Overall liquidity of fishery enterprises in Russia

Credinform Information Agency prepared a ranking “Overall liquidity of fishery enterprises in Russia”. For this ranking, the experts selected fishery enterprises with highest revenue in Russia and then ranked these companies by “overall liquidity” index.

In general, liquidity coefficients reflect ratio of liquid assets to short-term liability and characterize the company’s ability to repay its short-term liability, which is the most risky.

What concerns overall liquidity index, it constitutes the ratio of total current assets of company to short-term liability. This indicator is used for evaluation of the company’s current liquidity and shows the sufficiency of its current assets for repayment of short-term liability.

Recommended value is between 1.0 and 2.0.

We should remind that current assets include the following indicators: inventory, value added tax on acquired assets, accounts receivable, financial investments (except monetary equivalents), monetary assets and monetary equivalents, and other current assets.

Short-term liability incorporates debenture, accounts payable, deferred income, estimated liability, and other short-term liability.

Analysis of the table shows that almost all companies possess sufficient current assets for repayment of short-term liability. Moreover, Akros Fishery Company CJSC and Nakhodka Active Marine Fishery Base OJSC possess substantial current assets, which is accordingly reflected in overall liquidity index as well. According to the results of 2011, it has increased for these enterprises by 6.74 and 3.5 respectively.

On the one hand, this fact is positive for both companies, since in this case they possess substantial resources to cover short0term liability. On the other hand, high overall liquidity index bears also a negative load, in particular: excess of products in stocks and delayed receipt of money from partners against critical processes taking place in the country’s economy may result in serious problems for the company, such as: overstocking and arrears in payments. In both cases losses in cash inflow are possible, which may ultimately affect the entire business.

Taking into account that the solvency index of Akros Fishery Company CJSC and Nakhodka Active Marine Fishery Base OJSC is identified by experts from IA Credinform as highest, we should hardly expect serious losses in business of aforementioned companies, while excess of products in stocks and delayed receipt of money from partners has a merely temporary nature related to production activity in 2011.

Overall liquidity index of Dalmoreprodukt Holding Company OJSC is slightly lower than the standard one. In this case, the index result has been affected by excessive number of accounts payable that increased almost up to 2 billion rub. according to the results of 2011.

However, in conclusion, we should emphasize that the overall liquidity index must be mandatorily considered in complex with other financial indicators of financial and business activity of the company. Such complex is constituted by the solvency index.
Against acceptable results of overall liquidity coefficient, the indices vary significantly, for example: the highest is assigned to first four companies, while such company as Dalmoreprodukt Holding Company OJSC has a satisfactory one. Such solvency index is assigned to this company due to losses according to the results of activities in 2010-2011.

Moreover, low solvency indices mean that the company is not all right. These may imply problems in rate of production and sales, poor payment discipline – both that of partners and of the company itself, expensive credits, low profitability of the business, and other factors, the mitigation of which may sometimes require application of radical measures.