Current asset management in the enterprise

Table 2.2.1. Financial ratios used to assess the financial sustainability of the enterprise

Ratio	Calculation method	Recommended value	2005	2006	2007	2008	2009
Equity Capital/Total Assets ratio	U1=Equity/Total Assets	Min 0,4	0,28	0,35	0,29	0,13	0,19
Total Debt ratio/Equity Capital	U2=(LTL+STL)/Capital	U2<1,5	2,55	1,82	2,45	6,74	4,21
Availability of internal funds ratio	U3=(Capital-NCA)/CA	U3>0,1	-0,1	0,15	0,15	-0,02	0,01
Margin of financial safety	U4=(Capital+LTL)/Balance	U4>0,6	0,51	0,45	0,67	0,27	0,47

Equity Capital/Total Assets ratio shows the share of equity in the total amount of all assets of the company. Minimum threshold should be at the level of 0.4. This restriction shows that all the obligations of the organization may be covered with their own funds. In considered business, this ratio in 2006 was approaching the threshold, but in 2008 (because of the crisis) fell to its lowest value (0.13). Analysis of this factor shows that the activities of the enterprise are largely dependent on borrowing.
Figure 2.2.1. Dynamics of main financial coefficients for 2005-2009 and their recommended values
T otal Debt/Equity Capital ratio shows how much debt a company has attracted to 1 ruble invested in the assets of its own funds. The maximum recommended value should not exceed the value of 1.5. Exceeding the specified limits means the company’s reliance on external sources of funds, loss of financial stability (autonomy). In this enterprise, this factor in the last considered reporting period exceeded the recommended value in 2.8 times.
Availability of internal funds ratio illustrates the existence of the company's own working capital needed for its financial stability. The higher the value, the better the financial condition of the company is, so the greater its capacity is to conduct an independent monetary policy. In 2009, this ratio was 10 times less than the allowable threshold.
Margin of financial safety shows how much of an asset is financed by sustainable sources. Recommended value is not less than 0.6. Since the company was during the reviewed period in the long-term lending, rate of financial stability was within the realm of valid values.