What is the appropriate current liability ratio?

Question 1: What is the current liability ratio considered relatively normal? There is no absolute standard for the current liability ratio. For a company that is operating normally, the current liability ratio will be high or low in different periods. Its inevitable objective reasons. Personally, I judge that the current liability ratio is in the range of 30%-70%, which is relatively normal.

Explanation:

Current liability ratio = total current liabilities/total assets. Current liability ratio refers to the ratio of current liabilities to total assets (total liabilities). This indicator reflects the degree to which a company relies on short-term creditors. The higher the ratio, the stronger the company's dependence on short-term funds.

1. When the ratio increases or is higher:

(1) The enterprise’s capital cost decreases;

(2) The debt repayment risk increases; < /p>

(3) It may be due to a decrease in corporate profitability or an increase in business volume.

2. When the ratio decreases or is lower:

(1) The company’s debt repayment ability is reduced;

(2) The stability of the company’s structure is improved;

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(3) It may be that the business of the enterprise is shrinking, or it may be that the profitability of the enterprise is improving.

Question 2: How much current liabilities should account for liability assets? Appropriate asset-liability ratio = total liabilities/total assets × 100% 1. Total liabilities: refers to the total of various liabilities borne by the company, including current liabilities and long-term liabilities Liabilities. 2. Total assets: refers to the total number of assets owned by the company, including current assets and long-term assets. The lower the ratio, the better for creditors. Because the owners (shareholders) of a company generally only bear limited liability, and once the company is bankrupt and liquidated, the proceeds from the realization of the assets are likely to be lower than their book value. So if this indicator is too high, creditors may suffer losses. When the asset-liability ratio is greater than 100%, it indicates that the company is insolvent and the risk is very high for creditors. The asset-liability ratio reflects the proportion of funds provided by creditors to all funds, as well as the extent to which corporate assets protect the rights and interests of creditors. The lower this ratio (below 50%), the stronger the company's solvency. In fact, the analysis of this ratio depends on whose perspective you stand. From the perspective of creditors, the lower the debt ratio, the better. The company's debt repayment is guaranteed and the loan does not carry too much risk. From the perspective of shareholders, when the total capital profit rate is higher than the borrowing interest rate, the larger the debt ratio, the better. , because the profits received by shareholders will increase. From the perspective of financial management, when making decisions about borrowing capital, enterprises should assess the situation, consider it comprehensively, fully estimate expected profits and increased risks, weigh the pros and cons, and make correct analysis and decisions.

Question 3: What is the appropriate current ratio? The current ratio is the ratio of current assets to current liabilities. It is used to measure the ability of a company's current assets to be turned into cash to repay liabilities before short-term debts mature. Generally speaking, the higher the ratio, the stronger the liquidity of the company's assets and the stronger its short-term solvency; vice versa. It is generally believed that the current ratio should be above 2:1, which means that current assets are twice current liabilities. Even if half of the current assets cannot be realized in the short term, all current liabilities can be guaranteed to be repaid.

Question 4: Is it better to have a higher or lower current liability ratio? After reading the following, you will know whether it is better to have a high or low current liability ratio.

Comprehensive analysis of current liability ratio, current asset ratio, and profit growth rate

Current liability ratio = current liabilities/assets, current asset ratio = current assets/assets, profit growth rate =(Net profit for the current period - Net profit for the previous period)/Net profit for the previous period

We combine the above indicators to see the company's profit prospects. If the three indicators increase at the same time, it means that the company has expanded its production and operation business, increased production, and expanded profits; if the current liability ratio increases and the current asset ratio decreases, but the profit rate increases, it means that the company's product sales are very good, supply exceeds demand, and operations The situation remains good; if the current liability ratio increases, the current asset ratio decreases, and the profit rate decreases, it means that the company's production and operation situation has deteriorated, and the company will have financial difficulties; if the current liability ratio, current asset ratio, and profit rate decrease at the same time , indicating that the company's production and operation business is shrinking, and the company's profit prospects are very unoptimistic.

To sum up, we found that after correlating and matching the financial indicators that reflect the company's profitability, if it shows that the company's profitability is weakening, then the company's profitability potential is worthy of our Discussion, investors should treat it with caution.

Case analysis

Let’s first use the Heyin listed company analysis system and use the first method to give examples. Taking Huatian Hotel 000428

as an example, we can see that the company's debt operating ratio increased from 1.59% at the end of 2001 to 11.77% at the end of 2002, but the profit The growth rate was -19.8%, showing a downward trend, indicating that corporate debt did not bring expected returns to the company.

Using the second method for example analysis, still taking Huatian Hotel as an example, we analyze the relationship between current liability ratio, current asset ratio, and profit growth rate, as shown in the following table:

Indicator Name Growth Rate in 2001 and 2002

Current liabilities ratio 35.8% 27% -25% ↓

Current assets ratio 32% 22% -31% ↓

Profit growth rate -19.8% ↓

We see that the three indicators show a downward trend at the same time, indicating that the profitability of the company is gradually weakening as the production and operation business shrinks

Of course, it is better for the current debt ratio to be lower.

Question 5: In what range is it generally better to control the current ratio and asset-liability ratio? 20 points for the calculation formula and analysis of financial indicators

1. General classification and calculation of commonly used financial indicators

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1. Solvency Indicator

(1) Short-term Solvency Indicator

1. Current Ratio = Current Assets ÷ Current Liabilities

2. Quick ratio = quick assets ÷ current liabilities

3. Cash flow liability ratio = annual net operating cash flow ÷ current liabilities at the end of the year × 100%

(2) Long-term repayment Debt capacity indicators

1. Asset-liability ratio = total liabilities ÷ total assets

2. Equity ratio = total liabilities ÷ owners’ equity

2. Operating capabilities Indicators

(1) Human resources operating capability indicators

Labor efficiency = net income from main business or net output value ÷ average number of employees

(2) Production means Operating capability indicators

1. Current assets turnover indicators

(1) Accounts receivable turnover rate (times) = net income from main business ÷ average accounts receivable balance

Accounts receivable turnover days = average accounts receivable × 360 ÷ net income from main business

(2) Inventory turnover rate (number of times) = main business cost ÷ Average inventory

Inventory turnover days = average inventory × 360 ÷ main business cost

(3) Current asset turnover rate (number of times) = net income from main business ÷ average current assets Total amount

Current assets turnover period (number of days) = Average total current assets × 360 ÷ Net income from main business

2. Fixed asset turnover rate = Net income from main business ÷ Average net value of fixed assets

3. Total asset turnover rate = net income from main business ÷ average total assets

3. Profitability indicators

(1) General indicators of corporate profitability

1. Main business profit margin = profit ÷ net income from main business

2. Cost and expense profit rate = profit ÷ cost and expense

3. Return on equity = net profit ÷ average net assets × 100%

4. Capital preservation and appreciation rate = owner’s equity at the end of the year after deducting objective factors ÷ equity at the beginning of the year × 100%

(2) Indicators of social contribution ability

1. Social contribution rate = total social contribution of enterprises ÷ average total assets

2. Social accumulation rate =Total amount of national fiscal revenue ÷Total corporate social contribution

4. Development capability indicators

1. Sales (business) growth rate = Sales (business) growth this year ÷Previous year Total sales (operating) income × 100%

2. Capital accumulation rate = growth in owners’ equity this year ÷ owners’ equity at the beginning of the year × 100%

3. Growth rate of total assets = Growth of total assets for the year ÷ Total assets at the beginning of the year × 100%

4. Fixed asset renewal rate = Average net fixed assets ÷ Average original value of fixed assets × 100%

2 , Specific application analysis of commonly used financial indicators

1. Liquidity ratio

Liquidity is the ability of an enterprise to generate cash, which depends on the amount 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

Meaning: reflects the company's ability to repay short-term debts. The more current assets and less short-term debt, the greater the current ratio and the stronger the company's short-term debt repayment ability.

Analysis Tip: Lower than normal, the company's short-term debt repayment risk is greater. Generally speaking, the operating cycle, the amount of accounts receivable in current assets and the turnover rate of inventory are the main factors that affect the current ratio.

(2) Quick ratio

Formula: Quick ratio = (Total current assets - inventory) / Total current liabilities

Conservative quick ratio = 0.8 (Monetary funds + short-term investments + notes receivable + net accounts receivable) / Current liabilities

Meaning: It can better reflect the company's ability to repay short-term debts than the current ratio. Because current assets also include inventories that are slowly realized and may have depreciated in value, current assets are deducted from inventories and then compared with current liabilities to measure the company's short-term solvency.

Analysis Tip: A quick ratio lower than 1 is usually considered to be a low short-term solvency. An important factor affecting the credibility of the quick ratio is the liquidity of accounts receivable. Accounts receivable on the books may not always be liquidated, nor may they be very reliable.

General tips for liquidity analysis:

(1) Factors that increase liquidity: available bank loan indicators; long-term assets ready to be liquidated quickly; reputation for solvency.

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

2. Asset management ratio

(1) Inventory turnover ratio

Formula...>>

Question 6 : What is the most appropriate asset-liability ratio for a company? Different industries have different asset-liability ratio requirements

A conservative setting is 60%

Question 7: When current liabilities are "0", what is the quick ratio? Such a quick ratio makes no sense.

Quick ratio = (current assets - inventory) / current liabilities * 100%

Question 8: What is the current ratio? Quick ratio? What is the standard value? Current ratio = Current assets/current liabilities

Quick ratio = quick assets/current liabilities

Quick assets = current assets - inventory

Liquidity chicken: current assets It refers to the assets that an enterprise can realize or use within a business cycle of one year or more than one year. It is an indispensable part of the enterprise's assets.

The current ratio should generally be greater than 200%. But it can be considered as appropriate

Quick ratio Quick ratio should generally be kept above 100%, same as above!

Question 9: What is the reason why the proportion of current liabilities to total liabilities is too high? Common components of current liabilities include: accounts payable 2, accounts payable in advance, notes payable, short-term loans, long-term loans due within one year, etc.

Detailed analysis must be carried out based on detailed project conditions

It may be:

1. There is a problem in the company's operation, the capital flow is seriously insufficient, and it is unable to pay suppliers and others

2. The long-term loan is about to expire

3. The company has no major project construction and only needs to solve the problem of short-term capital flow shortage. It has signed a loan contract with the bank such as a maximum limit of working capital.