Assessment of the financial condition of the enterprise: the coefficient of financial independence

The condition for the development and survival of any company is its financial independence and stability. If the company is stable, then it is able to withstand unexpected changes in market conditions. A financially independent enterprise is able to settle on time in its obligations with partners, the state, personnel, off-budget funds.

The financial independence of the company guarantees its solvency in normal economic conditions and with occasional changes in the market.

The main factors that determine the financial stability and independence of the organization are the financial structure of capital and the policy of financing certain individual components of assets (stocks and non-current assets). The financial structure of capital depends on the ratio of debt and equity, as well as its sources (long-term and short-term). Therefore, in order to assess the financial stability of the firm, it will be necessary to analyze not only the structure of financial resources, determine the coefficient of financial independence, but also the direction of investment of assets.

Estimation of the level of sustainability is made with the help of the ratio of equity and borrowing, the solvency index (autonomy), the maneuverability ratio of the funds (own). Also use the coefficient of financial independence, an indicator of the effectiveness of the use of own funds and the amount of use of resources of all property of the company.

The coefficient of the ratio of borrowed funds and own funds allows us to characterize the structure of the company's resources. The indicator is a quotient of the total amount of borrowed funds for the amount of equity. The permissible maximum value of this indicator is equal to one, which implies an equal ratio of own and attracted assets.

Coefficient of financial independence: formula

This indicator is the most important in assessing the situation of the enterprise. It is calculated by the ratio of its own funds to the entire volume of resources (financial). The coefficient of financial independence shows to what extent the company is independent of external loans. In addition, the indicator characterizes the organization's ability to provide its own external obligations through its own funds. With a larger value of the coefficient, we can say about the best state of the company, its less dependence and greater stability. Sometimes the opposite coefficient of financial independence is applied.

For the analysis, also calculate the coefficient of autonomy (the concentration of its capital), determining the proportion of funds that the owner has invested in the total value of their property. It is calculated by the formula showing the ratio of equity to the base balance currency.

The normal value of the coefficient is 0.5 level. In this situation, one can say that the firm is provided with its own resources and with a minimum of borrowed assets. Thus, the company can pay off its obligations by selling the property generated from its own sources.

When assessing this coefficient, account should be taken of the organization's industry affiliation, the availability of borrowed long-term assets and other factors.

The degree of mobility of the application of equity is determined using the maneuverability coefficient. It is calculated by the ratio of current assets to own capital.

Despite the fact that increasing financial independence is a positive trend, there is nothing wrong with attracting outside capital, especially if these assets will not prevail and will be inexpensive.