Solvency is considered one of the key performance indicators of the company. It reflects the company's ability to cover all its obligations.

Evaluation
As a source of information for analysissolvency is the balance sheet. One of its main goals is to evaluate the company's assets, its liabilities and the size of its own capital. To determine these indicators, it is necessary to analyze the structure of property and debt of the company, to establish the level of balance sheet liquidity. In addition, it is necessary to carry out the calculation and assessment of the coefficients of solvency and economic sustainability. The normal financial condition of the company is characterized by a good level of ability to repay obligations. The unsatisfactory situation is indicated by the low solvency recovery ratio. The best option is when a company has free funds for circulation of debts. But an enterprise can remain solvent even if it is possible to sell assets to pay off liabilities. In this case, the company may not have the cash.

The value of the coefficient of solvency recovery
In accordance with the Federal Law "On Bankruptcy", underthe insolvency of the enterprise should be understood declared by the debtor or recognized by the court inability to fully meet the requirements of creditors, or to make mandatory payments. Prior to the date of adoption of the said law, another procedure for declaring the company bankrupt was in force. For the company to be considered insolvent, it was necessary to carry out the calculation:
- Solvency recovery ratio.
- Total liquidity ratio.
- The ratio of the availability of its working capital.
Liquidity is a characteristicassets of the company, which determines the possibility of their implementation in the short term at the market price. The recovery ratio of the company's solvency acts as a financial, economic indicator, reflecting the company's ability to reach the level of optimal liquidity for six months at the time of the reporting date.

Asset classification
Separation is based on liquidity. Assets can be high-, low- and illiquid. Ascending distinguish:
- Unfinished construction sites, buildings, structures, equipment, machinery.
- The volume of raw materials and stocks in warehouses.
- Own shares or securities owned by the state.
- Funds in bank accounts.
Solvency recovery ratio: formula
The description of this indicator is present inMethodical position, which is determined by the assessment of the material situation of the company and the unsatisfactory state of its balance. The document also contains an equation by which you can find the coefficient of solvency recovery. The formula looks like this: KV = (K1F + 6 / T (K1F - K1H)) / 2.

The equation uses the firm’s liquidity ratio and its standard:
- the actual figure of the degree of liquidity (at the end) - K1F;
- the initial coefficient is K1H;
- indicator standard - K1norm = 2;
- time to restore solvency (in months) - 6;
- reporting period (calculated in months) - T.

A more accurate result can be obtained for 4 andmore period. According to economists, the coefficient of solvency restoration is not an exceptional indicator to be followed.
Recognition of the balance sheet structure unsatisfactory
In the process of analysis, in order for an enterprise to be considered insolvent, any of the following conditions must be fulfilled:
- The liquidity ratio by the end of the reporting period is less than 2.
- The degree of availability of own funds by the reporting date is less than 0.1.
Consider what could be the coefficient of solvency recovery.
Example
During the last year the liquidity ratiocompanies at the beginning of the period amounted to 0.97, and by the end - 1.18. Using the above formula, you can get: Ap = 1.18 + 6/12 (1.18 - 0.97) = 0.3528.
If the calculation results in an indicator of more than 1, then we can say that the company has the opportunity to achieve the optimal financial condition over the next six months. If the solvency recovery ratio is less than one, then, accordingly, in the next six months, the company will not be able to achieve the necessary economic sustainability.
Forecasting
Recovery / Loss Ratiosolvency is considered one of the key in the management analysis of the company. These indicators allow you to plan financial and economic activities for a certain period. The solvency recovery ratio makes it possible to distribute operations and funds over the next six months to get the company out of the crisis. However, this situation can be avoided. To do this, calculate the indicator of the probability of deterioration of the current liquidity of the company for the three months following the reporting date: Coup = [K1f + 3 / T (K1f - K1n)] / K1norm.

For the benchmark against which the coefficient is comparedrecovery / loss of solvency, taken unit. If, when calculating the probability of a deteriorating financial situation, the indicator is greater than 1, then this indicates that the company has every chance of not losing its liquidity. Accordingly, with a value less than 1, the firm may become insolvent in the next three months.
Detection of false bankruptcy
Today, there are several otherevaluation system. When analyzing, the insolvency itself is not established, but signs of fictitious bankruptcy are identified. They represent the fact that the company has a real opportunity to repay obligations to creditors in full at the date of filing the application for declaring it insolvent. Identification of these signs is carried out when establishing the ability to repay debts by assets by the ratio of their value to the size of short-term liabilities. Calculations exclude consumption funds, upcoming incomes and reserves of payments and expenses. After making the necessary calculations, we can draw the appropriate conclusions:
- If the degree of security is equal to or greater than 1, then there are signs of fictitious bankruptcy.
- If the value is less than one, then, accordingly, the failure is real.
Verification of the financial and economic work of the company
This procedure involves 2 stages:
- The calculation of indicators that have affected the changes in the company's ability to repay the commitments that occurred during the audit period.
- An analysis of the conditions of transactions, which led to the adjustment of values.
The indicators that reflect the level of debt to creditors are as follows:
- Security obligations working capital.
- The volume of net assets.
- Debt security with all assets.
The study of the financial and economic activity of the companyinvolves the study of the dynamics of these indicators during the test period. If, at the first stage, the procedure reveals a significant deterioration in the degree of debt security, the experts proceed to the analysis of the conditions in which transactions were concluded during the specified time. Consideration is given to those contracts that could affect the change in indicators.