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What are the financial indicators?
Analysis of Several Common Financial Indicators

1, liquidity ratio

Liquidity is the ability of an enterprise to generate cash, which depends on the number of current assets that can be converted into cash in the near future.

(1) current ratio

Formula: current ratio = total current assets/total current liabilities

Standard value set by the enterprise: 2

Significance: Reflect the ability of enterprises to repay short-term debts. The more current assets, the less short-term debt, the greater the current ratio, and the stronger the short-term solvency of enterprises.

The analysis shows that the short-term risk of corporate debt is greater when it is lower than normal. Generally speaking, business cycle, the amount of accounts receivable in current assets and inventory turnover rate are the main factors affecting the current ratio.

(2) Quick ratio

Formula: quick ratio = (total current assets-inventory)/total current liabilities.

Conservative quick ratio =0.8 (monetary fund+short-term investment+notes receivable+net accounts receivable)/current liabilities.

Standard value set by the enterprise: 1.

Significance: It can better reflect the ability of enterprises to repay short-term debts than the current ratio. Because the current assets also include the inventory that is slowly realized and may have depreciated, the current assets are deducted from the inventory and then compared with the current liabilities to measure the short-term solvency of the enterprise.

The analysis shows that the quick ratio below 1 is usually considered as low short-term solvency. An important factor affecting the credibility of quick ratio is the liquidity of accounts receivable. Accounts receivable on the books may not be realized and may not be reliable.

General tips for liquidity analysis:

(1) Factors to increase liquidity: available bank loan indicators; Long-term assets to be realized; Reputation of solvency.

(2) Factors that weaken liquidity: unrecorded contingent liabilities; Contingent liabilities arising from guarantee liability.

2. Asset management ratio

(1) Inventory turnover rate

Formula: inventory turnover rate = product sales cost/[(opening inventory+ending inventory) /2]

Standard value set by the enterprise: 3

Significance: Inventory turnover rate is the main index of inventory turnover rate. Increasing inventory turnover rate and shortening business cycle can improve the liquidity of enterprises.

The analysis shows that the inventory turnover rate reflects the inventory management level. The higher the inventory turnover rate, the lower the inventory occupancy level, the stronger the liquidity, and the faster the inventory can be converted into cash or accounts receivable. It not only affects the short-term solvency of enterprises, but also is an important content of the whole enterprise management.

(2) Inventory turnover days

Formula: inventory turnover days =360/ inventory turnover rate =[360* (beginning inventory+ending inventory) /2]/ product sales cost.

Standard value set by the enterprise: 120.

Significance: the number of days for an enterprise to purchase inventory, put into production and sell. Increasing inventory turnover rate and shortening business cycle can improve the liquidity of enterprises.

The analysis shows that the inventory turnover rate reflects the inventory management level. The faster the inventory turnover rate, the lower the inventory occupancy level and the stronger the liquidity, and the faster the inventory can be converted into cash or accounts receivable. It not only affects the short-term solvency of enterprises, but also is an important content of the whole enterprise management.

(3) Accounts receivable turnover rate

Definition: The average number of times accounts receivable are converted into cash during the specified analysis period.

Formula: accounts receivable turnover rate = sales revenue/[(accounts receivable at the beginning+accounts receivable at the end) /2]

Standard value set by the enterprise: 3

Significance: The higher the turnover rate of accounts receivable, the faster the recovery. On the contrary, it shows that the liquidity in accounts receivable is too sluggish, which affects the normal capital turnover and solvency.

According to the analysis, the turnover rate of accounts receivable should be considered in combination with the operation mode of enterprises. Using this indicator can not reflect the actual situation in the following situations: first, enterprises that operate seasonally; Second, the installment settlement method is widely used; Third, a large number of sales settled in cash; Fourth, a large number of sales at the end of the year or a sharp decline in sales at the end of the year.

(4) Average collection period

Definition: indicates the time required for an enterprise to obtain the right of accounts receivable, recover the money and convert it into cash.

Formula: average collection period = 360/ accounts receivable turnover rate.

= (accounts receivable at the beginning+accounts receivable at the end) /2]/ product sales revenue

Standard value set by the enterprise: 100.

Significance: The higher the turnover rate of accounts receivable, the faster the recovery. On the contrary, it shows that the liquidity in accounts receivable is too sluggish, which affects the normal capital turnover and solvency.

According to the analysis, the turnover rate of accounts receivable should be considered in combination with the operation mode of enterprises. Using this indicator can not reflect the actual situation in the following situations: first, enterprises that operate seasonally; Second, the installment settlement method is widely used; Third, a large number of sales settled in cash; Fourth, a large number of sales at the end of the year or a sharp decline in sales at the end of the year.

(5) Business cycle

Formula: business cycle = inventory turnover days+average collection cycle.

= {[(opening inventory+ending inventory) /2]* 360}/ product sales cost+{[(opening accounts receivable+ending accounts receivable) /2]* 360}/ product sales revenue

Standard value set by the enterprise: 200.

Significance: The business cycle is the time from acquiring inventory to selling inventory and recovering cash. Under normal circumstances, the short business cycle indicates that the capital turnover speed is fast; The long business cycle indicates that the capital turnover rate is slow.

Analysis hint: Business cycle should generally be analyzed together with inventory turnover rate and accounts receivable turnover rate. The length of business cycle not only reflects the asset management level of enterprises, but also affects the solvency and profitability of enterprises.

(6) Turnover rate of current assets

Formula: turnover rate of current assets = sales revenue/[(current assets at the beginning+current assets at the end) /2]

Standard value set by the enterprise: 1.

Significance: The turnover rate of current assets reflects the turnover rate of current assets. The faster the turnover rate, the more economical the current assets, which is equivalent to expanding the investment of assets and enhancing the profitability of enterprises. To slow down the turnover rate, it is necessary to supplement the current assets to participate in the turnover, which will waste assets and reduce the profitability of enterprises.

The analysis suggests that the turnover rate of current assets should be analyzed together with inventory and accounts receivable, and used together with indicators reflecting profitability, which can comprehensively evaluate the profitability of enterprises.

(7) Total assets turnover rate

Formula: total assets turnover rate = sales revenue/[(total assets at the beginning+total assets at the end) /2]

Standard value set by the enterprise: 0.8

Significance: This indicator reflects the turnover rate of total assets. The faster the turnover, the stronger the sales ability. Enterprises can adopt the method of small profits but quick turnover to speed up asset turnover and increase absolute profits.

It is considered that the total assets turnover rate index is used to measure the ability of enterprises to make profits by using assets. It is often used together with indicators reflecting profitability to comprehensively evaluate the profitability of enterprises.