Types of economic activities

There are several types of economic activities:

• A household is a business run by a group of people living together.
• A small enterprise is an economic unit engaged in the production of a relatively small number of goods. The owner of such an enterprise can be one person or several. As a rule, the owner uses his own labor or employs a relatively small number of workers.
• Large enterprises are enterprises that mass produce goods. As a rule, these enterprises are formed by combining the property of the owners. An example of which enterprise is a joint stock company.
• The national economy is the unification of economic activities throughout the country. To a certain extent, this activity is directed by the state, which, in turn, tries to ensure sustainable growth of the country's economy and thereby increase the well-being of the entire population.
• The world economy is an economic system in which there are relationships between different countries and peoples.

Forms of economic activity

Definition 1

The form of economic activity is a system of norms that determines the internal relations of the partners of the enterprise, as well as the relationship of this enterprise with other counterparties and government bodies.

There are several forms of economic activity:

• Individual form;
• Collective form;
• Corporate form.

Under individual form of economic activity refers to an enterprise whose owner is either an individual or a family. The functions of the owner and entrepreneurs are combined in one entity. He receives and distributes the income received, and also bears the risk of carrying out his business activities and has unlimited property liability to his creditors and third parties. As a rule, such enterprises are not legal entities. The owner of this enterprise can attract additional hired labor, but in a rather limited quantity (no more than 20 people).

If speak about collective form of economic activity, then there are three types of them: business partnerships, business companies, joint-stock companies.

Business partnerships can be in the form of: a general partnership and a limited partnership. A general partnership is an organization that is based on collective ownership. As a rule, it is an association of several individuals or legal entities. All participants in this type of partnership bear full, unlimited liability for all obligations of the partnership. The property of a general partnership is formed from the contributions of its participants and income received in the process of carrying out its activities. All property belongs to the participant of the general partnership on the basis of shared ownership.

A limited partnership is an association where one or more of its owners bear full liability for all obligations of the partnership, the remaining investors are liable only to the extent of their capital.

TO business companies include: limited liability company, additional liability company. Limited liability companies are enterprises that are created by combining the contributions of legal entities and individuals. At the same time, the number of participants in a limited liability company cannot exceed the established limit, otherwise within a year this company will be transformed into a joint stock company.

Additional liability company is an organization whose authorized capital is divided into shares, the size of which is determined in advance. This type of company is formed by one or more persons. For all obligations of the company, all its founders bear subsidiary liability in an amount that is a multiple of the value of the contribution to the authorized capital.

Joint-Stock Company represents a form of economic activity, all funds of which are formed by combining the capital of the founders, as well as the issue and placement of shares. Participants in a joint stock company are liable for all obligations of the company in an amount equal to contributions.

In order to protect their commercial interests and increase the efficiency of use of the enterprise’s capital, various organizational and legal forms can be combined into the so-called corporate forms of entrepreneurship. These include: concerns, consortium, intersectoral and regional unions.

Concern is an association of organizations that carry out joint activities voluntarily. As a rule, concerts have scientific and technical functions, functions of production and social development, functions of foreign economic activity, etc.

Consortium- an association of an organization to solve certain problems, created for a while. In our country, a consortium is created to implement government programs using organizations of any form of ownership.

Industry and regional unions represent an association of organizations on contractual terms. These unions are created to carry out one or more production and economic functions.

Organization of economic activities

The organization of economic activity goes through three stages:

1. Stage 1 - opportunity assessment. Initially, you should give an objective assessment of all resources needed for the production process. For these purposes, it is advisable to use scientific developments. The main advantage of this stage is that it helps to give a preliminary assessment of the potential for production of products precisely in those volumes and in those conditions that will be studied, and on the basis of which the decision to launch production of a particular product will be approved. After the production potential of the organization has been studied, the production line is launched within the framework of the formed plan.
2. Stage 2 - launch of auxiliary production. The implementation of this stage takes place only if there is a need. Auxiliary production is a rather necessary activity, since it helps to develop new market segments and increase the chance of effective financial development of the organization. Servicing an organization can be carried out either in-house or through the involvement of third-party organizations and resources. At this stage, services are used that allow optimizing product production activities and assessing the potential costs of funds. At the next stage, work is carried out aimed at studying the sales market and the possibilities of selling products.
3. Stage 3 - sales of products. All stages affecting the sale of products are monitored. At the same time, records of sold products are kept, forecasts are compiled and studied, allowing the management of the organization to make competent decisions. There are situations when it is necessary to develop a methodology for after-sales service. For example, when establishing a warranty period for your products.

In the distant past (over 10 thousand years ago), people practically did not engage in production, but only took everything they needed from nature. Their activities consisted of hunting, fishing and gathering. Over time, humanity has greatly changed and improved activities.

From this article you will learn what economic activity is and what types of economic activity there are.

So, farming refers to the production by people of everything that is necessary to meet needs and improve living conditions. In other words, economic activity is a set of industries that are interconnected.

These industries include:

• Agriculture;
• industry;
• services sector;
• transport;
• trade;
• science and education;
• healthcare;
• construction.

It is engaged in providing the population with food and supplying raw materials for some industries. The development of agricultural production depends mainly on natural conditions. The degree of development of agriculture, in turn, has a great influence on the economy and political situation of the state, as well as on its food independence.

The most important areas of this industry are animal husbandry and crop production. Animal husbandry deals with keeping and breeding farm animals to produce food (eggs, cheese, milk), raw materials (wool) and organic fertilizers. It includes cattle breeding, poultry farming, sheep breeding, pig breeding, etc.

The objective of crop farming is to grow various agricultural crops, which are then used as food, animal feed and raw materials. The branches of crop production include vegetable growing, potato growing, horticulture, grain farming, etc.

Enterprises that produce tools and are engaged in the extraction of materials, raw materials, fuel, as well as the processing of industrial or agricultural products. Industry is divided into mining and manufacturing. The mining industry specializes in the extraction of raw materials, oil, coal, ores, peat, and the manufacturing industry specializes in the production of ferrous and non-ferrous metals, machinery, equipment, and building materials. Industry includes the following sectors:

• fuel industry;
• light industry;
• food industry;
• forest industry;
• non-ferrous metallurgy;
• ferrous metallurgy;
• mechanical engineering and other industries.

Services sector

This industry is designed to provide the population with material and intangible (spiritual) services. Material services include consumer services, communications, and transportation. Intangible ones - healthcare, trade, public services. There are also market and non-market services. Market services mean those services that are sold on the market at prices that are significant from an economic point of view. Transport, paid education and healthcare are examples of typical market services. Non-market services include science, defense and free health and education services, that is, everything that has no economic significance.

A means of meeting the needs of the population for the transportation of goods and passengers. This industry expands the scale of production and consumption, as it literally connects these two processes. However, transport is highly dependent on external conditions, because transportation is often carried out over long distances. However, the transport industry is considered quite profitable in market conditions, not to mention the monopolization of transport.

Human activities that are associated with acts of purchase and sale and a set of operations intended to carry out the exchange process. There are two types of trade: wholesale and retail. In wholesale trade, the purchase of goods occurs in large quantities, since they are purchased for the purpose of further use. Retail, on the contrary, carries out acts of purchase and sale directly to end consumers.

Education includes preschool and general secondary education, as well as personnel training. Education includes such sectors as transport, natural science, psychological, radio engineering, mathematics, construction and other types of education. The goal of science is to obtain scientific knowledge as the results of research. Science is very difficult to overestimate: its contribution to the development of the state’s economy, increasing the efficiency of material production and protecting the state’s information resources is very great.

The industry involved in organizing and ensuring public health protection. To preserve and maintain physical and mental health, as well as to provide assistance in case of deterioration of health, special social institutions are created.

This industry ensures the commissioning of new ones, as well as the reconstruction and repair of facilities for both production and non-production purposes. The main role of this industry is to create conditions for the dynamic pace of development of the state’s economy. In addition, this industry is directly involved in the creation of fixed assets (along with the building materials industry, metallurgy and some other sectors of the economy), which are intended for all sectors of the national economy.

1.1 Main activities of the enterprise

Current (main, operational) activity - the activity of an organization that pursues making a profit as the main goal, or does not have making a profit as such in accordance with the subject and goals of the activity, i.e. production of industrial, agricultural products, construction work, sales goods, provision of catering services, procurement of agricultural products, rental of property, etc.

Inflows from current activities:

· receipt of revenue from the sale of products (works, services);

· proceeds from the resale of goods received through barter exchange;

· proceeds from repayment of accounts receivable;

· advances received from buyers and customers.

Outflows from current activities:

· payment for purchased goods, works, services;

· issuing advances for the purchase of goods, works, services;

· payment of accounts payable for goods, works, services;

· salary;

· payment of dividends, interest;

· payment for taxes and fees.

Investment activity is the activity of an organization related to the acquisition of land, buildings, other real estate, equipment, intangible assets and other non-current assets, as well as their sale; with the implementation of its own construction, expenses for research, development and technological development; with financial investments.

Inflows from investment activities:

· receipt of proceeds from the sale of non-current assets;

· receipt of proceeds from the sale of securities and other financial investments;

· proceeds from repayments of loans provided to other organizations;

· receiving dividends and interest.

Outflows from investment activities:

· payment for acquired non-current assets;

· payment for purchased financial investments;

· issuing advances for the purchase of non-current assets and financial investments;

· providing loans to other organizations;

· contributions to the authorized (share) capital of other organizations.

Financial activity is the activity of an organization, as a result of which the amount and composition of the organization’s equity capital and borrowed funds change.

Inflows from financing activities:

· proceeds from the issue of equity securities;

· proceeds from loans and credits provided by other organizations.

Outflows from financing activities:

· repayment of loans and credits;

· repayment of finance lease obligations.

1.2 Nature and objectives of operating activities

Enterprises operate in the market in conditions of fierce competition. Those who lose in this fight become bankrupt. In order not to go bankrupt, business entities must constantly monitor changes in the market environment and develop methods to counteract negative aspects to maintain their competitiveness.

In the process of managing the profit of an enterprise, the main role is given to the formation of profit from operating activities. Operating activities are the main type of activity of the enterprise for the purpose of which it was created.

The nature of the operating activities of an enterprise is determined primarily by the specifics of the economic sector to which it belongs. The basis of the operating activities of most enterprises is production, commercial or trading activities, which are complemented by investment and financial activities carried out by them. At the same time, investment activity is the main one for investment companies, investment funds and other investment institutions, and financial activity is the main one for banks and other financial institutions. But the nature of the activities of such financial and investment institutions, due to its specificity, requires special consideration.

The current activities of the enterprise are aimed primarily at generating profit from the assets at its disposal. When analyzing this process, the following quantities are usually taken into account:

· added value. This indicator is calculated by subtracting from the enterprise's revenue for the reporting period the cost of consumed material assets and services of third-party organizations. To further use this indicator, it is necessary to subtract value added tax from it;

· gross operating result of investments (BRER). It is calculated by subtracting labor costs and all taxes and mandatory deductions, except income tax, from the added value. BERI represents earnings before income taxes, interest on borrowed funds and depreciation and amortization. BREI shows whether the enterprise has enough funds to cover these expenses;

· earnings before interest and income taxes, EBIT (Earnings before Interest and Taxes). It is calculated by subtracting depreciation charges from the BRIE;

· economic profitability, or income generation ratio (ERR), already mentioned earlier in the section on analysis using financial ratios. It is calculated as the quotient of EBIT divided by the total assets of the enterprise;

· commercial margin. It is calculated by dividing EBIT by revenue for the reporting period and shows how much profit before taxes and interest each ruble of the company’s turnover gives. In financial analysis, this ratio is considered as one of the factors influencing economic profitability (ER). Indeed, BER can be represented as the product of commercial margin and asset turnover.

Achieving a high level of economic profitability is always associated with the management of two of its components: commercial margin and asset turnover. As a rule, an increase in asset turnover is associated with a decrease in commercial margin and vice versa.

Both commercial margin and asset turnover directly depend on the volume of revenue of the enterprise, cost structure, pricing policy and overall strategy of the enterprise. The simplest analysis shows that the higher the product prices, the higher the commercial margin, but this usually reduces asset turnover, which significantly constrains the increase in economic profitability.

Economic profitability is a very useful indicator of a company's performance, but for owners, an indicator such as return on equity (ROE) is often more important. To maximize it, it is necessary to select the optimal capital structure of the company (the ratio of debt and equity). In this case, an analysis of financial risk is carried out by calculating the effect of financial leverage.

The amount of cash flows generated from operating activities is a key indicator of the extent to which a company's operations produce sufficient cash flows to repay loans, maintain operating capabilities, pay dividends, and make new investments without resorting to external sources of financing. Information about the specific components of initial operating cash flows, when combined with other information, is very useful in forecasting future operating cash flows.

Cash flows from operating activities primarily arise from the company's core revenue-generating activities. Thus, they generally result from transactions and other events included in the definition of net profit or loss. Examples of cash flows from operating activities are:

· cash receipts from the sale of goods and provision of services;

· cash receipts from rent, fees, commissions and other income;

· cash payments to suppliers for goods and services;

· cash payments to employees and on their behalf;

· cash receipts and payments to the insurance company for premiums and claims, annual premiums and other insurance benefits;

· cash payments or income tax compensation, unless they can be linked to financial or investment activities;

· cash receipts and payments from contracts entered into for commercial or trading purposes. Some transactions, such as the sale of a piece of equipment, may result in a gain or loss that is included in the definition of net gain or loss. However, the cash flows associated with such transactions are cash flows from investing activities.

A company may hold securities and loans for business or trading purposes, in which case they may be considered inventory acquired specifically for resale. Thus, cash flows arising from the purchase or sale of commercial or trading securities are classified as operating activities. Similarly, cash advances and loans provided by finance companies are generally classified as operating activities because they relate to the core, revenue-generating activities of the finance company.

One of the tools for market research and maintaining competitiveness is the analysis of the financial and economic activities of an enterprise, including an analysis of its financial condition. The procedure and tools of analysis, which are carried out for the purpose of making financial decisions, are determined by the very logic of the functioning of the financial mechanism of the enterprise.

One of the simplest but most effective types of financial analysis is operational analysis, called CVP (cost-volum-profit, costs - volume - profit).

The purpose of operating activity analysis is to track the dependence of the financial results of a business on costs and product sales volumes.

The main objective of CVP analysis is to obtain answers to important questions that arise for entrepreneurs at all stages of money circulation, for example:

How much capital does a business need to have on hand?

How to mobilize these funds?

To what extent can financial risk be increased using the effect of financial leverage?

What is cheaper: purchasing or renting real estate?

To what extent can you increase the strength of operating leverage by maneuvering variable and fixed costs, thereby changing the level of business risk associated with the activities of the enterprise?

Is it worth selling products at prices below cost?

Should we produce more of this or that product?

How will a change in sales volume affect profits?

Cost Allocation and Gross Margin

CVP analysis serves to find the optimal, most profitable costs for the enterprise. It requires the distribution of costs into variable and fixed, direct and indirect, relevant and irrelevant.

Variable costs generally change in direct proportion to the volume of production. These may be the costs of raw materials and materials for the main production, wages of the main production workers, costs of marketing products, etc. It is beneficial for an enterprise to have fewer variable costs per unit of production, since this ensures itself, accordingly, more profit. As production volume changes, total variable costs decrease (increase), while at the same time per unit of production they remain unchanged.

Fixed costs must be considered in the short term, the so-called relevant range. In this case, they generally do not change. Fixed costs include rent, depreciation, management salaries, etc. Changes in production volume have no effect on the size of these costs. However, when recalculated per unit of production, these costs change inversely.

Direct costs are the costs of an enterprise associated directly with the production process or sale of goods (services). These costs can be easily attributed to a specific product. For example, raw materials, materials, salaries of key workers, depreciation of specific machines, and others.

Indirect costs are not directly related to the production process and cannot be easily attributed to a specific product. Such costs include salaries of managers, sales agents, heat energy, and electricity for auxiliary production.

Relevant costs are costs that depend on management decisions.

Irrelevant costs do not depend on management decisions. For example, an enterprise manager has a choice: to produce the necessary part for a mechanism or to buy it. Fixed costs for producing a part are 35 USD, but you can buy it for 45 USD. This means that in this case, the supplier’s price is a relevant cost, and fixed production costs are an irrelevant cost.

The problem associated with the analysis of fixed costs in production is that it is necessary to distribute their total value across the entire product range. There are several ways of such distribution. For example, the sum of fixed costs relative to the time fund gives the cost rate for 1 hour. If it takes 1/2 hour to produce a product, and the rate is 6 USD. per hour, then the amount of fixed costs for the production of this product is equal to 3 cu.

Mixed costs include elements of fixed and variable costs. For example, the cost of paying for electricity, which is used both for technological purposes and for lighting premises. When analyzing, it is necessary to separate mixed costs into fixed and variable.

The sums of fixed and variable costs represent the total costs for the entire volume of production.

The ideal business environment is a combination of low fixed costs and high gross margins. Operational analysis allows you to establish the most profitable combination of variable and fixed costs, price and sales volume.

The process of asset management aimed at increasing profits is characterized in financial management as leverage. This is a process, even a minor change in which leads to significant changes in performance indicators.

There are three types of leverage, which are determined by rearranging and disaggregating the items in the income statement.

Production (operating) leverage is the potential opportunity to influence gross profit by changing the cost structure and production volume. The effect of operating leverage (leverage) is manifested in the fact that any change in revenue from the sale of products always generates a significant change in profit. This effect is due to the different degrees of influence of the dynamics of fixed and variable costs on the formation of financial results when production volume changes. The higher the level of fixed costs, the greater the influence of operating leverage. The strength of operating leverage informs the level of business risk.

Financial leverage is a tool that affects the profit of an enterprise by changing the structure and volume of long-term liabilities. The effect of financial leverage is that an enterprise using borrowed funds changes its net return on equity and its dividend capabilities. The level of financial leverage indicates the financial risk associated with the enterprise.

Since interest on a loan is a fixed cost, an increase in the share of borrowed funds in the structure of an enterprise’s financial resources is accompanied by an increase in the strength of operating leverage and an increase in business risk. The category that generalizes the previous two is called production and financial leverage, which is characterized by the relationship of three indicators: revenue, production and financial costs and net profit.

Risks associated with the enterprise have two main sources:

The very influence of operating leverage, the strength of which depends on the share of fixed costs in their total amount and determines the degree of flexibility of the enterprise, generates business risk. This is the risk associated with a specific business in a market niche.

The instability of financial lending conditions, the uncertainty of shareholders in the return of investments in the event of liquidation of an enterprise with a high level of borrowed funds, in fact, the very action of financial leverage generates financial risk.

Operational analysis is often called break-even analysis. Break-even analysis of production is a powerful tool for making management decisions. By analyzing data on the break-even of production, the manager can answer questions that arise when changing the direction of action, namely: what impact will a decrease in the selling price have on profit, what is the sales volume needed to cover additional fixed costs in connection with the envisaged expansion of the enterprise, how many people need to be hired etc. In his work, a manager constantly needs to make decisions about the selling price, variable and fixed costs, the acquisition and use of resources. If he cannot make a reliable forecast about the level of profits and costs, his decisions can only harm the company.

Thus, the purpose of break-even analysis is to determine what will happen to financial results if a certain level of productivity or production volume changes.

Break-even analysis is based on the relationship between changes in production volume and changes in total sales profit, costs and net profit.

The break-even point is understood as the point of sales volume at which costs are equal to the revenue from the sale of all products, that is, there is neither profit nor loss.

To calculate the break-even point, you can use 3 methods:

· equations;

· marginal income;

· graphic image.

Despite the difficult economic conditions in which enterprises find themselves today (lack of working capital, tax pressure, uncertainty about the future and other factors), each enterprise must have a strategic financial plan, a budget for a certain period: a month, a quarter, a year or more , for which the enterprise should implement a budgeting system.

Budgeting is the process of planning the future activities of an enterprise and formalizing its results in the form of a budget system.

The objectives of budgeting are as follows:

· ensuring ongoing planning;

· ensuring coordination, cooperation and communication between departments of the enterprise;

· force managers to quantitatively justify their plans;

· justification of enterprise costs;

· formation of a basis for assessing and monitoring the plans of the enterprise;

· compliance with laws and contracts.

The enterprise budgeting system is based on the concept of centers and responsibility accounting.

A responsibility center is an area of ​​activity within which the manager’s personal responsibility is established for the performance indicators that he is obliged to monitor.

Responsibility accounting is an accounting system that provides control and evaluation of the activities of each responsibility center. The creation and operation of an accounting system for responsibility centers provides for:

· identification of responsibility centers;

· drawing up a budget for each responsibility center;

Regular reporting on performance;

· analysis of the causes of deviations and assessment of the center’s activities.

In an enterprise, as a rule, there are three types of responsibility centers: a cost center, the manager of which is responsible for costs, influences them, but does not affect the income of the unit, the volume of capital investments and is not responsible for them; a profit center, the head of which is responsible not only for costs, but also for income and financial results; investment center, the head of which controls costs, income, financial results, and investments.

Budgeting will allow the company to save financial resources, reduce non-production costs, and achieve flexibility in managing and controlling product costs.

1.3 Managing the organization’s cash flows in the organization’s activities

Cash flows created by the current activities of the organization often move into the sphere of investment activities, where they can be used for the development of production. However, they can also be directed to the sphere of financial activities to pay dividends to shareholders. Current activities are quite often supported by financial and investment activities, which ensures additional capital inflow and the survival of the organization in a crisis situation. In this case, the organization stops financing capital investments and suspends the payment of dividends to shareholders.

Cash flow from current activities is characterized by the following features:

· current activities are the main component of the entire economic activity of the organization, therefore the cash flow generated by it should occupy the largest share in the total cash flow of the organization;

· forms and methods of current activities depend on industry characteristics, therefore, in different organizations, cash flow cycles of current activities may vary significantly;

· operations that determine current activities are usually characterized by regularity, which makes the cash cycle quite clear;

· current activities are focused mainly on the commodity market, therefore its cash flow is related to the state of the commodity market and its individual segments. For example, a shortage of inventories on the market can increase the outflow of money, and overstocking of finished products can reduce their inflow;

· current activities, and therefore its cash flow, are inherent in operational risks that can disrupt the cash cycle.

Fixed assets are not included in the cash flow cycle of current activities, since they are a component of investment activities, but it is impossible to exclude them from the cash flow cycle. This is explained by the fact that current activities, as a rule, cannot exist without fixed assets and, in addition, part of the costs of investment activities is reimbursed through current activities by depreciation of fixed assets.

Thus, the current and investment activities of the organization are closely interconnected. The investing cash flow cycle is the period of time during which cash invested in non-current assets will return to the organization in the form of accumulated depreciation, interest, or proceeds from the sale of those assets.

The movement of cash flows from investment activities is characterized by the following features:

· the investment activity of the organization is subordinate in nature in relation to current activities, therefore the inflow and outflow of funds from investment activities should be determined by the pace of development of current activities;

· forms and methods of investment activity depend to a much lesser extent on the industry characteristics of the organization than on current activities, therefore, in different organizations, the cash flow cycles of investment activity are, as a rule, almost identical;

· the inflow of funds from investment activities is usually significantly distant from the outflow in time, i.e. the cycle is characterized by a long time lag;

· investment activity has various forms (acquisition, construction, long-term financial investments, etc.) and different directions of cash flow in certain periods of time (as a rule, outflow initially prevails, significantly exceeding inflow, and then vice versa), which makes it difficult to imagine the cycle of its cash flow flow in a fairly clear pattern;

· investment activity is associated with both commodity and financial markets, the fluctuations of which often do not coincide and can affect investment cash flow in different ways. For example, an increase in demand in the commodity market can give an organization an additional cash flow from the sale of fixed assets, but this, as a rule, will lead to a decrease in financial resources in the financial market, which is accompanied by an increase in their value (interest), which, in turn, can lead to an increase in the organization’s cash outflow;

· the cash flow of investment activities is influenced by specific types of risks inherent in investment activities, united by the concept of investment risks, which have a greater probability of occurrence than operational ones.

The cash flow cycle of a financial activity is the period of time during which cash invested in profitable assets will be returned to the organization with interest.

The movement of cash flows from financial activities is characterized by the following features:

· financial activities are subordinate in nature in relation to current and investment activities, therefore, the cash flow of financial activities should not be formed to the detriment of the current and investment activities of the organization;

· the volume of cash flow from financial activities should depend on the availability of temporarily free funds, so cash flow from financial activities may not exist for every organization and not permanently;

· financial activity is directly related to the financial market and depends on its condition. A developed and stable financial market can stimulate the financial activities of an organization, therefore, ensure an increase in the cash flow of these activities, and vice versa;

· financial activities are characterized by specific types of risks, defined as financial risks that are characterized by particular danger and therefore can significantly affect cash flow.

The organization's cash flows closely connect all three types of its activities. Money constantly “flows” from one type of activity to another. Cash flow from operating activities should generally fuel investing and financing activities. If there is a reverse direction of cash flows, then this indicates an unfavorable financial position of the organization.

Analysis of the financial and economic activities of an enterprise using the example of OJSC "Voronezh Machine Tool Plant"

practice report

Analysis of the financial and economic activities of the enterprise

The main source of information for financial analysis is financial (accounting) reporting.

Accounting statements are a unified system of data on the property and financial position of an organization and the results of its economic activities, compiled on the basis of financial accounting data in order to provide external and internal users with generalized information about the financial position of the organization in a form that is convenient and understandable for these users to accept certain business decisions.

The organization must prepare interim financial statements for the month, quarter, on an accrual basis for the reporting year, unless otherwise established by the legislation of the Russian Federation.

When forming financial reporting indicators, you must be guided by:

* Federal Law “On Accounting” dated November 21, 1996 No. 129-FZ;

* Accounting Regulations “Accounting Statements of an Organization” PBU 4/99, approved by order of the Ministry of Finance of the Russian Federation dated July 6, 1999 No. 43n;

* by order of the Ministry of Finance of the Russian Federation dated July 22, 2003. No. 67n “On the forms of financial statements of an organization.”

This block of regulatory documents is related to the implementation of the Accounting Reform Program in accordance with international financial reporting standards.

The financial statements of an organization (except for budgetary, insurance organizations and banks) consist of:

Balance sheet (form No. 1) - appendices - 1, 4, 7.

Profit and loss statement (form No. 2) - appendices - 2, 5, 8.

Statement of changes in capital (form No. 3) - appendices - 3, 6, 9.

Cash flow statement (form No. 4);

Appendixes to the balance sheet (form No. 5);

Explanatory note;

An audit report confirming the reliability of the organization’s financial statements, if they are subject to mandatory audit in accordance with federal laws.

The organization prepares monthly, quarterly and annual financial statements. In this case, the first and second financial statements are interim.

The reporting year for all organizations covers the period from January 1 to December 31 of the calendar year inclusive. The first reporting year for newly created organizations is considered to be from the date of their state registration to December 31; for organizations created after October 1 - from the date of state registration to December 31 of the following year inclusive.

Accounting (financial) statements serve as the basis for analyzing the financial position of an enterprise.

The purpose of financial analysis is to evaluate the information contained in the statements, compare existing information and create new information on their basis, which will serve as the basis for making certain decisions.

The choice of the depth and scale of analysis, as well as specific parameters and tools (set of methods) of analysis depends on the specific tasks that the user sets for himself in order to obtain the maximum possible information useful to him. To analyze (interpret) indicators of accounting (financial) statements, generally accepted techniques are used:

Reading reports;

Vertical analysis;

Horizontal analysis;

Trend analysis;

Calculation of financial indicators.

Reading statements - informational familiarization with the financial position of the subject of analysis according to the balance sheet, appendices to it and the profit and loss statement. Reading the reports is the initial stage during which the user first gets acquainted with the enterprise. Based on the financial statements, the user judges the property status of the enterprise, the nature of its activities, the ratio of funds by type in the composition of assets, the amount of equity and borrowed funds, etc.

Let's consider certain techniques for analyzing accounting (financial) statements using the example of the enterprise OJSC "Machine Tool Plant", which produces various types of equipment.

We will analyze the property status of the organization and assess the efficiency of using its resources using the balance sheet (Form No. 1) and the profit and loss statement (Form No. 2). The balance sheet characterizes in monetary terms the financial position of the organization as of the reporting date. The balance sheet characterizes the state of inventories, settlements, availability of funds, and investments.

Balance sheet data is necessary for owners to control invested capital, for the management of the organization in analysis and planning, for banks and other creditors to assess financial stability.

The Concept of Accounting in the Russian Market Economy provides definitions of assets, liabilities and capital.

Assets are considered to be economic assets over which an organization has gained control as a result of accomplished facts of its economic activity and which should bring it economic benefits in the future.

A liability is considered to be the organization's debt existing at the reporting date, which is a consequence of completed projects of its economic activity and settlements for which should lead to an outflow of assets.

Capital represents the investments of owners and profits accumulated over the entire period of the organization’s activities.

In accordance with PBU 4/99, the balance sheet combines assets in the following sections:

"Fixed assets",

"Current assets"

and the sources of formation of these funds by section:

"Capital and reserves",

"Long term duties",

"Short-term liabilities".

Each section of the balance sheet combines a group of items.

According to current regulatory documents, the balance is currently compiled in a net assessment. The balance sheet total gives an approximate estimate of the amount of funds at the disposal of the enterprise. This estimate is accounting (balance sheet) and does not reflect the actual amount of money that can be obtained for the property, for example, in the event of liquidation of the enterprise. The current “price” of assets is determined by market conditions and can deviate in any direction from the accounting value, especially during periods of inflation.

Characterizing the balance sheets of JSC VSZ for the period 2003-2005 (Appendix 1, 4, 7), it can be noted that over the three-year period of its activity, the authorized capital of the organization remained constant and amounts to 46,750 thousand rubles. At the beginning of 2003, the company's assets were represented by unfinished construction. As part of the funds available to the enterprise, at the beginning of 2004, non-current assets slightly exceeded current assets, and by the end of 2004, non-current assets began to significantly exceed the amount of current assets. At the end of 2005, the largest share was occupied by working capital.

The sources of funds for this organization are the authorized capital and short-term liabilities, which are represented by loans and credits, as well as accounts payable. By the end of 2005, short-term accounts payable had increased significantly compared to 2003 and 2004 and began to constitute the largest portion of short-term liabilities.

It should also be noted that the company has an uncovered loss, which increased throughout 2004 and 2005.

When analyzing accounting (financial) statements, it is necessary to determine the liquidity of the balance sheet. Balance sheet liquidity is defined as the degree to which an organization's liabilities are covered by its assets, the period of conversion of which into money corresponds to the period of repayment of liabilities.

The liquidity of assets is defined as the reciprocal of the time required to convert them into cash. The shorter the time it takes for a given type of asset to turn into money, the higher its liquidity.

Analysis of balance sheet liquidity consists of comparing funds for assets, grouped by the degree of their liquidity and arranged in descending order of liquidity, with liabilities for liabilities, grouped by their maturity dates and arranged in ascending order of maturity.

Depending on the degree of liquidity, i.e. the rate of conversion into cash, the assets of the enterprise are divided into the following groups:

The most liquid assets (A1) - these include all items of the enterprise’s funds and short-term financial investments (securities). This group is calculated as follows:

Cash + Short-term financial investments or line 250 + line 260.

Quickly realizable assets (A2) - accounts receivable, payments for which are expected within 12 months after the reporting date.

Short-term accounts receivable or p.240.

Slowly selling assets (A3) - items in section II of the balance sheet asset, including inventories, value added tax, receivables (payments for which are expected more than 12 months after the reporting date) and other current assets. Inventories + Long-term accounts receivable + VAT + Other current assets or line 210 + line 220 + line 230 + line 270.

Hard-to-sell assets (A4) - items in section I of the balance sheet asset - non-current assets. Non-current assets or page 190.

Balance sheet liabilities are grouped according to the degree of urgency of their payment:

The most urgent obligations (P1) - these include accounts payable. Accounts payable or line 620.

Short-term liabilities (P2) are short-term borrowed funds, debt to participants for payment of income, and other short-term liabilities. Short-term borrowed funds + Debt to participants for payment of income + Other short-term liabilities or line 610 + line 630 + line 660.

Long-term liabilities (P3) are balance sheet items related to sections IV and V, i.e. long-term loans and borrowed funds, as well as deferred income, reserves for future expenses and payments. Long-term liabilities + Deferred income + Reserves for future expenses and payments or line 590 + line 640 + line 650.

Constant liabilities (P4) are items in Section III of the balance sheet “Capital and Reserves”. Capital and reserves (organization's own capital) or p.490.

To determine the liquidity of the balance sheet, you should compare the results of the given groups for assets and liabilities.

The balance is considered absolutely liquid if the following ratios (inequalities) are met:

The first three inequalities mean the need to comply with the constant liquidity rule - the excess of assets over liabilities. The data in Table 1 allows us to characterize the degree of liquidity of current assets and their parts. To calculate the data in Table 1, balance sheets are used (Appendix 1, 4, 7).

Table 1. Comparison of results for assets and liabilities of VSZ OJSC for

2003-2005

Analyzing the calculations for 2003, we can say that the first ratio is not met, which indicates a lack of quickly realizable assets to repay short-term accounts payable. The second and third inequalities are satisfied, that is, quickly realizable and slowly realizable assets significantly exceed the short-term and long-term liabilities of the enterprise. The fourth inequality also holds. This means that the enterprise had enough funds in 2003 not only to form non-current assets, but also to cover the need for current assets.

Analysis of calculations for 2004 and 2005 shows that non-compliance with the first inequality is increasing, because the most liquid assets in both 2004 and 2005, respectively, were 159 and 168 times less than the amount of the most urgent liabilities. Comparison of assets and liabilities on the balance sheet in 2004 in the second and third proportions indicates that the enterprise will be able to cover its short-term and long-term liabilities through quickly and slowly sold assets. In 2005, there is a discrepancy in the second inequality, which indicates a shortage of quickly marketable assets. Compliance with only the third inequality in 2005 suggests that the excess of slowly realized assets will make it possible to cover long-term liabilities. In 2004 and 2005, the fourth inequality is not observed, i.e. the presence of hard-to-sell assets exceeds the cost of equity capital, and this in turn means that there is not any of it left to replenish working capital, which will have to be replenished mainly by delaying the repayment of accounts payable in the absence of own funds for these purposes.

Studying the profit and loss statement allows you to see the procedure for forming the final financial result of the enterprise, the magnitude of this result both from the sale of goods, products, works, services, and from other operations, the amount of payments due to the budget for income tax and other taxes from net profit, as well as the amount of net profit remaining at the disposal of the enterprise. All this data is presented to the user for the reporting and previous years, which also provides the opportunity to compare the corresponding indicators for two years.

Net profit in 2003 was obtained from income from ordinary activities, which covered expenses from non-operating operations. And in 2004 and 2005, losses were incurred, which were formed due to losses from financial and economic activities and other expenses. This indicates negative changes in the core activities of the enterprise compared to 2003.

Vertical (structural) analysis is the presentation of accounting (financial) statements in the form of relative values ​​that characterize the structure of the final indicators. Vertical analysis can be carried out based on original reporting or aggregated reporting. The benefits of this type of reporting analysis are also obvious when comparing reports.

All balance sheet items in vertical analysis are given as a percentage of the balance sheet total. Structural analysis of the balance sheet allows us to consider the ratio of current and non-current assets of the enterprise, as well as the structure of non-current and current assets; determine the share of equity and borrowed capital, the structure of capital by type.

A vertical analysis of the balance sheets of JSC VSZ for 2003-2005 is presented in Table 2.

Table 2. Vertical analysis of the balance sheets of JSC VSZ for 2003-2005,%

Indicators
I. Non-current assets
Fixed assets
Unfinished construction
Long-term financial investments
Other non-current
II. Current assets
including:
raw materials, supplies and other similar assets
costs in work in progress
finished products and goods for resale
future expenses periods
Added tax cost by acquired values
Accounts receivable
Short-term financial investments
Cash
Other current assets
III. Capital and reserves
Authorized capital
Retained earnings (uncovered loss)
Loans and credits
Accounts payable debt
including:
suppliers and contractors
debt to staff of the organization
debt to state off-budget funds
debt on taxes and fees
other creditors

Vertical analysis of balance sheets allows you to clearly determine the significance of the assets and liabilities of the balance sheet. Non-current assets in 2003 amounted to 52.13% of all funds, and in 2004 their share increased by 9.01 points, and in 2005 there was a decline of 16.25 points compared to 2004. Working capital in 2003 amounted to 47.87% of all funds, the predominant part of current assets is represented by accounts receivable. In 2004, working capital decreased and inventories began to occupy the predominant part of funds (64%). Comparing 2004 and 2005, we can say that working capital in 2005 increased and amounted to 55.11%, and inventories also increased (86%), which began to occupy the bulk of working capital.

In 2003, the authorized capital and retained earnings (uncovered loss) accounted for 61.24% of the enterprise’s sources of funds. Throughout 2004 and 2005, the authorized capital and retained earnings (uncovered loss) are reduced and in 2005 they amounted to 33.66%. This indicates that the company has more borrowed funds than its own. Borrowed capital is represented by short-term loans and credits, and short-term accounts payable. It should also be noted that every year there is an increase in loans and accounts payable. In 2003, loans amounted to 6.94%, accounts payable - 31.82%. In 2005, short-term loans more than doubled, and accounts payable began to occupy more than half of all sources of the enterprise.

All indicators of the profit and loss statement when conducting structural analysis are given as a percentage of the total revenue from product sales.

Horizontal analysis consists of constructing one or more analytical tables in which absolute balance sheet indicators are supplemented by relative growth (decrease) rates. A horizontal analysis of the balance sheet of JSC VSZ is presented in Table 4.

The results of horizontal balance sheet analysis show changes in the main balance sheet items. In 2004, there was an increase in fixed assets by 4.14%, industrial inventories increased almost threefold. This increase was due to an increase in raw materials by 113.34%, costs in work in progress by 63.59% and finished goods by more than eight times. Accounts receivable decreased by 73.15%, cash by 67.44%, other current assets by 29.15%, and short-term financial investments are almost zero.

Table 4. Horizontal analysis of the balance sheet of JSC VSZ for 2003-2005

Indicators		Relative values,%
				2004 to 2003	2005 to 2004	2005 to 2003
I. Non-current assets
Fixed assets
Unfinished construction
Long-term financial investments
Other non-current
II. Current assets
including:
raw materials, materials and others similar values
costs in unfinished production
finished products and goods for resale
future expenses periods
Value added tax on acquired values
Accounts receivable debt
Short term financial investments
Cash
Other negotiable
III. Capital and reserves
Authorized capital
Unallocated profit (uncovered
IV. long term duties
V. Current liabilities
Loans and credits
Accounts payable debt
including:
suppliers and contractors
debt in front of the staff organizations
debt to government off-budget
debt on taxes and fees
other creditors

In general, for the balance sheet assets for 2004, we can say that non-current assets increased by 8.19%, and current assets decreased by 25.13%. When comparing 2003 and 2004, it can be noted that in 2004, capital and reserves decreased by 11.48%, but short-term loans and credits increased by 11.94% and short-term accounts payable decreased slightly. The company's balance sheet during this period decreased by 7.76%. Comparing 2004 and 2005, it is clear that in 2005 there was a reduction in fixed assets by 9.64 points, but due to an increase in other balance sheet items, non-current assets increased by 3.32 points. The current assets of the enterprise almost doubled, due to production inventories more than two and a half times, cash more than twice. The growth of current assets was negatively affected by a reduction in accounts receivable by 11.69 points.

In the liabilities side of the 2005 balance sheet, there was a reduction in capital and reserves by 19.41 points, but an increase of more than two and a half times in short-term loans and credits and more than doubling of short-term accounts payable allowed the balance to increase by almost one and a half times.

Analyzing 2005 with 2003, we can say that the balance sheet assets show an increase in non-current and current assets by 11.78 points and 49.4 points, respectively. A decrease in fixed assets by 5.9 points had a negative impact on the increase in non-current assets, and an increase in current assets - accounts receivable and cash.

The results of the horizontal analysis of the profit and loss statement of JSC VSZ are reflected in Table 5.

Table 5 shows that in 2004, revenue from product sales decreased to 89.56%. Compared to 2003, in 2004 income decreased by 6.91 points. The cost of goods sold has a negative impact on the organization's profit, since it decreases at a slower pace than revenue. The increase in non-operating income in 2004 by almost seven and a half times and the increase in operating income does not allow covering the organization's expenses and, consequently, increasing profits.

Compared to 2003, in 2005 there was a decrease in income by 9.47 points. Analyzing 2004 and 2005, we can say that in 2005 there was a decrease in sales revenue by 12.22 points and cost of goods sold by 15.02 points. Revenues in 2005 decreased by 2.75 points. Revenues were positively impacted by other operating income, which increased more than eightfold. The negative impact was caused by an increase in other operating expenses by more than twelve times, non-operating expenses by almost two times and a reduction in non-operating income by 86.69%.

Table 5. Horizontal analysis of the income statement

JSC "VSZ" for 2003-2005

Indicators	Absolute values, thousand rubles.	Relative values,%
				2004 to 2003	2005 to 2004	2005 to 2003
1. Sales revenue
2. Cost goods sold
3. Business expenses
4. Managerial
5. Profit (loss) from sales
6. Other operating income
7. Other operating expenses
8. Non-operating income
9. Non-operating expenses
10. Profit (loss) before tax
11. Current income tax
12. Net profit (loss) of the reporting year
13. Total income (line 1 + line 6 + line 8)

In 2004 and 2005, no income tax was charged because the company had a pre-tax loss in 2004 that amounted to 777.65%. Compared to 2004, the loss in 2005 increased by almost one and a half times.

Based on the balance sheet data (Appendix 1, 4, 7), the calculation of financial stability indicators is presented in Table 6.

Table 6.

Indicators of financial stability of JSC VSZ for 2003-2005.

Index
Autonomy (financial independence) coefficient of health insurance* 0.5
Gearing ratio OZ 0.5
Financial dependency ratio
Financial stability ratio
Health care financing ratio > 1
Coefficient of provision with own funds of healthcare facilities 0.1
OZ maneuverability coefficient 0.1
Long-term investment structure coefficient

* OZ - optimal value.

Indicators of the financial stability of an enterprise characterize the structure of the capital used by the enterprise from the standpoint of its solvency and financial stability of development. These indicators make it possible to assess the degree of protection of investors and creditors, as they reflect the company’s ability to repay long-term obligations. This group of indicators is also called indicators of capital structure and solvency or coefficients for managing sources of funds.

The data in Table 6 shows that the autonomy coefficient in 2003 was 0.61, and in 2004 and 2005 it decreased and in 2005 it was 0.34. Thus, most of the company's assets are formed from borrowed capital. The value of the 2005 coefficient is below the optimal value, therefore, the enterprise does not have sufficient independence and capabilities to pursue an independent financial policy.

The coefficient of financial dependence in 2004 increased compared to 2003 by 0.07 and amounted to 0.7, and in 2005 it increased almost three times compared to 2004. This means that for one ruble of equity capital the company attracted 63 kopecks in 2003, in 2004 - 70 kopecks, in 2005 1 ruble 97 kopecks, i.e. There is an increase in creditors to participate in financing the enterprise. The dependence of this enterprise on external sources is high.

The equity financing ratio for debt capital in 2003 and 2004 turned out to be higher than the optimal value, because the debt capital mainly included accounts payable, which, if used wisely, can be completely “free”. In 2005, there is a sharp decrease in the financing ratio to 0.51 and this leads to the fact that borrowed and attracted funds significantly exceed equity capital, which ensures the unsustainable development of the organization.

The coefficients given in Table 7 characterize the efficiency of the enterprise's use of its total assets or any type thereof. They show how much revenue each ruble of assets provides, how quickly assets turn over in the course of the enterprise’s activities.

Table 7.

Indicators of business activity of JSC VSZ for 2003-2005.

Index	Calculation formula indicator according to reporting
Asset turnover ratio (there should be a tendency for turnover to accelerate)
Inventory turnover ratio (there should be a tendency for turnover to accelerate)
Capital productivity
Accounts receivable turnover ratio
Receivables circulation time
Accounts payable turnover ratio
Accounts payable circulation time
Receivables to payables ratio
Finished product turnover ratio
Working capital turnover ratio (acceleration of turnover - positive trend)
Equity turnover ratio
Turnover ratio of attracted financial capital (loan debt)

The asset turnover ratio reflects the turnover rate of the organization's entire capital or the efficiency of using all available resources, regardless of their sources. The data in Table 7 shows that during the studied period this indicator decreased. This means that the organization completed the full cycle of production and circulation, bringing profit, more slowly. Since the company is experiencing unfavorable dynamics of this ratio, therefore, it is necessary to increase the volume of sales of its services, analyze the composition of assets and get rid of unnecessary assets, as well as look for other ways to increase capital productivity. Capital productivity in 2003 was 3.54, in 2004 it decreased to 1.55, and in 2005 it was 1.4.

The inventory turnover ratio at this enterprise in 2003 was 22.35. In 2004, there is a sharp drop in this indicator to 5.67, and in 2005 it decreases by another 3.9. A low value of the ratio confirms the unfavorable characteristics of the financial condition of the organization. The lower this indicator, the greater the overstocking, the slower you can pay off debts.

The turnover of accounts receivable in 2003 was 5.98, and its circulation time was 61 days. That is, the average period of time required for an enterprise to receive money after selling products (services) is 61 days. In 2004, the receivables turnover ratio decreases by 1.76, and the circulation time increases to 86 days, and in 2005 there is a tendency to increase the receivables turnover ratio and reduce the circulation period to 39 days. About the accounts payable turnover ratio, we can say that it decreases every year, and the debt circulation time increases. So in 2005, the coefficient remained 1.49, and the circulation time was 244 days. To maintain its solvency, a company must strictly control accounts receivable.

The stability of the organization's financial position and its business activity are characterized by the ratio of receivables and payables. At JSC VSZ, accounts payable predominates over receivables, and this predominance increases every year. In 2003, the ratio of accounts receivable to accounts payable was 0.96, in 2004 - 0.27, and in 2005 - 0.11.

The finished product turnover ratio shows how many times a year finished products are circulated. In 2003, finished products were handled 147 times a year, and in 2004 and 2005 there was a sharp decrease in this figure. So in 2005, the finished product ratio was 4.54. Working capital turnover in 2003 was 3.84, i.e. each type of current assets was consumed and renewed again almost 4 times a year. In 2004, renewal occurs about twice a year, and in 2005 it tends to one. The rate of return on equity reflects the active use of funds. The low value of this indicator indicates the inactivity of part of the company's own funds. At JSC VSZ this figure in 2003 was 1.51, in 2004 it decreased to 1.42, and in 2005 it increased slightly.

The intensity of use of enterprise resources, the ability to generate income and profit are judged by profitability indicators. These indicators reflect both the financial position of the enterprise and the efficiency of management of economic activities, existing assets and capital invested by the owners. The indicators of this group, as well as indicators of business activity, are of interest to all users.

Profitability ratios show how profitable the organization's activities are and are calculated by the ratio of the profit received to the sources of funds used. These ratios include: return on assets, return on equity, return on operating costs and others.

The calculation of profitability indicators according to the accounting (financial) statements is given in Table 8.

Table 8.

Profitability indicators of JSC VSZ for 2003-2005,%

Index	Formula for calculating the indicator based on reporting data
Return on assets (economic profitability ratio)
Return on equity (financial profitability ratio)
Sales profitability (commercial profitability ratio)
Return on operating costs
Gross Margin

According to the reporting data, VSZ OJSC does not use its existing assets and share capital effectively enough, since the return on its assets in 2003 was 0.9%, and in 2004 and 2005 the coefficient had negative values ​​that were increasing. In 2004 and 2005, all profitability indicators have negative values, since the company had a loss from its core activities. Return on equity in 2003 was 1.43%, then in 2004 and 2005 there was a sharp decrease in this indicator. So in 2005 it was equal to minus 24.09%. Return on equity should ensure the return on investment in the enterprise, but since the indicator is negative, therefore, the return on investment is not ensured. In 2003, the profitability of sales shows that 2% of profit falls on a unit of products sold. Gross profitability for 2003 reflects that each ruble of products sold represents 2.05% of gross profit. The profitability of current costs shows that in 2003, 2.04% of profit accounted for one ruble of costs. Since in 2004 and 2005 this coefficient takes negative values ​​for the enterprise, therefore, it is necessary to revise prices or strengthen control over the cost of production.

Financial stability is a goal-setting property of financial analysis, and the search for intra-economic opportunities, means and ways to strengthen it has a deep economic meaning and determines the nature of its implementation and content.

The ratio of the value of either all assets of the organization, or current assets or their main component - inventories and costs (3) with the amount (cost) of equity and/or borrowed capital as the main sources of formation determine the degree of financial stability. The provision of at least only reserves and upcoming costs (p. 210 f.1) with sources of their formation expresses the essence of financial stability, while solvency is its external manifestation. Sources of coverage and increase (growth) of inventories and costs are:

equity capital (SC) (line 490), adjusted by the amount of targeted funds for revenues and financing (line 450);

short-term credits and loans (KKZ), p. 610;

accounts payable (AC), line 620;

debt to participants (founders) for the payment of income (the reimbursement period for which has not yet arrived) (ZU), line 630;

other short-term liabilities (P KO), line 660.

The choice of specific sources of coverage from all those mentioned above is the prerogative of the business entity.

Funds from long-term loans and borrowings (DO), line 590 f.1 are spent, as a rule, on replenishing non-current assets, although the organization can partially use them in some cases to cover the lack of working capital. Having such information according to the Balance Sheet, it is possible to identify the types of financial stability of the organization.

Absolute financial stability (rarely found in modern Russian practice): when< (СК - ВА) + ККЗ + КЗ, или стр.210 < строки 490 - 190 + 610 + 620.

Normal stability, which is guaranteed by its solvency: when 3 = (SK - VA) + KK3 + K3, or line 210 = lines 490 - 190 + 610 + 620.

An unstable financial condition, in which there are failures in solvency, but there is still an opportunity to restore it: when 3 = (SK - VA) + KK3 + K3 + SKOS, where SKOS is a special part of equity capital intended to service other short-term obligations, restraining financial tension (lines 630 + 660), or p.210 = lines 490 - 190 + 610 + 620 + 630 + 660.

Crisis financial condition, or crisis financial instability: when 3 > (SK - VA) + KK3 + K3 + SKOS, or line 210 > lines 490 - 190 +.610 + 620 + 630 + 660.

The definition of the type of financial stability of JSC VSZ in the period from 2003 to 2005 is presented in Table 9.

Table 9.

Type of financial stability of JSC VSZ for 2003-2005.

Financial type sustainability	Optimal ratio
Absolute financial stability			17809 < 27685	47560 < 55244
Normal financial stability			17809 < 27685	47560 < 55244
Unstable financial condition			17809 < 27685	47560 < 55244
Crisis financial condition			17809 < 27685	47560 < 55244

A quadruple inequality, when even only reserves and costs are greater than all possible sources of their formation, indicates an extremely critical financial situation of an organization that is on the verge of bankruptcy.

According to Table 9, it is clear that in the period from 2003 to 2005 the first inequality is fulfilled, therefore, JSC VSZ has absolute financial stability. The financial condition of this organization allows us to be confident in the timely fulfillment of obligations in accordance with contracts. Consequently, JSC VSZ has a rational structure of property and its sources.

The solvency of an enterprise is the ability to repay its financial obligations in a timely manner and in full.

Liquidity is the ability of certain types of property assets to be converted into cash without loss of their book value.

The concepts of solvency and liquidity are similar in content, but not identical. With a sufficiently high level of solvency of the enterprise, its financial position is characterized as stable. At the same time, a high level of solvency does not always confirm the profitability of investing in current assets; in particular, excess inventory, overstocking of finished products, and the presence of bad receivables reduce the level of liquidity of current assets.

The stable financial position of an enterprise is the most important factor in its insurance against possible bankruptcy. From this perspective, it is important to know how solvent the enterprise is and what is the degree of liquidity of its assets.

The liquidity of assets is their ability, under certain circumstances, to be converted into monetary form (cash) to reimburse liabilities. Of all the assets of the organization, the most liquid are current assets, and of all current assets, cash, short-term financial investments (securities, deposits, etc.), as well as non-overdue receivables that have become due for payment, or bills accepted to pay.

The other part of current assets cannot with great confidence be called highly liquid assets (for example, inventories, overdue accounts receivable, debt on advances issued and funds on account). However, under certain conditions and competent methods of working with debtors-clients, this debt will still be returned, and inventories will be sold. However, it should be borne in mind that certain types of non-current assets (transport, buildings, modern equipment, computers, etc.) can also, if necessary, be sold even more successfully than, for example, some stocks, and obtain the required cash if this in the interests of the organization.

Solvency and liquidity ratios reflect the ability of an enterprise to pay off its short-term obligations with easily realizable funds. A high value of these ratios indicates a stable financial position of the enterprise, a low value indicates possible problems with cash flow and difficulties in further operating activities. At the same time, a very large value of the coefficients indicates an unprofitable investment in current assets.

In domestic and foreign practice, various liquidity ratios of current assets and their elements are calculated. The most important liquidity indicators in terms of economic essence and practical relevance are:

The absolute liquidity ratio is calculated based on data from sections II and IV of the balance sheet using the formula:

where DS is cash; KFV - short-term financial investments;

KO - short-term liabilities.

Current liabilities include: debt on short-term loans and borrowings; accounts payable; debt to participants (founders) for payment of income; other short-term liabilities.

The critical liquidity ratio or “intermediate liquidity” is calculated using the formula:

where DZ is accounts receivable; POA - other current assets.

The current liquidity ratio is calculated for a general assessment of the liquidity of current assets:

where OA are current assets.

This indicator characterizes the degree of provision (coverage) of short-term liabilities with all current assets.

The excess of current assets over short-term liabilities by more than twice is not desirable for the organization, because such a situation rather indicates an irrational investment of funds in replenishing current assets and their ineffective use.

The current values ​​of these liquidity indicators according to the data of JSC VSZ for 2003-2005 are presented in Table 10.

Table 10.

Liquidity indicators of JSC VSZ for 2003-2005.

Analyzing the critical liquidity ratio, it is clear that compared to 2004, in 2005 it decreased by 0.21 points and amounted to 0.09. This indicates that the enterprise can repay only a small share of short-term obligations with the funds at its disposal, financial investments and receivables attracted for repayment. The value of the current ratio in 2004 and 2005 shows that the company has less working capital than short-term liabilities. In 2004, this coefficient was 0.94, and in 2005 it decreased to 0.81.

Solvency is characterized by the degree of liquidity of current assets and indicates the financial capabilities of the organization (cash and cash equivalents, accounts payable) to fully pay off its obligations as the debt matures.

To assess the solvency of the organization, the indicators are used, which are presented in table 11. When calculating the indicators, data from the balance sheet (Appendix 1, 4, 7), profit and loss statement (Appendix 2, 5, 8) and cash flow statement (Appendix) are used 3, 6, 9).

Analysis of financial and economic activities plays an important role in increasing the economic efficiency of the organization, in its management, and in strengthening its financial condition. It is an economic science that studies the economics of organizations, their activities from the point of view of assessing their work in implementing business plans, assessing their property and financial status and in order to identify untapped reserves for increasing the efficiency of organizations.

The adoption of justified, optimal ones is impossible without first conducting a comprehensive, in-depth economic analysis of the organization’s activities.

The results of the economic analysis are used to establish reasonable planning targets. Business plan indicators are set based on the actual achieved indicators, analyzed from the point of view of opportunities for their improvement. The same applies to rationing. Norms and standards are determined on the basis of previously existing ones, analyzed from the point of view of the possibilities of their optimization. For example, standards for the consumption of materials for the manufacture of products should be established taking into account the need to reduce them without compromising the quality and competitiveness of products. Consequently, analysis of economic activity helps to establish reasonable values ​​for planned indicators and various standards.

Economic analysis helps to increase the efficiency of organizations, the most rational and efficient use of fixed assets, material, labor and financial resources, the elimination of unnecessary costs and losses, and, consequently, the implementation of a savings regime. An immutable law of management is to achieve the greatest results at the lowest cost. The most important role in this is played by economic analysis, which allows, by eliminating the causes of unnecessary costs, to minimize and, therefore, maximize the amount received.

The analysis of economic activity plays a great role in strengthening the financial condition of organizations. The analysis makes it possible to determine the presence or absence of financial difficulties in an organization, identify their causes and outline measures to eliminate these causes. The analysis also makes it possible to state the degree of solvency and liquidity of the organization and predict the possible bankruptcy of the organization in the future. When analyzing the financial results of an organization's activities, the causes of losses are established, ways to eliminate these causes are outlined, the influence of individual factors on the amount of profit is studied, recommendations are made for maximizing profits through the use of identified reserves for its growth, and ways of using them are outlined.

The relationship of economic analysis (analysis of economic activity) with other sciences

First of all, the analysis of financial and economic activities is related to. Among all the information used in conducting business, the most important place (more than 70 percent) is occupied by information provided by accounting and. Accounting forms the main indicators of the organization’s activities and its financial condition (, liquidity, etc.).

Analysis of economic activity is also associated with statistical accounting (). The information provided by statistical accounting and reporting is used to analyze the organization's activities. In addition, economic analysis uses a number of statistical research methods. Economic analysis is interrelated with auditing.

Auditors carry out verification of the correctness and validity of the organization’s business plans, which, along with accounting data, are an important source of information for conducting economic analysis. Further, auditors carry out a documentary check of the organization’s activities, which is very important to ensure the reliability of the information used in economic analysis. Auditors also analyze the profit, profitability and financial condition of the organization. Here audit comes into close interaction with economic analysis.

Analysis of economic activity is also associated with intra-farm planning.

Business analysis is closely related to mathematics. Research is widely used in this process.

Economic analysis is also closely connected with the economics of individual sectors of the national economy, as well as with the economics of individual industries (mechanical engineering, metallurgy, chemical industry, etc.

Analysis of economic activity is also interconnected with such sciences as , . In the process of conducting economic analysis, it is necessary to take into account the formation and use of cash flows, the peculiarities of the functioning of both own and borrowed funds.

Economic analysis is very closely related to the management of organizations. Strictly speaking, the analysis of the activities of organizations is carried out with the aim of implementing, on the basis of its results, the development and adoption of optimal management decisions that ensure increased efficiency of the organization's activities. Thus, economic analysis contributes to the organization of the most rational and effective management system.

Along with the specific economic sciences listed, economic analysis is certainly associated with. The latter sets out the most important economic categories, which serves as a methodological basis for economic analysis.

Goals of analyzing financial and economic activities

In the process of conducting economic analysis, it is carried out identifying improvements in the efficiency of organizations and ways of mobilization, that is, the use of identified reserves. These reserves are the basis for the development of organizational and technical measures that must be carried out to activate the identified reserves. The developed measures, being optimal management decisions, make it possible to effectively manage the activities of the objects of analysis. Consequently, analysis of the economic activities of organizations can be considered as one of the most important management functions or, as the main method of justifying decisions on the management of organizations. In the conditions of market relations in the economy, the analysis of economic activity is designed to ensure high profitability and competitiveness of organizations both in the near and longer term.

The analysis of economic activity, which arose as balance sheet analysis, as balance sheet science, continues to consider as the main direction of research precisely the analysis of the financial condition of the organization on the balance sheet (using, of course, other sources of information). In the context of the transition to market relations in the economy, the role of analysis of the financial condition of the organization increases significantly, although, of course, the importance of analysis of other aspects of their work is not diminished.

Methods for analyzing economic activity

The method of analyzing economic activity includes a whole system of methods and techniques. providing the opportunity for scientific research of economic phenomena and processes that make up the economic activities of the organization. Moreover, any of the methods and techniques used in economic analysis can be called a method in the narrow sense of the word, as a synonym for the concepts “method” and “technique”. Analysis of economic activity also uses methods and techniques characteristic of other sciences, especially statistics and mathematics.

Method of analysis is a set of methods and techniques that provide a systematic, comprehensive study of the influence of individual factors on changes in economic indicators and the identification of reserves for improving the activities of organizations.

The method of analyzing economic activity as a way of studying the subject of this science is characterized by the following features:

1. The use of tasks (taking into account their validity), as well as standard values ​​of individual indicators as the main criterion for assessing the activities of organizations and their financial condition;
2. The transition from assessing the organization’s activities based on the overall results of the implementation of business plans to detailing these results according to spatial and temporal characteristics;
3. calculating the influence of individual factors on economic indicators (where possible);
4. Comparison of the indicators of this organization with the indicators of other organizations;
5. Integrated use of all available sources of economic information;
6. Generalization of the results of the economic analysis and a summary calculation of identified reserves for improving the organization’s activities.

In the process of analyzing economic activity, a large number of special methods and techniques are used, in which the systematic, complex nature of the analysis is manifested. Systemic nature of economic analysis is manifested in the fact that all economic phenomena and processes that make up the activities of the organization are considered as certain aggregates, consisting of individual components connected with each other and as a whole with the system, which is the economic activity of the organization. When carrying out the analysis, the relationship between the individual components of these aggregates, as well as these parts and the aggregate as a whole, is studied, and finally, between the individual aggregates and the activities of the organization as a whole. The latter is considered as a system, and all of its components listed are considered as subsystems of various levels. For example, an organization as a system includes a number of workshops, i.e. subsystems, which are aggregates consisting of separate production areas and workplaces, that is, subsystems of the second and higher orders. Economic analysis studies the interrelations of the system and subsystems of various levels, as well as the latter among themselves.

Analysis and assessment of business performance

Analysis of the financial and economic activities of an enterprise makes it possible to assess the effectiveness of the business, that is, to establish the degree of efficiency of the functioning of this enterprise.

The main principle of business efficiency is to achieve the greatest results at the lowest cost. If we detail this situation, we can say that the effective operation of an enterprise occurs when the cost of producing a unit of product is minimized in conditions of strict adherence to technology and production and ensuring high quality and quality.

The most general performance indicators are profitability, . There are private indicators that characterize the effectiveness of individual aspects of the functioning of an enterprise.

These indicators include:

• efficiency of use of production resources available to the organization:
  • fixed production assets (here the indicators are , );
  • (indicators - personnel profitability, );
  • (indicators - , profit per one ruble of material costs);
• efficiency of the organization's investment activities (indicators - payback period of capital investments, profit per one ruble of capital investments);
• efficiency of use of the organization's assets (indicators - turnover of current assets, profit per one ruble of the value of assets, including current and non-current assets, etc.);
• efficiency of capital use (indicators - net profit per share, dividends per share, etc.)

Actually achieved private performance indicators are compared with planned indicators, with data for previous reporting periods, as well as with indicators of other organizations.

We present the initial data for analysis in the following table:

Particular indicators of the efficiency of financial and economic activities of an enterprise

Indicators characterizing certain aspects of the financial and economic activities of the enterprise have improved. Thus, capital productivity, labor productivity and material productivity have increased, therefore, the use of all types of production resources available to the organization has improved. The payback period for capital investments has decreased. The turnover of working capital has accelerated due to increased efficiency of their use. Finally, there is an increase in the amount of dividends paid to shareholders per share.

All these changes that took place compared to the previous period indicate an increase in the efficiency of the enterprise.

As a general indicator of the effectiveness of the financial and economic activities of an enterprise, we use the level as the ratio of net profit to the amount of fixed and current production assets. This indicator combines a number of private performance indicators. Therefore, changes in the level of profitability reflect the dynamics of the efficiency of all aspects of the organization’s activities. In the example we are considering, the level of profitability in the previous year was 21 percent, and in the reporting year it was 22.8%. Consequently, an increase in the level of profitability by 1.8 points indicates an increase in business efficiency, which is expressed in the comprehensive intensification of the financial and economic activities of the enterprise.

The level of profitability can be considered as a general, integral indicator of business efficiency. Profitability expresses a measure of the profitability of an enterprise. Profitability is a relative indicator; it is much less susceptible to the influence of inflation processes than the absolute profit indicator and therefore more accurately shows the efficiency of the organization. Profitability characterizes the profit received by the enterprise from each ruble of funds invested in the formation of assets. In addition to the profitability indicator under consideration, there are others, which are covered in detail in the article “Analysis of Profit and Profitability” of this site.

The efficiency of an organization is influenced by a large number of factors at different levels. These factors are:

• general economic factors. These include: trends and patterns of economic development, achievements of scientific and technological progress, tax, investment, depreciation policies of the state, etc.
• natural-geographical factors: location of the organization, climatic features of the area, etc.
• Regional factors: economic potential of a given region, investment policy in this region, etc.
• industry factors: the place of a given industry within the national economic complex, market conditions in this industry, etc.
• factors determined by the functioning of the analyzed organization - the degree of use of production resources, compliance with the cost-saving regime for the production and sale of products, the rationality of organizing supply and marketing activities, investment and pricing policy, the most complete identification and use of on-farm reserves, etc.

Improving the use of production resources is very important for increasing the efficiency of the enterprise. Any of the indicators we named that reflect their use ( , ) is a synthetic, generalizing indicator that is influenced by more detailed indicators (factors). In turn, each of these two factors is influenced by even more detailed factors. Consequently, any of the general indicators of the use of production resources (for example, capital productivity) characterizes the efficiency of their use only in general.

In order to reveal true effectiveness, it is necessary to carry out more detailed measurements of these indicators.

The main private indicators characterizing the efficiency of the enterprise should be considered capital productivity, labor productivity, material productivity and working capital turnover. Moreover, the latter indicator, compared to the previous ones, is more generalizing, directly related to such performance indicators as profitability, profitability, profitability. The faster the working capital turns over, the more efficiently the organization functions and the greater the amount of profit received and the higher the level of profitability.

Acceleration of turnover characterizes the improvement of both the production and economic aspects of the organization’s activities.

So, the main indicators that reflect the effectiveness of an organization are profitability, profitability, and level of profitability.

In addition, there is a system of private indicators that characterize the effectiveness of various aspects of the organization’s functioning. Among the private indicators, the most important is the turnover of working capital.

Systematic approach to the analysis of financial and economic activities

Systems approach to the analysis of the financial and economic activities of the enterprise assumes her study as a certain totality, as a single system. The systems approach also assumes that an enterprise or other analyzed object must include a system of various elements that are in certain connections with each other, as well as with other systems. Consequently, the analysis of these elements that make up the system should be carried out taking into account both intra-system and external connections.

Thus, any system (in this case, the analyzed organization or other object of analysis) consists of a number of subsystems interconnected. At the same time, this same system, as a component, as a subsystem, is included in another system of a higher level, where the first system is in interconnection and interaction with other subsystems. For example, the analyzed organization as a system includes a number of workshops and management services (subsystems). At the same time, this organization as a subsystem is part of any branch of the national economy or industry, i.e. higher level systems, where it interacts with other subsystems (other organizations included in this system), as well as with subsystems of other systems, i.e. with organizations from other industries. Thus, the analysis of the activities of individual structural divisions of the organization, as well as individual aspects of the latter’s activities (supply and sales, production, financial, investment, etc.) should not be carried out in isolation, but taking into account the relationships existing in the analyzed system.

In these conditions, economic analysis must, of course, be systematic, complex and multifaceted.

The economic literature discusses the concepts of “ system analysis" And " comprehensive analysis" These categories are closely interrelated. In many ways, systematicity and complexity of analysis are synonymous concepts. However, there are also differences between them. Systematic approach to economic analysis involves an interconnected consideration of the functioning of individual structural divisions of the organization, the organization as a whole, and their interaction with the external environment, that is, with other systems. Along with this, a systematic approach means an interconnected consideration of various aspects of the activity of the analyzed organization (supply and sales, production, financial, investment, socio-economic, economic-ecological, etc.). Systematic analysis is a broader concept compared to its complexity. Complexity includes the study of individual aspects of the organization’s activities in their unity and interconnection. As a result, complex analysis should be considered as one of the fundamental parts of systems analysis. The generality of the complexity and systematic analysis of financial and economic activities is reflected in the unity of the study of various aspects of the activities of a given organization, as well as in the interconnected study of the activities of the organization as a whole and its individual divisions, and, in addition, in the use of a general set of economic indicators, and, finally, in integrated use of all types of information support for economic analysis.

Stages of analysis of the financial and economic activities of an enterprise

In the process of conducting a systematic, comprehensive analysis of the financial and economic activities of an enterprise, the following stages can be distinguished. At the first stage The analyzed system should be divided into separate subsystems. It should be borne in mind that in each individual case the main subsystems may be different, or identical, but having far from identical content. Thus, in an organization that manufactures industrial products, the most important subsystem will be its production activity, which is absent in a trading organization. Organizations providing services to the public have so-called production activities, which are sharply different in essence from the production activities of industrial organizations.

Thus, all functions performed by a given organization are performed through the activities of its individual subsystems, which are identified at the first stage of a systemic, comprehensive analysis.

At the second stage a system of economic indicators is being developed that reflects the functioning of both individual subsystems of a given organization, that is, the system, and the organization as a whole. At the same stage, criteria for assessing the values ​​of these economic indicators are developed based on the use of their normative and critical values. And finally, at the third stage of a systematic, comprehensive analysis, the relationships between the functioning of individual subsystems of a given organization and the organization as a whole are identified, and the economic indicators that express these relationships are determined and are influenced by them. For example, they analyze how the functioning of the labor and social affairs department of a given organization will affect the cost of production, or how the investment activities of the organization affected the amount of balance sheet profit it received.

Systems approach to economic analysis provides an opportunity for the most complete and objective study of the functioning of this organization.

In this case, one should take into account the materiality and significance of each type of identified relationships, the specific weight of their influence on the overall amount of change in the economic indicator. If this condition is met, a systematic approach to economic analysis provides opportunities for the development and implementation of optimal management decisions.

When conducting a systematic, comprehensive analysis, it is necessary to take into account that economic and political factors are interconnected and have a joint impact on the activities of any organization and its results. Political decisions made by legislative bodies must necessarily be in accordance with legislative acts regulating economic development. True, at the micro level, that is, at the level of individual organizations, it is very problematic to give a reasonable assessment of the influence of political factors on the performance of an organization and to measure their influence. As for the macro level, that is, the national economic aspect of the functioning of the economy, here it seems more realistic to identify the influence of political factors.

Along with the unity of economic and political factors, when conducting a system analysis, it is also necessary to take into account the interconnectedness of economic and social factors. Achieving the optimal level of economic indicators is currently largely determined by the implementation of measures to improve the socio-cultural level of the organization's employees and improve their quality of life. In the process of analysis, it is necessary to study the degree of implementation of plans for socio-economic indicators and their relationship with other performance indicators of organizations.

When conducting a systematic, comprehensive economic analysis, one should also take into account unity of economic and environmental factors. In modern conditions of enterprise activity, the environmental side of this activity has acquired very important importance. It should be borne in mind that the costs of implementing environmental protection measures cannot be considered only from the standpoint of short-term benefits, since the biological damage caused to nature by the activities of metallurgical, chemical, food and other organizations may in the future become irreversible, irreparable. Therefore, during the analysis process, it is necessary to check how plans have been implemented for the construction of treatment facilities, for the transition to waste-free production technologies, for the beneficial use or implementation of planned returnable waste. It is also necessary to calculate reasonable amounts of damage caused to the natural environment by the activities of this organization and its individual structural divisions. The environmental activities of the organization and its divisions should be analyzed in connection with other aspects of its activities, with the implementation of plans and the dynamics of key economic indicators. At the same time, cost savings on environmental protection measures in cases where it is caused by incomplete implementation of plans for these measures, and not by more economical expenditure of material, labor and financial resources, should be recognized as unjustified.

Further, when conducting a systematic, comprehensive analysis, it is necessary to take into account that obtaining a holistic view of the organization’s activities can only be achieved by studying all aspects of its activities (and the activities of its structural divisions), taking into account the interrelations between them, as well as their interaction with external environment. Thus, when carrying out the analysis, we fragment the holistic concept - the activities of the organization - into separate component parts; then, in order to check the objectivity of analytical calculations, we carry out algebraic addition of the results of the analysis, that is, individual parts that together should form a holistic picture of the activities of this organization.

The systematic and comprehensive nature of the analysis of financial and economic activities is reflected in the fact that in the process of its implementation, a certain system of economic indicators is created and directly applied, characterizing the activities of the enterprise, its individual aspects, and the relationships between them.

Finally, the systematic and comprehensive nature of economic analysis is expressed in the fact that in the process of its implementation the entire set of information sources is used in an integrated manner.

Conclusion

So, the main content of the systems approach in economic analysis is to study the influence of the entire system of factors on economic indicators based on the intra-economic and external connections of these factors and indicators. In this case, the analyzed organization, that is, a certain system, is divided into a number of subsystems, which are separate structural units and individual aspects of the organization’s activities. In the process of analysis, the entire system of sources of economic information is used comprehensively.

Factors for increasing the efficiency of an organization

Classification of factors and reserves for increasing the efficiency of an organization’s economic activities

The processes that make up the financial and economic activities of an enterprise are interconnected. In this case, the connection can be direct, immediate, or indirect, mediated.

The financial and economic activities of the enterprise, its effectiveness are reflected in certain. The latter can be generalized, that is, synthetic, as well as detailed, analytical.

All indicators expressing the financial and economic activities of the organization are interconnected. Any indicator and a change in its value are influenced by certain reasons, which are usually called factors. So, for example, the volume of sales (realization) is influenced by two main factors (they can be called first-order factors): the volume of output of commercial products and the change in the balance of unsold products during the reporting period. In turn, the magnitudes of these factors are influenced by second-order factors, that is, more detailed factors. For example, the volume of output is influenced by three main groups of factors: factors associated with the availability and use of labor resources, factors associated with the availability and use of fixed assets, factors associated with the availability and use of material resources.

In the process of analyzing the activities of an organization, it is possible to identify even more detailed factors of the third, fourth, and also higher orders.

Any economic indicator can be a factor influencing another, more general indicator. In this case, the first indicator is usually called a factor indicator.

Studying the influence of individual factors on economic indicators is called factor analysis. The main types of factor analysis are deterministic analysis and stochastic analysis.

See below: and reserves for increasing the efficiency of the financial and economic activities of the enterprise