The autonomy coefficient is below normal. Financial stability ratios. What does the financial autonomy ratio show?
Financial ratio equal to the ratio equity capital and reserves to the amount of assets of the enterprise. The initial data for the calculation contains the organization's balance sheet.
It is calculated in the FinEkAnalysis program in the Financial Stability Score block as the Financial Independence Coefficient.
Autonomy coefficient - what it shows
Shows the share of the organization's assets that are covered by its own capital (provided by its own sources of formation). The remaining share of assets is covered by borrowed funds.
Investors and banks issuing loans pay attention to the value of this ratio. The higher the ratio, the more likely the organization is to pay off its debts using its own funds. The higher the indicator, the higher the financial independence of the enterprise.
Autonomy coefficient - formula
General formula for calculating the coefficient:
where line 490, line 700 are balance sheet lines (form No. 1)
Calculation formula based on the new balance sheet:
Autonomy coefficient - meaning
Regulatory limit K a > 0.5. The higher the ratio, the better the financial condition of the company. For in-depth financial analysis, the value of this ratio is compared with the average values for the industry to which the analyzed enterprise belongs.
The proximity of this value to one indicates a slowdown in the rate of development of the enterprise. By refusing to attract borrowed capital, the organization is deprived of an additional source of financing for the growth of assets (property), through which it is possible to increase income. At the same time, this reduces the risks of deterioration in financial solvency in the event of unfavorable developments in the situation.
Autonomy coefficient - diagram
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Synonyms
More found about the autonomy coefficient
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Coefficient of autonomy of sources of formation of reserves and costs Coefficient of autonomy of sources of formation of reserves and costs Coefficient of autonomy of sources of formation of reserves and costs - - Analysis of the capital structure and profitability of leading Russian oil and gas enterprises
When analyzing the capital structure of corporations, we calculated the following main coefficients: ownership coefficient, autonomy coefficient, financial dependence ratio, ratio of equity and borrowed capital, maneuverability coefficient of own working capital. Autonomy coefficient characterizes the degree of provision of existing obligations with equity capital. The minimum limit of this indicator is 1. - Vector method for predicting the probability of enterprise bankruptcy
In the first example given, the pairwise interdependent coefficients are the financial leverage ratio and the autonomy ratio, the current liquidity ratio and the working capital ratio. In the second example, they are pairwise interdependent - Comprehensive analysis of the company’s financial stability: coefficient, expert, factor and indicative
As such an integral indicator, the following financial stability coefficients can be used: autonomy coefficient, maneuverability coefficient, mobility of equity capital, level of financial leverage, interest coverage ratio, payable coefficients - Financial analysis of an enterprise - part 5
Indicators 2004 2005 Autonomy coefficient 0.259 0.615 Ratio of borrowed and own funds 2.855 0.626 Own maneuverability coefficient - On the standard values of coefficients when forming a rating assessment of the financial and economic condition of an enterprise
To adjust the standard values of indicators, the following logical premise should be recognized as fundamental: the maximum 100% financial stability of an enterprise can be provided that the autonomy coefficient K max A P4 BA is 1.0, i.e. the enterprise carries out its economic activities - The impact of IFRS on the results of the analysis of the financial position of PJSC Rostelecom
IFRS from RAS - 1 Financial independence coefficient > 0.5 0.444 0.356 -0.088 0.478 0.447 -0.031 2 Concentration ratio - Statistical analysis of the relationship between capital management indicators and the market value of public companies in Russia
According to the autonomy coefficient E A, the companies represented in the period 2000-2008 are quantitatively homogeneous V> - Financial analysis of an enterprise - part 4
Indicators 2002 2003 2004 Autonomy coefficient 0.442 0.182 0.259 Ratio of borrowed and own funds 1.262 4.488 2.855 Coefficient - Borrower default assessment
In addition, the autonomy coefficient and the indicator of the general degree of solvency, regardless of the type of functional connection, are significant by 1% - - Assessment of the market and financial stability of the enterprise
A B 1 2 3 1 Autonomy coefficient 0.334 0.274 0.329 2 Coefficient of provision of current assets with own working capital -0.369 -0.062 - Financial stability of the organization and criteria for the structure of liabilities
Thus, the level of financial stability can be judged by individual indicators from our chosen system of indicators for assessing financial stability, namely the autonomy coefficient, the ratio of debt and equity capital, the coefficient of concentration of borrowed capital. Strengthening the stability of the financial condition - Determination of standard values of financial stability coefficients for organizations of various types of economic activity in the context of the application of individual asset financing policies
Savitskaya proposed a methodology for calculating the standard level of the coefficient of autonomy of concentration of equity capital and financial leverage, depending on the chosen asset financing policy - Comprehensive analysis of the financial condition of an educational organization
The share of the obtained financial result in the total amount of own funds and obligations to creditors, the autonomy ratio decreased from 62 to 58% At the same time, the degree of dependence of the university on the use of funds increased - Study of the influence of the duration of operating and financial cycles on the financial stability of enterprises in the Tula region
The current liquidity ratio is calculated as the ratio of the value of current assets to the value of current liabilities 6 The autonomy ratio is calculated as the ratio of the amount of equity capital to the value of the balance sheet currency Duration of the operating cycle - Economic risk assessment based on financial ratios
Ktl 1.597 0.4 1.5 1.0-1.5<1,0 1 0.4 4 Коэффициент автономии Ксс СК А 0.525 0,2 0,4 0,25-0,4 <0,25 1 0.2 5. Рентабельность продаж - Analysis of financial condition over time
У21 0.586 0.537 0.776 0.732 0.979 0.393 Coefficient of autonomy of sources of formation of reserves and costs У22 0.246 0.285 0.509 0.547 0.976 0.73 Coefficient - Optimization of the balance sheet structure as a factor in increasing the financial stability of the organization
Such indicators include the current liquidity ratio, the autonomy ratio, the ratio of provision with own working capital, the capital structure ratio, the financial dependence ratio, Let's build a system of restrictions - Working capital and financial condition of enterprises
Vinci Autonomy coefficient Ka P3 WB 5 where WB is the balance sheet currency Minimum coefficient value 0.5 - Features of the application of comparative economic analysis methods when assessing the financial condition of an organization
Krsi ≥0.7 0.47 0.89 0.43 0.7 0.53 0.46 0.82 Autonomy coefficient Kyu ≥0.7 0.92 0.18 0.65 0.82 0.56 0, 57 0.9 Maneuverability coefficient Kman ≥0.5
Probably all companies whose activities are aimed at making a profit are quite naturally interested in competent financial analysis. The financial stability of an enterprise is determined by making a series of calculations - the information base for them is the balance sheet. An important role here is played by the autonomy coefficient, which in some sources has a “talking” name - the financial independence coefficient.
Let's discuss how to calculate the autonomy coefficient, its economic meaning, regulatory values, and also consider an example of calculation.
The autonomy coefficient is...
Economists distinguish four main groups of financial ratios:
- business activity;
- liquidity;
- profitability;
- financial stability.
The autonomy coefficient is included in the last group. There is often some confusion between liquidity and financial strength - obviously there is money everywhere... so what's the difference? The key difference in assessing a company's welfare: calculating liquidity ratios allows one to assess the company's short-term solvency, while determining financial stability is aimed at obtaining information about the long-term.
The autonomy ratio is the ratio of an organization's own capital to the total amount of its assets. It is calculated in order to find out how dependent the company is on creditors. The higher the value that the coefficient takes, the more stable the financial position of the company (it is autonomous, creditors cannot greatly influence the state of affairs if they suddenly demand debts).
In fact, everything is very logical - a company has independence when it is able to pay its debt obligations without affecting its normal activities. Of course, in our time, having loans is more of a necessity than a luxury. Some people stubbornly continue to believe that any loan is bad, guided by the saying that “you take someone else’s money for a short time, but you give it away forever.” However, today this approach to entrepreneurship is catastrophically outdated: accounts payable is not just the norm, it is even necessary for the effective development and expansion of a business.
But there is still a catch - you cannot accumulate a wagon and a small cart of loans without increasing assets, otherwise the company’s activities will resemble a soap bubble, which, undoubtedly, is beautiful, but is extremely short-lived. Calculating the autonomy coefficient allows you to find out whether management is going too far in their desire to carefreely spend borrowed money without creating or increasing their own capital.
Advice: investments and loans are standard components of any modern business, but you shouldn’t be happy about every loan, because first you need to decide on the financial stability of the company. Perhaps another debt is an overwhelming burden that can ruin your life’s work.
What does the autonomy coefficient show?
If you think about the meaning of the calculation formula, then everything will become extremely clear - the autonomy coefficient allows you to find out how much the company depends on creditors; it is a kind of indicator of stability. The higher its value, the more stable the company is financially, and vice versa.
But you shouldn’t go to the extreme and assume that if the indicator tends to one, then the business is thriving and things are going great. Everything is different, because in such a case the enterprise can easily lose its position in the competition due to the lack of the opportunity to purchase new equipment, keeping up with progress.
Autonomy coefficient - standard value
Everything is learned by comparison, so it is not trivial to calculate the coefficient of autonomy using the formula presented above. The resulting value must be correlated with something in order to understand how things are going in the company. Experts have formulated a normative value, knowing which one can assess the financial independence of an organization. In Russia it is 0.5 or more, with the optimal independence coefficient being 0.6-0.7.
World practice operates with slightly different figures - it is believed that equity capital should be at least 30-40% of the balance sheet currency. But in Russian reality, this is too little, since our business is periodically stormy due to frequent economic crises, which leave behind many problems for entrepreneurs. In any case, it must be borne in mind that the value of the autonomy coefficient naturally and significantly depends on the industry to which the company belongs.
Formula for calculating the autonomy coefficient
To make calculations, you need to have the company's financial statements, namely the balance sheet, at your disposal.
Autonomy coefficient= Own capital and reserves / Assets
This formula can be written differently using the line codes in the balance sheet (Form 1):
Autonomy coefficient= line 1300 / line 1600 where
- line 1300– total for Section III “Capital and Reserves”;
- line 1700– total for the asset (balance sheet currency).
The formula is presented in accordance with Form No. 1 of the balance sheet, approved by Order of the Ministry of Finance of Russia dated July 2, 2010 N 66n. It is best, of course, to focus on the meaning, and not on the line codes, since the reporting structure changes periodically, and new documentation is introduced at an alarming speed - for example, not so long ago it was developed and offered to organizations for use, which can significantly save the time of accounting workers.
An example of calculating the autonomy coefficient
For those who have an understanding of the compilation process and understand how they affect the balance sheet of the enterprise, it will not be difficult to calculate the autonomy ratio and use it to evaluate the financial position of the company.
Example: Let's calculate the autonomy coefficient according to the balance sheet of an organization (for 2017) engaged in the sale of building materials.
The required values that should be substituted into the formula are highlighted in red rectangles. For convenience, we summarize the data in a table:
Year Equity(line 1300) Assets (line 1600) Autonomy coefficient 2015 230 1912 230 / 1912 = 0,12 2016 839 10991 839 / 10991 = 0,08 2017 1823 12854 1823 / 12854 = 0,14 The calculations made allow us to draw the following conclusion: the company does not have sufficient financial independence, because the autonomy coefficient deviates significantly for the worse from the standard value of 0.5. That is, there is no talk of stability in this situation, since there are very few own funds.
Let's sum it up
Any business related to numbers (be it an analysis of a balance sheet or) requires care and a clear understanding of the situation. Calculating the autonomy coefficient will take a couple of minutes and will not be difficult even for beginners in the field of financial calculations, but it will allow you to fairly accurately assess the state of affairs of the company and its independence from creditors.
According to Russian standards, the autonomy coefficient should exceed 0.5, but in each situation it is necessary to take into account the specifics of a particular organization and its belonging to a particular industry: that is, for an adequate analysis it is necessary to know what indicators other stable companies from the same field of activity have.
Autonomy coefficient- one of the analytical coefficients used within the framework of financial analysis to obtain information about the financial stability of an enterprise. We'll talk about it in our article.
Assets are the totality of an organization’s property. In the balance sheet this is line 1600.
As a result, the formula for the balance sheet autonomy coefficient will look like:
CFA = (1310 + 1340 + 1350 + 1360 + 1370) / 1600
What does the financial autonomy ratio show?
The autonomy coefficient shows what part of the assets is formed from equity capital, for example, authorized capital, retained earnings.
A high CFA value indicates the stable operation of the enterprise.
Let's take the case when the autonomy coefficient is 0.4. This value can be explained as follows: 40% of the organization’s property is formed from its own funds.
CFA must be considered in dynamics. We can talk about strengthening financial autonomy if the coefficient has a positive trend. A decrease in value over time reflects a decrease in financial stability and the emergence of financial risks.
When studying this indicator, you also need to conduct a comparative analysis - consider the average values of the coefficient for the industry.
Financial independence (autonomy) coefficient and alternative coefficients
In Europe and the USA, the financial dependence ratio is used to assess the impact of debt capital. It is opposite in meaning and inversely proportional to the autonomy coefficient. The indicator is calculated as the ratio of the enterprise's assets to equity capital and reflects the number of enterprise assets per each ruble of equity capital.
The relationship between borrowed and equity funds and the impact of this proportion on the organization is also characterized by the financial leverage ratio.
Autonomy coefficient - standard value
In the economic literature you can find different standards for the autonomy coefficient - from 0.3 to 0.7. The wide variation is explained by the fact that the autonomy of an enterprise is largely determined by its industry. In high-capacity industries, the CFA is likely to be low because bank loans are required to purchase high-tech production equipment.
During the work process, the financial analyst derives an individually acceptable autonomy ratio for a particular enterprise. The management task is to prevent the autonomy coefficient from falling below the established critical level.
Like any analytical element, the autonomy coefficient has a dual nature. On the one hand, its growth indicates an increase in net worth and strengthening of financial independence. On the other hand, an increase in the volume of equity capital reduces its profitability. There are also times when an enterprise needs borrowed funds, for example, when expanding and modernizing production.
CFA analysis can also be carried out for the strategic assessment of counterparties-buyers. The data can be used to provide deferred payment and determine the credit limit when concluding supply contracts.
Results
The autonomy coefficient reveals the organization's dependence on credit funds. The growth of the indicator in dynamics indicates strengthening of financial independence. The value of the coefficient largely depends on the industry, so to obtain objective information it is necessary to conduct a comparative analysis of the coefficients of similar enterprises.
Explanation of the indicator
The indicator of financial autonomy is one of the most important coefficients of financial stability. It is equal to the ratio of the company's equity capital to all financial resources. The value of the indicator indicates what part of its assets the company is able to finance from its own financial resources. For example, if the ratio is 0.48, this means that the company is able to finance 48% of its assets with its own capital.
This indicator is important for both the owners and creditors of the company. A low value of the indicator will signal a high level of risks and low stability of the company in the medium term. For example, if a company is able to generate profits and is solvent in current conditions, this does not mean that the company will be able to operate stably when the market situation changes. A low share of equity capital is usually accompanied by significant financial costs (interest payments, other costs of attracting and using borrowed funds). Therefore, a change in the market situation may lead to a situation where the amount of operating expenses and financial expenses will exceed the company’s financial result. The long-term influence of such a factor will certainly lead to bankruptcy.
The owners are also concerned about the prospects for the company's operation in the next 3-10 years. However, they are also interested in another aspect, which shows the coefficient of financial autonomy. A low share of equity capital with high profitability will indicate the efficient use of the owners' funds and their high profitability. For example, if a company uses 100 thousand rubles. owners, then it can produce and sell 100 units of goods and make a profit of 20 thousand rubles, and when attracting an additional 100 thousand rubles. borrowed funds, will be able to produce and sell 200 units of goods and make a profit of 50 thousand rubles. taking into account financial costs. In the first case, the return on capital of the owners was only 20% per annum, and in the second - 50% per annum.
The company's management needs to find a middle ground between ensuring the interests of the owners and ensuring the financial stability of the company.
Standard value:
As mentioned, the company has various goals - both to generate profit and to remain stable in the medium and long term. Therefore, the standard value of the indicator is in the range of 0.4 – 0.6. A lower value may indicate a high level of financial risks. A financial autonomy indicator value above 0.6 will indicate that the company is not using its full potential.
When analyzing financial autonomy, you can compare the indicator with competitors (of the same size). The standard value will differ for different industries. For example, for commercial banks the typical value is 0.05 or less. For new companies that have not yet established themselves in the market, the share of equity capital will be high.
A negative value of the indicator indicates imminent bankruptcy and actions to restore financial stability must be taken immediately.
Rosselkhozbank offers the following standard values:
Table 1. Standard value of financial autonomy by field of activity
Source: Vasina N.V. Modeling the financial condition of agricultural organizations when assessing their creditworthiness: Monograph. Omsk: Publishing House NOU VPO OmGA, 2012. p. 49.
Directions for solving the problem of finding an indicator outside the standard limits
If the value of the financial autonomy indicator is too high, and there is potential for company growth, increasing market share, increasing sales volume, increasing operational efficiency by attracting additional funds, then it is advisable to attract additional borrowed funds. Calculating the effect of financial leverage will allow you to get an unambiguous answer about the advisability of such actions.
If the value of financial autonomy is below the standard value, then it is necessary to work towards increasing the value of the indicator. If solvency has already been impaired, then a desirable measure is to invest additional funds by the owners or attract a third-party investor. If the company’s liquidity is normal and it is able to balance input and output cash flows, then measures to improve the company’s stability may not be urgent. To do this, the company can, for example, reinvest the profits over the next few years.
Dynamics of the indicator in the economy
Fig. 1 Dynamics of autonomy of organizations (excluding small businesses) in the Russian Federation (according to financial statements, in%)
The balance sheet allows for a comprehensive analysis of the financial position of the organization. The main tools for this are various coefficients. Let's look at how one of them is calculated and what it shows - the financial independence ratio (FIR).
Financial Independence Ratio Formula
The question arises: what kind of addiction are businessmen so eager to get rid of that they even came up with a special coefficient for this?
We are talking about dependence on creditors, or more precisely, about the ratio between own and borrowed funds. In this case, “external” sources of funds should mean not only bank loans or debts to suppliers, but also all accounts payable in general.
In particular, current debts on wages, taxes or other obligatory payments available at the reporting date are also included in borrowed financial resources.
The coefficient of financial independence in terms of the balance sheet structure as a whole shows what share of the company's own resources occupy in the composition of the enterprise's funds.
In this case, the financial independence ratio is defined as the ratio of the amount of equity and reserve capital to the balance sheet currency.
K1 = (SK+RK) / B
This indicator is also calculated in a more “narrow” sense. The coefficient of financial independence in terms of reserve formation indicates what share of them the company provides from its own resources.
In this case, the financial independence ratio is calculated as the ratio of own working capital to the total amount of inventories.
K2 = SOS / Zp
Financial independence coefficient - balance formula
This analytical indicator is calculated based on the values of the corresponding lines of the balance sheet. Therefore, we will “translate” the above formulas using the line numbers of form No. 1.
The “full” financial independence ratio on the balance sheet is calculated using the formula:
K1 = page 1300 / page 1700
The coefficient of financial independence of working capital is determined as follows:
K2 = (page 1300 – page 1100) / page 1200
Example
Let's look at the company's enlarged balance sheet and calculate both indicators based on it:
Assets
Non-current assets (line 1100) – 100 million rubles.
Current assets (line 1200) – 400 million rubles.
BALANCE (p. 1600) – 500 million rubles.
Passive
Capital and reserves (line 1300) – 260 million rubles.
Long-term liabilities (line 1400) – 40 million rubles.
Short-term liabilities (line 1500) – 200 million rubles.
BALANCE (p. 1700) – 500 million rubles.
K1 = 260 / 500 = 0.52
K2 = (260 - 100) / 400 = 0.4
It is clear that the financial independence ratio is not calculated for the sake of the calculation itself, but to assess one aspect of the financial position of the business. In the next section, we will consider how, based on it, we can draw conclusions about whether the structure of the company’s sources of funds is optimal.
Analysis of the financial independence ratio
The standard value of the “total” FSC is more than 0.5. Those. to ensure acceptable financial stability, at least half of the company's resources must be its own.
The coefficient of financial independence for the formation of working capital has a higher standard - from 0.6.
Thus, from the example discussed above, we can conclude that, in general, the financial position of the analyzed company is stable (K1 = 0.52).
However, a significant part of equity capital is “frozen” in non-current assets. Therefore, the company experiences a certain lack of own funds to finance current assets. This is evidenced by the lower value of the K2 coefficient – 0.4. To avoid possible problems, you should increase the share of your own resources in the structure of working capital.
For a more in-depth analysis, the indicator should be studied over several periods and compared with industry averages and competitor data (if such information is available).
At first glance, we can say that the growth of the CFM in dynamics indicates an improvement in the financial situation. However, this is only true for those cases when the FIT does not exceed standard values or exceeds them insignificantly.
The approach of its value to one can no longer be called positive for the company. In this case, of course, the risks associated with debt are minimized. But, on the other hand, limiting itself only to its own resources, an enterprise may miss out on many opportunities for development due to lack of funds.
Therefore, the balance between equity and borrowed funds must be maintained at an optimal level, taking into account all internal and external factors.
It is the financial independence coefficient that shows the relationship between these groups of resources and is the main tool for monitoring them.
Conclusion
The value of the financial independence ratio shows the relationship between the company's own and attracted resources. It is calculated both on the balance sheet as a whole and separately on working capital. Analysis of the financial tax balance allows you to control the structure of an enterprise's liabilities and provide it with resources for development with minimal risks.
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