The autonomy ratio is an important indicator of the success of any enterprise. It refers to financial stability ratios. This technique allows you to evaluate the activities of the organization in the long term and based on the data obtained to improve their condition in the planning period.
general characteristics
The coefficient of autonomy is an indicator of the degree of freedom of the enterprise from borrowed capital. It reflects part of its own liabilities in the structure of the balance sheet currency. The company, of course, can use borrowed funds to increase its profits. However, the fee for the use of investor capital should not exceed the expected profit.
A low value of this indicator indicates a rather low attractiveness for the new lenders of the company.
Autonomy coefficient used arbitration managers in the analysis of the enterprise. Therefore, financial management within the company should also be based on the data of the presented valuation technique.
In the literature you can find many names of this indicator. This should not confuse the analyst, since the essence of the coefficient remains the same, regardless of its name.
Calculation formula
The generally accepted formula for determining this indicator is as follows:
KA = Own sources / Balance currency
If you rely on the data of Form No. 1 of the accounting report, the autonomy coefficient, the formula of which was presented above, will have such a breakdown.
KA = s. 1300 / s 1600.
In international financial sources and educational literature, you can find this kind of this formula:
EtTA = EC / TA, where the EU is Equity Capital (equity); TA - Total Assets (assets).
Normative value
In our country financial ratio autonomy has its normative value. This ratio should be equal to 0.5. Financial analysts believe that its optimal value is higher - 0.6-0.7.
This indicator depends on the type and direction of the business of the company, as well as the country of its operation. The indicator may be a little less. For example, for the USA, the optimal value of the autonomy coefficient is 0.5, and for South Korea it is 0.3. In order to be able to draw adequate conclusions, the presented indicator should be compared with its value among other enterprises in the industry. The standard value is only recommended, the decision is made in each case individually.
Calculation and Analysis Example
In order to better understand the essence of such a criterion of a company’s activity as the coefficient of autonomy, an example of its calculation at an enterprise should be considered.
Suppose the company had the amount of its own resources in the reporting period at the end of each quarter:
1Q - 1.876 million rubles;
2Q - 1.91 million rubles .;
3Q - 1.82 million rubles;
4Q - 1.928 million rubles.
The balance sheet currency at the end of each quarter was:
1Q - 3,961 million rubles;
2Q - 3,999 million rubles .;
3Q - 3.913 million rubles;
4Q - 3.88 million rubles.
The coefficient calculated for each quarter will be as follows:
K1 = 1.876 / 3.961 = 0.47;
K2 = 1.91 / 3.999 = 0.47;
K3 = 1.82 / 3.913 = 0.46;
K4 = 1.928 / 3.88 = 0.5.
The results of the analysis showed that the company in the reporting period did not have significant changes in the aspect of the considered indicator, which indicates the structure of its financial condition and the harmonious management of the capital structure by the enterprise management. Minor changes in the amount of own liabilities are the result of normal operating activities of the organization. The balance sheet currency did not increase by attracting innovative capital.
Having become acquainted with such an indicator as the coefficient of autonomy, we can analyze enterprise capital structure and draw conclusions about the financial stability of the investigated object.