1. Current ratio

Current ratio = current assets/current liabilities × 100%

This ratio is used It measures the extent to which an enterprise's current assets protect current liabilities, that is, the ability of current assets to be converted into cash to repay current liabilities before short-term debts mature. However, there are often some items in current assets that cannot be converted into cash quickly under actual circumstances. From an accounting perspective, certain misappropriated public funds or bad debts are reflected through accounts receivable, long-term accounts receivable and other accounts. Based on the principle of conservatism, it should be deducted when calculating the current ratio indicator or deducted in a certain proportion according to specific circumstances. In addition, it is best to add estimated contingent liabilities that may occur to the current liabilities on the balance sheet, such as product quality deposits, discounts on bills receivable, litigation compensation, etc.

2. Quick ratio

Quick ratio = quick assets/current liabilities × 100%

This indicator is used to measure the company's current ability to repay current liabilities with its current assets. It is generally believed that the higher this indicator, the smaller the creditor's debt risk. As for quick assets, there are two calculation methods in domestic and foreign accounting practices.

(1) General calculation method (subtraction)

Quick assets = current assets-inventory

The "General Principles of Corporate Finance" promulgated by the Ministry of Finance in 1993 is Calculated in this way.

(2) Conservative calculation method (addition)

Quick assets = monetary funds ten short-term marketable securities ten net accounts receivable (including notes receivable)

Most companies in the United States use this method to analyze their financial statements. Among them, monetary funds are different from other monetary funds, such as deposits from other places and bank deposits for designated purposes; long-term receivables are deducted from accounts receivable. The above two calculation methods sometimes make the calculation results of quick assets very different. Because conservative quick assets deduct larger amounts of prepaid accounts and other current assets. Judging from the items listed on the balance sheet of Chinese enterprises, these other current assets include other monetary funds, long-term accounts receivable, other receivables, deferred expenses, net losses on pending current assets, and long-term bonds due within one year. Investments, debt repayment funds that cannot be used for delivery

, technological transformation funds, etc. The accounting figures of these projects account for a considerable proportion of current assets, and at the same time it is difficult to obtain them at any time. Liquidate to pay off debt. Therefore, a more robust indicator of a company's immediate solvency is the cash ratio, which is equal to the ratio of cash and deposits plus cash equivalents to current liabilities. Cash equivalents are bonds and stock investments that are expected to be recovered within three months. This indicator is particularly useful when analyzing a company's financial difficulties and facing bankruptcy liquidation.

2. Application in long-term solvency analysis

The main indicator of long-term solvency is the asset-liability ratio. Formula: Asset-liability ratio = Total liabilities at the end of the period / Total assets at the end of the period × 100%

This indicator reflects the ratio of corporate debt operations. Used to measure the extent to which a company protects the interests of creditors. For different industries, different industries have different standards. For example, agriculture does not rely on loans for investment, so this indicator is usually around 20%. Secondary industries such as industry are generally between 40 and 60%, while the tertiary industry is relatively low. live. There are institutional reasons for the high asset-liability ratio in our country. Under the planned economy, enterprises have no risk of bankruptcy. Enterprise profits and depreciation funds are uniformly turned over to the government. The underdeveloped securities market also makes enterprises have less external capital investment. If a company wants to develop, it can only rely on borrowing. As a corporate creditor, I hope that the lower the indicator, the better; as an investor, as long as the return on assets of the company is greater than the cost of liabilities, it is okay to have more debt; operators hope to have a reasonable ratio, because too high will affect the company's financing reputation. If it is too low, it will affect the production expansion of the enterprise. During the specific analysis, we should pay attention to the following two aspects;

1. Minority Interests. After consolidating the financial statements of a subsidiary that is not 100% owned, a minority equity account must be added to reflect the interests of other shareholders who hold minority interests in the subsidiary. On the balance sheet, minority interests are usually listed before stockholders' equity (owners' equity). In Western countries, some companies do not include minority equity interests when calculating debt ratios on the grounds that minority equity interests are not debt that will be repaid in the future. Other companies include minority equity in total debt for calculating debt ratios on the grounds that minority equity is also the company's external financing and is part of the total capital used by the company. Since the minority equity makes the enterprise (for the owners of the parent company) an inflated asset, in order to make the content reflected in the numerator and denominator correspond, the minority equity must be included in the liability.

2. Redeemable preferred stock. It refers to preferred shares issued by a joint-stock company and can be redeemed at a certain price when needed. It can increase the room for enterprise capital utilization, reduce risks caused by fluctuations in market profits, and alleviate financial tensions during enterprise preparation. This type of preferred shares is different from ordinary shares and preferred shares in general, and it is best to be listed in the liability items for calculation.