Analysis of the Operation and Financial Condition of the Enterprise

Analysis of the Operation and Financial Condition of the Enterpriseyear after the expiry of the term, it is possible to exclude these 40,000 CU from the currentdebts as they are not due in the short-term, and therefore the real amount of current debtsdue in a short time to the creditors is by 40,000 CU less. This could improve the overallliquidity measures to some extent. Therefore, in Table 5.2 there is a new overall liquidityvalue arrived at with the 40,000 CU being deducted from the amount of short-term debts.In calculation of the quick ratio the 40,000 CU will also be deducted from the amount ofcurrent debts.Table 5.2Adjusted estimate of the Enterprise N overall liquidity for the period from31/12/2XX7 to 31/12/2XX9 (in CU)Dec.,2XX7March,2XX8June,2XX8Sept.,2XX8Dec.,2XX8March,2XX9June,2XX9Sept.,2XX9After reducing the amount of short-term debt by the credit line of 40,000 CU theoverall liquidity is slightly improved (see Table 5.2). Now liquidity is almost always abovethe critical level of 1 by the end of March, 2XX9, while afterwards it is below the criticallevel of 1. Theoretically, this enterprise should have undergone the bankruptcy procedurein the middle of year 2XX9 already, however, in view of the fact that this enterprise isoperating in the construction industry where suppliers await their invoices to be paid forone year even, the enterprise is still in business. If the debt to suppliers is too high and hasnot been paid for a considerable amount of time, the suppliers cease supplying materials tothe enterprise until they receive at least a partial payment for the debt. There areconstruction materials stores that have set the maximum credit limit which can be reachedwithout having to face any sanctions. As it was noted before the largest materials supplierhad issued the maximum debt or credit limit of 40,000 CU to Enterprise N, because inconsideration of the amount of construction materials purchased by Enterprise N from thelargest materials supplier, this is beneficial for the creditor.Quick liquidity ratioIn the estimation of this measure the formula for calculation of the quick ratio 4.2or 4.3 is applied. In order to calculate the quick ratio, it is necessary to know the totalamount of company’s current assets, stock, prepaid expenses and the amount of short-termdebts.Table 5.3Estimate of the Enterprise N quick liquidity ratio for the period from31/12/2XX7 to 31/12/2XX9 (in CU)Dec.,2XX9Totalcurrentassets 167806 210557 241778 343779 318301 476754 386462 296149 304415Adjustedshort-termdebts 152 442 177 224 275 697 256 244 287 454 430 252 505 623 437 655 378 595Overallliquidity 1,10 1,19 0,88 1,34 1,11 1,11 0,76 0,68 0,80Dec., March, June, Sept., Dec., March, June, Sept., Dec.,94