# How to define security with current assets

Security of the enterprise with current assets characterizes the speed of the address of investments made in its current assets. Its indicators allow to establish whether it is enough at the organization of stocks, money and other assets to carry out effective activity.

## It is required to you

• - balance sheet (form No. 1);
• - profit and loss report (form No. 2).

## Instruction

1. Assessment of a financial condition of the enterprise and its separate aspects is based on the analysis of accounting records. It forms a basis for calculation of the coefficients of financial and economic activity reflecting the current situation and trends of change in the best or worst parties.

2. For definition of security of the enterprise with current assets calculate its general coefficient: divide the total amount of current assets presented in line 1200 of form No. 1 of the balance sheet into average monthly revenue which is calculated by division of an indicator of line 2110 of the profit and loss report (form No. 2) on the number of months since the beginning of year.

3. Trace security coefficient in dynamics: its reduction can designate incorrect administrative policy and need for attraction of additional financial resources in the form of loans and the credits. Further it can lead to decrease in solvency of the enterprise.

4. Truly to estimate security of the enterprise with current assets, it is also necessary to consider similar coefficients of current assets in production and calculations which values reflect structure of the current assets of the organization.

5. Current assets in production – the book value of stocks of the enterprise specified in line 1210 of form No. 1. To calculate coefficient, divide value of line 1210 into average monthly revenue. The received result characterizes turnover of inventory holdings of the organization.

6. relation of the total cost of current assets minus current assets in production to average monthly revenue. Calculate it on a formula: To = (p. 1200-of p. 1210) / (p. 2110/n) where n is the number of months since the beginning of year.

7. The size of current assets in calculations shows the speed of the address of the current assets and average terms of their conclusion from a turn. Besides, it reflects liquidity of products, relationship with buyers of goods, efficiency of policy of the management regarding receiving payment for the sold products, including on credit. On the basis of this coefficient it is possible to predict emergence of doubtful and hopeless receivables.

Author: «MirrorInfo» Dream Team