Audit and economical analysis

Comparative analysis of debt dynamics with effectiveness and efficiency (analysis of debtability and creditworthiness of debt)

 

Economic decisions taken by users require an assessment of their ability to generate monetary assets and cash equivalents, and the duration and accuracy of the proper management of accounts receivable and payables.

Deep amalysis of changes in accounts receivable and payables of the business entity requires studying the real situation on their size, duration, delinquency, turnover during the period.

Borrowing is one of the most difficult issues in assessing the financial situation of an enterprise.   His decision does not always apply to the enterprise itself.   In particular, the liabilities of the receivables and their deduction, the timeliness and the occurrence of additional liabilities arising from debts are not a simple process undertaken by the management of the enterprise.   In turn, the obligations of the receivables are on the opposite side of the enterprise, the repayment of debts, their structural   effect algorithm.   Since receivables and payables affect both sides of the transaction, affecting one of them and the other in the other.   At the same time, the decision of debt in one enterprise, in the network and, ultimately, affects the payment discipline in the country.

Debt repayment is carried out   behind   score   own   funds   and their equivalents. The main stream of cash and cash equivalents in anenterprise is operating activities. On the other hand, most of the obligations are related to this activity. Therefore, managers of the enterprise will always try to keep money and cash equivalents in proportion to their short-term obligations. In addition, maintaining an excessive portion of their operating and debt is not considered acceptable to the enterprise. This will cause the assets to be interrupted.   Investing cashless cash equivalents is a tool   of management   funds.

Cash equivalents include short-term investments. In order for the short-term form of financial investment   was   recognized   cash equivalent   risk of change in the value of the convertible   amounts   and its value should be negligible.

The dynamics of borrowing is a gradual change in its years. This is a retrospective analysis of debt, which is also necessary to determine future projections. In the periodicity of the assessment of debt it is necessary to pay great attention to the costs and outflow of past liabilities. This does not mean that debts are deducted from profit or loss. Deposits must be kept on off-balance sheet accounts for a period of up to 5 years.

An assessment of the debtor’s obligations is not always sufficient to make clear conclusions about the financial situation of the organization.   Therefore, the relative expression of this process is also evaluated in terms of its efficiency and effectiveness.   These parameters are studied and analyzed in terms of the turnover ratio of receivables and payables.

When considering the debts of debtors and creditors, two aspects of turnover are important.

1. 
   Rotation coefficients and their change.
   
2. 
   Period of rotation and their change.