase in the value of assets - by 69.19% due to the growth of circulating and non-circulating assets (Table 6). In general, the company is able to effectively manage working resources, because in the conditions of sales growth by 77.58%, the amount of working assets increased only by 60.65%. The credit policy of the enterprise is of high quality: in conditions of significant growth in revenue, the amount of accounts receivable, the basis of which was the debt of buyers and customers, increased only by 45.29%.
The amount of cash and cash equivalents is growing from year to year and amounted to about 29 billion rubles. Considering the value of the absolute liquidity indicator, it can be argued that this indicator is too high - if the absolute liquidity of the largest competitor UTair is only 19.99, then in PJSC Aeroflot this indicator was 24.95%. Money is the least productive part of assets, therefore, if available funds are available, they should be directed, for example, to short-term investment instruments. This will allow you to receive additional financial income.
Due to the depreciation of the ruble, the cost of inventories has grown significantly due to an increase in the cost of components, spare parts, materials, as well as due to an increase in the cost of jet fuel despite the decline in oil prices. Therefore, stocks grow faster than sales.
The main factor behind the growth of non-current assets is an increase in accounts receivable, payments on which are expected more than 12 months after the reporting date. The basis of this indicator is made up of advances for the supply of A-320/321 aircraft, which will be received by the company in 2017-2018. In general, this trend is positive, as it allows the company to ensure development and increase competitiveness.
The enterprise financing policy is as follows:
Table 7 - Dynamics of sources of financial resources of PJSC Aeroflot in 2013-2015, million rubles
|
Indicators |
Absolute deviation, +, - |
Relative deviation,% |
||||||
|
Authorized capital (share capital, authorized capital, partners' contributions) |
||||||||
|
Own shares repurchased as shareholders |
||||||||
|
Revaluation of non-current assets |
||||||||
|
Reserve capital |
||||||||
|
Retained earnings (uncovered loss) |
||||||||
|
EQUITY CAPITAL AND RESERVES |
||||||||
|
Long-term borrowed funds |
||||||||
|
Deferred tax liabilities |
||||||||
|
Provisions for contingent liabilities |
||||||||
|
LONG TERM COMMITMENT TOTAL |
||||||||
|
Short-term borrowed funds |
||||||||
|
Accounts payable |
||||||||
|
revenue of the future periods |
||||||||
|
Provisions for future expenses and payments |
||||||||
|
SHORT TERM COMMITMENTS TOTAL |
||||||||
An unambiguously negative trend is a decrease in the amount of equity capital by 13.4 over the study period due to a significant net loss in 2015 (Table 7). This means that the prosperity of investors has significantly decreased, and the level of financial risks has increased due to the need to attract additional funds to finance the growing volume of assets.
As a result, the amount of long-term liabilities increased by 46%, and the amount of current liabilities - by 199.31%, which led to a catastrophic decline in solvency and liquidity indicators. A significant increase in borrowed funds leads to an increase in financial costs of debt servicing.
Table 8 - Dynamics of the financial results of PJSC Aeroflot in 2013-2015, million rubles
|
Indicators |
Absolute deviation, +, - |
Relative deviation,% |
||||||
|
Cost of sales |
||||||||
|
Gross profit (loss) |
||||||||
|
Business expenses |
||||||||
|
Administrative expenses |
||||||||
|
Profit (loss) from sales |
||||||||
|
Income from participation in other organizations |
||||||||
|
Interest receivable |
||||||||
|
Percentage to be paid |
||||||||
|
Other income |
||||||||
|
other expenses |
||||||||
|
Profit (loss) before tax |
||||||||
|
Current income tax |
||||||||
|
Change in deferred tax liabilities |
||||||||
|
Change in deferred tax assets |
||||||||
|
Net income (loss) |
||||||||
In general, the process of forming the financial result was ineffective due to an increase in interest payable and other expenses by 270.85%, as well as due to an increase in other expenses by 416.08% (Table 8). The write-off of the share of PJSC Aeroflot in the authorized capital of LLC Dobrolet due to the termination of activities led to a significant increase in the latter indicator. While this is a significant loss of funds, this expense is not permanent, so it does not say anything bad about the ability to maintain business continuity. However, other reasons for the increase in other expenses may threaten the stable operation of the company. In addition to the write-off of part of the shares, other expenses also increased due to leasing expenses, expenses from hedging transactions, as well as due to the formation of significant reserves. All this speaks of ineffective risk management in the framework of financial activities.
Indicators
Absolute deviation, +, -
Current liquidity ratio
Quick ratio
Absolute liquidity ratio
The ratio of short-term receivables and payables
Liquidity indicators indicate serious problems with solvency in the short term (Table 9). As mentioned earlier, absolute liquidity is excessive, which leads to an incomplete use of the financial potential of the enterprise.
On the other hand, the current liquidity ratio is well below the norm. If in UTair, a direct competitor of the company, the indicator was 2.66, then in PJSC Aeroflot it was only 0.95. This means that the company may experience problems with timely repayment of current obligations.
Table 10 - Indicators of financial stability of PJSC Aeroflot in 2013-2015
|
Indicators |
Absolute deviation, +, - |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Own working capital, mln rubles |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Equity ratio of current assets |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Maneuverability of own working capital |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Coefficient of provision with own circulating assets of inventories |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Financial autonomy ratio |
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|
Dependency ratio |
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|
Financial Leverage Ratio |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Equity capital flexibility ratio |
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|
Short-term debt ratio |
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|
Financial stability ratio (coverage of investments) |
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|
Asset mobility ratio |
Financial autonomy also dropped significantly to 26% in 2015 from 52% in 2013. This indicates a lower level of lender protection and a higher level of financial risks. The indicators of liquidity and financial stability made it possible to understand that the state of the company is unsatisfactory. Consider also the company's ability to generate positive financial results. Table 11 - Indicators of business activity of PJSC "Aeroflot" (turnover indicators) in 2014-2015
In general, the turnover of the main elements of assets, as well as equity, increased (Table 11). However, it should be noted that the reason for this trend is the growth of the national currency, which led to a significant increase in the cost of tickets. It is also worth noting that the asset turnover is significantly higher than that of UTair's direct competitor. Therefore, it can be argued that, in general, the company's operating process is efficient. Table 12 - Indicators of profitability (loss ratio) of PJSC "Aeroflot"
The company was unable to generate profit in 2015 (Table 12), which led to a significant deterioration in the financial result. For each ruble of assets attracted, the company received 11.18 kopecks of net loss. In addition, the owners received 32.19 kopecks of net loss for each ruble of invested funds. Therefore, it is obvious that the financial performance of the company is unsatisfactory. 2. Thomas R. Robinson, International financial statement analysis / Wiley, 2008, 188 pp. 3.site - Online program for calculating financial indicators // URL: https: //www.site/ru/ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Information base for the analysis of indicators for assessing business performance
The well-being of an enterprise depends on the efficiency of its main economic activity, this is an important condition for its continuous functioning, which in modern conditions serves as a guarantee of survival and the basis for a stable position of the enterprise.
Business performance assessment affects the economic, investment and production activities of the enterprise, therefore, it is necessary to analyze the indicators for assessing business performance.
In this regard, we will consider the methodology for analyzing indicators for assessing business performance and determine the information base for conducting such an assessment.
The main information base for assessing business performance is financial statements. The purpose of the financial statements is to present information about the financial position, results of operations and changes in the financial position of the company. This information is needed by a wide range of users to make economic decisions.
The balance sheet is a document that reflects the results of the calculation and double expansion of the company's capital at the reporting date. Capital is the only independent and systemically important balance sheet indicator that determines the composition and grouping of all its items and final indicators. Therefore, it would be more correct to say that the balance sheet reflects the state of capital, and not a certain financial state.
Financial result is the main criterion for business efficiency. In addition, the company's net income shown in the income statement is the upper limit of the funds that can be distributed as dividends to shareholders.
Evaluating the performance of the business as a whole over the past period is the most important task solved by using data from the profit and loss statement.
This provides information about past transactions and other events, which is extremely important for users when making economic decisions.
Evaluation of enterprise efficiency on the basis of information from the financial statements of the enterprise should help in determining the criteria aspects, on the basis of which it is possible to draw conclusions regarding the objective efficiency of the economic activity of the enterprise.
"The statements are based on the facts that have already occurred and reflect the state of capital at the reporting (already past) date and its changes for the reporting (already past) period." Consequently, the predictive function of reporting is not the main one, but a secondary one. Forecasts, among other things, are based on events that have already taken place, on already accumulated resources.
In the context of evaluating enterprise performance, the purpose of accounting reports is to provide users with useful information. At present, practically at all enterprises, the expediency and necessity of meeting the information needs of numerous users have been recognized, which can be grouped into three main groups:
- Working directly at this enterprise;
- Outside the enterprise, but with a direct financial interest in the business;
- Having an indirect interest in the business.
Information about the financial position of the enterprise is presented in the form of a balance sheet, balance sheet. This report shows assets, i.e. what the company owns and the sources of its financing from payables or equity. The balance serves as an indicator for assessing the financial condition of the enterprise. It is designed to assist the user in assessing the company's ability to meet its obligations.
Assets include equipment, long-term receivables, current receivables, inventories, cash and bank accounts, and advances. Liabilities (liabilities) include equity, short-term loans and liabilities, accounts payable, debts to the budget and staff of the enterprise.
Assets give a certain idea of the economic potential of the enterprise, liabilities show the amount of funds received by the enterprise and their sources. The structure of the balance sheet asset can be represented in the form of a diagram shown in Fig. one.
Rice. 1. The structure of the balance sheet asset
The liabilities of the balance sheet reflect the sources of funds of the enterprise at a certain date. They are divided into sources of own funds (capital and reserves), long-term liabilities (loans and borrowings) and short-term liabilities (loans, borrowings, settlements and other liabilities).
The sources of own funds include: authorized capital, additional capital, reserve capital, accumulation and social funds, targeted financing and retained earnings of previous years. Borrowed funds include: long-term and short-term loans and borrowings, accounts payable, and other liabilities.
The structure of the balance sheet liability can be represented in the form of a diagram shown in Fig. 2.
Rice. 2. Structure of the balance sheet liability
Reporting - a set of information about the results and conditions of the enterprise over the past time, presented by the relevant economic entity for the purpose of analysis, control and management of activities. The financial statements contain information about the products sold, works and services, the costs of their production, the state of economic assets and the sources of their formation, and the financial results of the work.
Methods for analyzing indicators for assessing the effectiveness of an enterprise
Evaluation of business performance is based on the data of the balance sheet and the income statement, which presents the most important results of the business entity. However, depending on the purpose of the assessment, different users are interested in certain indicators of financial results. The main managers of the enterprise are interested in the volume of profit and its structure, as well as the factors affecting its value. Tax office - the amount of taxable profit. Shareholders - the net profit and the amount of dividends paid per share, the possibility of making a profit in the near and foreseeable future. However, regardless of the objectives of the assessment, the performance indicators of the economic activity of the enterprise are the criterion aspect of the company's efficiency.
To assess the efficiency of a commercial enterprise, it is not enough to use the analysis of absolute values of profit, since the presence of profit does not mean that the enterprise is working well. The absolute amount of profit does not allow judging the degree of profitability of a particular enterprise, transaction, idea. Many commercial enterprises that have received the same amount of profit have different sales volumes, different costs.
"To determine the effectiveness of the costs incurred, to assess the effectiveness and economic feasibility of the enterprise, it is not enough just to determine the absolute indicators, it is necessary to use a relative indicator." Therefore, to assess the level of work efficiency, the result obtained - profit - is compared with the costs or resources used, which allows you to get a more objective picture. Comparison of profit with costs or resources characterize the indicators of profitability. "Profitability is a relative measure of economic efficiency that shows the efficiency, profitability, profitability of an enterprise or business. This indicator characterizes the level of return on costs and the degree of use of funds." Thus, the indicators of profitability are relative characteristics of the financial results and efficiency of the enterprise.
The indicators of profitability, used to assess the efficiency of advanced resources and costs used in economic activity, and indicators, on the basis of which the profitability and efficiency of capital use are determined, are distinguished.
The return on equity characterizes the amount of profit from each ruble invested in the enterprise's funds.
The main indicators of return on equity are:
- return on assets (property);
- return on current assets;
- return on equity.
- return on investment.
The profitability of the property is calculated as follows:
P of property = Profit at the disposal of the enterprise / Average value of assets * 100%
This indicator reflects how many units of profit are received from a unit of asset value, regardless of the source of funds. This indicator serves to determine the efficiency of using the capital of different organizations and industries, since it gives an overall assessment of the profitability of capital invested in production, both own and borrowed, attracted on a long-term basis.
Profit at the disposal of the enterprise is understood as the profit remaining after paying taxes and paying off expenses attributed to net profit.
The return on current assets can be determined by the formula:
P current assets = Profit at the disposal of the enterprise / Average value of current assets * 100%
The indicator for assessing the degree of return on invested capital is the return on equity. Return on equity is expressed by the ratio of net profit (PP) to sources of equity capital (IS). This indicator characterizes the amount of profit per one ruble of own funds. The return on equity ratio also plays an important role in assessing the level of quotations of the company's shares on the stock exchange.
Return on equity (Rsk) is expressed by the formula:
Rsk = Pch / Is * 100%
If an enterprise focuses its activities on the future, it needs to develop an investment policy. In this case, investing means long-term financing. Information about funds invested in an enterprise can be calculated from the balance sheet as the sum of own sources of funds and long-term liabilities or as the difference between the total amount of assets and short-term liabilities. The return on investment (RI) is calculated as follows:
Ri = Pdn / (B - Ok) * 100%
where Пдн - profit before tax,
B - balance currency,
Ok - short-term liabilities.
The indicator of return on investment is considered in the practice of financial analysis as a way to assess the "skill" of financial managers in investment management. Since the company's management cannot influence the amount of taxes paid, for a more accurate calculation of the indicator, the amount of profit before income taxes is used in the numerator.
The difference between the indicators of profitability of all assets and equity capital is due to the attraction of external sources of financing. If the borrowed funds bring in more profits than the payment of interest on this borrowed capital, then the difference can be used to increase the return on equity. However, in the event that the return on assets is less than the interest paid on borrowed funds, the impact of the borrowed funds on the activities of the enterprise should be assessed negatively.
It also calculates ROI and ROI. Return on sales (Pp) characterizes the ratio of net profit (Pp) to the value of sales proceeds (Bp), expressed as a percentage:
Pp = Pch / Bp * 100%
Return on sales is an estimated indicator of the production and economic activity of a business entity. It reflects the level of demand for products, works and services, how correctly a business entity determines the product range and product strategy.
Return on costs (Рз) characterizes the ratio of net profit to the sum of costs for production and sale (З), expressed as a percentage:
Rz = Pch / Z * 100%
Return on costs demonstrates the efficiency of economic activity as a whole, the calculation takes into account the cost, selling and management costs. The cost-benefit indicator shows how many kopecks of profit are accounted for by the ruble of expenses.
The dynamics of changes in profitability indicators depends, on the one hand, on factors affecting the value of the numerator of the profit indicator, on the basis of which it is calculated: sales profit, taxable, net. On the other hand, from the factors that influence the value of the denominator: the amount of assets, investments, sales, total cost. The main factors in the growth of profitability are the implementation of measures to improve the efficiency of the company's economic activities.
Practical aspects of analyzing indicators for assessing business performance
Let us consider a practical example of the methodology for assessing the effectiveness of an enterprise. To do this, we will analyze the profit indicators of a conditional enterprise in order to evaluate the income received by the enterprise, reduced by the amount of expenses incurred, in the context of reporting and analytical data. The assessment of the efficiency of the enterprise's business will be carried out on the basis that the dynamics of profit indicators of an economic entity characterizes its business activity and financial independence. The positive dynamics of the absolute indicators of profit creates the basis for self-financing of the economic activity of the enterprise on the principles of economic calculation.
The summary analytical table shows the dynamics of the company's profit indicators for 3 years.
|
Indicators |
absolute change |
Growth rate |
|||
|---|---|---|---|---|---|
|
Cost price |
|||||
|
Gross profit |
|||||
|
Business expenses |
|||||
|
Administrative expenses |
|||||
|
Profit (loss) from sales |
|||||
|
Other income |
|||||
|
other expenses |
|||||
|
Profit before tax |
|||||
|
Income tax and other similar payments |
|||||
|
Net profit (retained earnings) |
Now let's analyze business performance indicators for a given conditional enterprise.
Analyzing the data in the table, it should be noted that the company has shown an improvement in key profit indicators over a three-year period. The exception was gross profit, since, starting from 2014, administrative expenses are partly included in the cost of sales, partly transferred to selling expenses. The result was a significant growth rate of production costs, which exceeded the growth rate of revenue, and a decline in gross profit.
The increase in revenue in 2015 compared to 2013 amounted to almost 1.8 billion rubles, the growth rate reached 34.62%. The prime cost increased by more than 2 billion rubles, the growth rate was 43.5%. However, taking into account the internal reasons for the growth of the prime cost, it can be judged that there is no negative structural influence of this factor. At the same time, it is not possible to objectively assess the ratio of the dynamics of profit from sales, the growth of which amounted to 21.28%, an increase of 93.7 million rubles, in comparison with commercial and administrative expenses, for the same internal reasons. However, taking into account the lag of the growth rate of profit from sales from the growth rate of revenue, it can be judged that the company has not used internal reserves to increase the final financial result, a relative reduction in costs, as well as rational optimization of selling and administrative expenses.
During the analyzed period, other expenses and income showed a strong decline, however, other expenses in 2015 almost doubled other income, which affected the slowdown in the growth rate of profit before tax, which amounted to only 11.38%.
It should also be noted that the company's net profit for the analyzed period increased by 57 million rubles, the growth rate was 19.75%, which against the background of a decrease in tax payments indicates the successful application of preferential mechanisms to reduce tax payments and improve the efficiency of the company's financial discipline.
For the period from 2013 to 2015, there were no fluctuations of a probabilistic or stochastic nature in terms of profit from sales, profit before tax and net profit. This testifies to the effective economic activity of the enterprise as a whole and the implementation of a consistent policy in relation to economic development as an independent economic entity. In addition, for this period there is no stable negative dynamics in all profit indicators, which characterizes the maintenance of the profitability of the enterprise by the presence of prospects for the implementation of economic activity in the future.
Further, it is necessary, taking into account the specifics of the enterprise, its sphere of economic activity and the characteristics of the indicators, to assess the efficiency of the business, taking into account the factors of increasing sales and net profit and factors that hindered a more significant growth in profit. If enterprise efficiency assessment has shown an unsatisfactory state of the business, appropriate conclusions should be drawn about the unfavorable prospects of the organization.
As an example of factors of increase or decrease in sales volumes and net profit, we will cite the following:
- significant expansion or contraction of activities;
- changes in the structure of income and expenses;
- changes in the financial policy of the enterprise;
- increasing costs or reducing them.
Profitability indicators characterize the efficiency of the enterprise. Profitability is a relative measure of the level of profitability of production activities. Unlike profit, which characterizes the absolute results of activities, profitability shows the ratio of the effect to the value of the costs incurred, thereby determining the level of financial security and strength of position.
Using formulas (1), (2), (3), (4), (5) and (6), we calculate the profitability indicators based on the data above and present the results in the table.
Analyzing the results of the calculations, it should be noted a negative change in all profitability indicators in 2015, both in comparison with 2014 and in comparison with 2013. Consequently, business performance assessment shows the unsatisfactory state of the economic activity of the enterprise.
When assessing the effectiveness of a business, it should be borne in mind that the level and dynamics of profitability indicators at an enterprise is objectively influenced by the entire set of internal production and economic factors:
- the level of organization of economic activity;
- structure of capital and its sources;
- the degree of use of available resources;
- volume of sales;
- the volume of costs incurred.
The profitability of property, which characterizes the return on each ruble invested in the assets of the enterprise, makes it possible to judge the decrease in the operational efficiency of the enterprise. In addition, it is necessary to take into account the extremely low value of the indicator, which indicates an insufficient level of rationalization of the financial and economic activities of the enterprise, since the overall assessment of the profitability of capital invested in production, both own and borrowed, attracted on a long-term basis, is a little more than 6 kopecks. for each ruble invested.
The profitability of current assets, demonstrating the company's ability to provide a sufficient amount of profit in relation to the used circulating assets, allows us to conclude that the return on the use of circulating assets is relatively low.
The return on equity, which makes it possible to determine the real efficiency of the use of capital invested by the owners of the enterprise, indicates a fairly high return on equity in comparison with other indicators. It should be noted that the observed negative dynamics of changes in this indicator in the long term can significantly complicate the financial and economic activities of the enterprise.
The return on investment, which characterizes the return on capital investments and is a financial and economic reflection of the competitiveness of the enterprise, in connection with the observed dynamics of the decrease in the indicator, makes it possible to judge the decrease in the potential level of the enterprise's competitiveness. At the same time, the long-term nature of the enterprise's activities partly explains the long periods of negative dynamics, but it is not a factor that neutralizes unfavorable prospects.
The dynamics of the profitability of sales, which characterizes the economic efficiency of the main activity of the enterprise, testifies to a slight decrease in demand for the results of economic activity. Despite a slight increase in the profitability of sales in 2014, in 2015 this indicator decreased, which makes it possible to judge the lack of objectivity of the economic activity of the enterprise and the need to revise the strategy for further development.
The dynamics of return on costs, which determines the efficiency of economic activity as a whole, demonstrates a similar trend as the return on sales. It should be noted that the decrease in the value of this indicator is a consequence of a decrease in the efficiency of the use of own and borrowed funds for the implementation of the main economic activity of the enterprise.
Thus, it can be judged that the decrease in profitability indicates that the enterprise has difficulties that the enterprise is experiencing in relation to the effective implementation of the main economic and economic activity. It can be judged that there is an objective need for the enterprise to revise its policy in relation to basic commercial issues in order to increase the amount of profit received.
Based on the results of the assessment of indicators, in order to improve the efficiency of the business, the enterprise needs to find possible ways to increase the efficiency of using the net profit.
conclusions
The analysis of indicators for assessing the effectiveness of a business in the framework of the analysis of financial statements is necessary for the management of the main economic activities of an enterprise on the basis of making informed management decisions.
Information base for the analysis of indicators business performance assessment serves as accounting statements, which provides information about the financial position, results of operations and changes in the financial position of the company. The balance sheet shows assets, i.e. what the company owns and the sources of its financing from payables or equity. The balance serves as an indicator for assessing the financial condition of the enterprise. For the purpose of assessing the effectiveness of a business, financial statements are the main source of information that contains the entire set of information about the results and conditions of the enterprise over the past time.
Business performance assessment according to the accounting data it is used for the analysis, control and management of the economic activity of the enterprise.
Analysis of indicators for assessing business performance is not an end in itself.
Based on the results of the analysis, conclusions are drawn about possible ways to improve the efficiency of the economic activity of the enterprise. The methodology for analyzing indicators for assessing the effectiveness of a business allows us to identify possible directions, ways of development and improvement of the economic activity of an enterprise in accordance with the results obtained.
Literature
- Dontsova L.V., Nikiforova N.A. Analysis of accounting (financial) statements. - M .: Business and Service, 2015.
- Tolpegina O.A., Tolpegina N.A. Comprehensive economic analysis of economic activities. - M .: Yurayt, 2013.
- Gubina O.V., Gubin V.E. Analysis of financial and economic activities. - M .: Infra-M, 2014.
- Lyubushin N.P. Comprehensive analysis of financial and economic activities. - M .: Finance and Statistics, 2014.
- Petrova A.N. The economic content of the income statement. // Economic sciences. - 2012. - No. 7. - S. 157-159.
- Chechevitsyna L.N. Analysis of financial and economic activities. - Rostov-on-Don: Phoenix, 2014.
- Kuter M.I. Accounting theory. - M .: Finance and Statistics, 2013.
Introduction
1. Theoretical and methodological foundations for assessing the effectiveness of the financial and economic activities of the enterprise
1.2 Information support for the analysis of the effectiveness of the financial and economic activities of the enterprise
1.3 Methods for assessing the financial and economic activities of the enterprise
2. Comprehensive assessment of the effectiveness of financial and economic activities of PSC "TAIF-NK"
2.1 General characteristics of the financial and economic activities of PSC "TAIF-NK"
2.2 Analysis of the dynamics and structure of profit
2.3 Analysis of profitability and solvency of PSC "TAIF-NK"
2.4 Assessment of business activity of PSC "TAIF-NK"
3. The main directions of improving the efficiency of financial and economic activities of PSC "TAIF-NK"
3.1 Features of foreign experience in assessing the effectiveness of financial and economic activities of enterprises and its use in Russia
3.2 Development of measures to improve the efficiency of financial and economic activities of PSC "TAIF-NK"
Conclusion
List of used sources and literature
The relevance of the study is due to the fact that the market economy is associated with the need to improve production efficiency, competitiveness of products and services based on a systematic analysis of the financial and economic activities of the enterprise. The analysis of financial and economic activities makes it possible to develop the necessary strategy and tactics for the development of the enterprise, on the basis of which the production program is formed, and the reserves for increasing production efficiency are identified.
The purpose of the analysis is not only to establish and evaluate the effectiveness of the financial and economic activities of the enterprise, but also to constantly carry out work aimed at improving it.
Analysis of the effectiveness of the financial and economic activities of the enterprise shows in which directions this work should be carried out, makes it possible to identify the most important aspects and the weakest positions in the financial condition of the enterprise. In accordance with this, the results of the analysis give an answer to the question of what are the most important ways to improve the financial condition of an enterprise in a specific period of its activity. But the main purpose of the analysis is to timely identify and eliminate shortcomings in financial activities and find reserves for improving the financial condition of the enterprise and its solvency.
The analysis of the effectiveness of the financial and economic activities of the enterprise is carried out by the managers and relevant services of the enterprise, as well as founders and investors, in order to study the efficiency of the use of resources, banks to assess the conditions for granting a loan and determine the degree of risk, suppliers for timely receipt of payments, tax authorities to fulfill the plan receipts of funds to the budget, etc.
The financial results of the enterprise are determined primarily by the quality indicators of the products manufactured by the enterprise, the level of demand for these products, since, as a rule, the bulk of the financial results is profit (loss) from the sale of products (works, services).
Financial analysis is a flexible tool in the hands of business leaders. The efficiency of the financial and economic activity of the enterprise is characterized by the placement and use of the enterprise's funds. This information is presented in the balance sheet of the enterprise.
The main factors that determine the efficiency of the financial and economic activities of an enterprise are, firstly, the fulfillment of the financial plan and replenishment, as the need arises, of its own working capital at the expense of profit and, secondly, the rate of turnover of working capital (assets).
The signal indicator in which the efficiency of financial and economic activity is manifested is the company's solvency, which means its ability to meet payment requirements on time, repay loans, pay staff, and make payments to the budget.
The analysis of the effectiveness of the financial and economic activities of the enterprise includes the analysis of the balance sheet of liabilities and assets, their relationship and structure; analysis of the use of capital and assessment of financial stability; analysis of the company's solvency and creditworthiness, etc.
Thus, it can be seen how important is the assessment of the effectiveness of the financial and economic activities of the enterprise, and that this problem is even more urgent in the transition to a developed market economy.
The aim of the thesis is to conduct a general analysis of the effectiveness of the financial and economic activities of the enterprise of PSC "TAIF-NK" and identify ways to improve it.
Based on this goal, the following tasks were formulated:
Consider the theoretical foundations of the analysis of the financial and economic activities of the enterprise;
Study the methods of assessing the financial and economic activities of the enterprise;
Give a comprehensive assessment of the effectiveness of the financial and economic activities of the enterprise;
Develop measures to improve the efficiency of the financial and economic activities of the enterprise.
The object of the research is the financial and economic activity of PSC "TAIF - NK".
The subject of the research is the effectiveness of the financial and economic activities of the enterprise.
When covering the theoretical issues of assessing the effectiveness of the financial and economic activities of the enterprise, various textbooks, legislative acts of the Russian Federation, statistical and reference materials published both in periodicals and on the Internet were used. In the course of the work, the works of such authors as Kovalev V.V., Volkova O.N., Selezneva N.N., Terekhova V.A., Fashchevsky V.N., the journals "Economic Analysis", "Economist" and information sources of the enterprise: "Enterprise Balance", "Profit and Loss Statement", etc.
The conducted scientific research is based on the complex use of a systematic approach to the analysis of the processes and phenomena under consideration, methods of statistical and factor analysis.
Methods of economic and graphical analysis were used as a toolkit.
The thesis consists of an introduction, three chapters, a conclusion, a list of used sources and literature and applications.
The first chapter of the thesis reveals the economic essence and importance of assessing the effectiveness of financial and economic activities, studying methods for assessing the financial and economic activities of an enterprise.
The second chapter provides a comprehensive assessment of the effectiveness of the financial and economic activities of PSC "TAIF-NK".
The third chapter summarizes foreign experience in the field of enterprise performance management and presents ways to improve the efficiency of financial and economic activities of PSC "TAIF-NK".
1. Theoretical and methodological foundations for assessing the effectiveness of the financial and economic activities of an enterprise
1.1 The economic essence and value of assessing the effectiveness of the financial and economic activities of the enterprise
Ensuring the effective functioning of organizations requires economically competent management of their activities, which is largely determined by the ability to analyze it. With the help of a comprehensive analysis, development trends are studied, the factors of change in the results of activities are deeply and systematically studied, business plans and management decisions are justified, their implementation is monitored, reserves for increasing production efficiency are identified, the results of the enterprise are assessed, and an economic strategy for its development is developed.
Analysis of the financial and economic activities and financial results of the enterprise involves the study of the technical level of production, quality, and competitiveness of products, the provision of production with labor, material and financial resources and the efficiency of their use. They are based on a systematic approach, complex consideration of various factors, high-quality selection of reliable information and are an important management function.
The purpose of the analysis of the financial results and economic activities of the enterprise is to increase the efficiency of its work on the basis of a systematic study of all types of its activities. In the process of analysis, a set of technological, socio-economic, legal and other processes, patterns of formation, construction and functioning of management systems are investigated: the principles of building organizational structures, the effectiveness of the methods used.