In order to have an idea of the benefits of investments, the calculation of the investment ratio is carried out. What is he like? What does his formula look like?
general information
First, let's deal with terminology. So, the investment ratio is an indicator that is used to analyze the structure and financial assessment of the company's own sources of collateral and their subsequent application. It is used to display the ability to provide its non-current assets independently. It also gives an idea of how much the enterprise’s own resources can cover production investments.
The coefficient takes into account the degree of investment risk due to the influence of liquidity and solvency assessment of the structure, and its ability to cope with foreign economic fluctuations. Guided by it, they make decisions about whether to invest in the enterprise and whether its risks are high. Indeed, in the event of a crisis, companies with unsatisfactory value are destroyed in the first place.
Representation
Two assessment approaches are conventionally distinguished:
- Coefficient of investment of own sources. Used to display the level of security of production investments of the enterprise through its own resources. The normative value of this coefficient is in the range from ¼ to 1. If the condition is not met, then it is considered that the company is not financially stable.
- Coefficient of investment of own sources and long-term liabilities. It is used to show how enterprise resources provide all the investments received. Regulatory requirements require a value of more than one.
The investment ratio on the balance sheet of the enterprise can be calculated. This approach allows you to get the most reliable results. In this case, to analyze the financial situation of the enterprise and better disclosure of the situation, the coefficients of financing, stability, independence / concentration, concentration of borrowed capital, debt, total solvency, coverage, maneuverability and others can be additionally used.
How to count?
So, we already know in general terms what constitutes an investment ratio. The formula will allow you to calculate how much each individual subject is independent. It should be noted here that the chosen approach will directly depend on the goals pursued by us. First, let's look at the situation with our own sources of financial resources.
In general terms, the formula is as follows:
KI1 = UPC / OS.
In short, it reflects the ratio of the company's own funds to its fixed capital.
Here KI1 is the investment ratio. But, pay your attention exclusively to your means.
SKP is the equity of an enterprise.
OS - this is the fixed capital of the organization, which include non-current assets and other investments that are the result of the first division of assets within the balance sheet.
Now consider the formula for the coefficient of investment of own sources and long-term liabilities.
It looks like this:
KI2 = SKP + DK / OS.
The only change, namely DC, here means long-term loans of the organization. To better understand how your investment ratio is calculated, let's look at a couple of examples.
The first case. A toy shop
Let's say we have a toy store with its own capital, which is an investment of the founders of the business. Its size is one million rubles. At the same time, fixed assets of the store, such as premises, furniture, cash registers and shop windows, cost 5.2 million rubles.
We use the above formula: KI1 = 1 / 5.2 = 0.192.
Since the resulting investment ratio is less than 0.25, we conclude that the store does not have sufficient financial stability. Fixed assets of the store at the expense of equity are not provided enough. Therefore, theoretically, and perhaps practically, the enterprise may encounter problems in terms of solvency or a lack of liquidity.
Second case. Car service
Car service has its own capital, which was formed from the investments of shareholders. Its size is fifteen million rubles. In addition, the company took a long-term bank loan. At the moment, its amount is exactly three million rubles. At the same time, fixed capital represented by premises, equipment, durable tools and other things is estimated at 16.5 million rubles.
We calculate by the formula: KI2 = 15 + 3 / 16.5 = 1.09.
Since the investment ratio exceeds unity, we can conclude that the company has sufficient financial independence, its capital and long-term liabilities cover non-current assets to the necessary extent. Therefore, in the event of economic shocks, non-payment of receivables and other problems, the company will be able to continue functioning.
The third example. Online store
Consider another such case. We have an online store with equity of forty thousand rubles. Let it be small and founded by an individual entrepreneur. In this case, fixed capital is 70 thousand rubles.
We use the first formula: KI1 = 40/70 = 0.57.
As you can see, the requirement of 0.25 All these indicators are used to predict how easily the company will be able to survive the possible difficulties. The share of borrowed funds can affect them most. How? It is believed that if they make up more than half of all the funds available to the company, then this is not a good sign for its sustainability and future. Although for different industries this indicator can vary significantly. So, for trading companies that have significant turnover, this figure is much more loyal. That’s basically all you need to know about the investment ratio.Why is all this calculated?
The investment ratio is necessary to calculate financial stability. It is used to determine the balance of financial flows, which allows the organization to support its activities over a long period of time, producing products and servicing loans received. In addition to this, for this purpose, the coefficients of autonomy, security with own working capital, reserves, mobility, maneuverability and others can be calculated.