Liquidity and solvency management at LLC production and commercial firm "Rom LTD"
Students Name: Ohorodnyk Mykola Ihorovych
Qualification Level: magister
Speciality: Finance, Banking and Insurance
Institute: Institute of Economics and Management
Mode of Study: full
Academic Year: 2021-2022 н.р.
Language of Defence: ukrainian
Abstract: The master’s qualification work on the topic "Liquidity and Solvency Management of VKF" Rom LTD "LLC" consists of an introduction of three sections, conclusions, a list of used sources and appendices. The three main sections are theoretical-analytical, research-prognostic and recommendatory. The theoretical part of the theoretical and analytical section presents theoretical approaches to determining the liquidity and solvency of economic entities. The solvency of an enterprise is its ability to conduct settlement activities in full in cash and to meet its obligations. Liquidity is the ability of an enterprise to repay its liabilities from various assets and convert them into cash. To ensure maximum liquidity and ensure the solvency of the enterprise, it is necessary to constantly monitor the financial and economic activities and control the structure of assets, especially highly liquid and the structure of liabilities and their repayment periods. In the second part of the first section the general financial analysis of the enterprise was carried out. Thus, the total balance in 2018 amounted to 129710 thousand UAH, in 2019, compared to the previous year, increased by 13734 thousand UAH. ie by 10.59% to UAH 143444 thousand, in 2020, compared to the previous year, the balance sheet total increased by UAH 31248 thousand. (21.78%) to 174692 thousand UAH. According to the analysis, the company’s revenues and expenses are growing. Accordingly, they form a profit, the main purpose of the enterprise. Thus, net profit in 2018 amounted to UAH 3,315.9 thousand, in 2019, compared to the previous year, net profit increased by UAH 469.1 thousand. (14.15%) to 3785 thousand UAH., In 2020, compared to the previous year, net profit increased by 490 thousand UAH. (12.95%) to 4275 thousand UAH. After performing a factor analysis, it was found that the business activity of the company is growing, the company is profitable, although profitability is low and has impaired financial stability. The next part of the section analyzes the liquidity and solvency of the enterprise. In general, we observe a low level of liquidity and insufficient solvency of the enterprise. All this indicates an increase in the riskiness of the enterprise in terms of non-repayment of debts and a decrease in the real level of solvency. Failure to repay your obligations on time may lead to a deterioration in relations with suppliers in the future. To assess the real level of liquidity of the enterprise conducted an analysis of balance sheet liquidity. In the second section of the work, a SWOT analysis of the company’s activities, modeling of factors influencing the company’s liquidity and forecasting indicators that affect the liquidity and solvency of the company. With the help of SWOT-analysis the strengths and weaknesses of the enterprise and opportunities and threats are presented. The strategic program of financial and economic development of the enterprise is presented. This takes into account the internal strengths and external capabilities of VKF "Rom LTD". Also, the impact of weaknesses and the negative impact of external threats is somewhat reduced. After modeling the factors influencing the liquidity of the enterprise, it was found that in 2018-2020. the influence of the first factor "Cash and cash equivalents" on the change of the studied absolute liquidity ratio prevailed over the influence of the second factor "1 / (Current liabilities)". In particular, the impact of factors was in 2019. -0.02 and -0.0083, and in 2020. 0.0475 and -0.0066, respectively. As for the "undistributed balance", it was in 2019. 0.0030, and in 2020. -0.0105, ie was insignificant. The last part of the section provides a forecast of the company’s cash and current liabilities. Current liabilities are projected to grow at a very high rate, while cash tends to grow, but their growth rate is much lower, which indicates a future deterioration in the liquidity and solvency of the company. The recommendation part of the work contains a number of measures that will improve the liquidity and solvency of the enterprise. The company has very large inventories, so the first step was to optimize the size of inventories. As a result of establishing the optimal average size of inventories, it was possible to make an absolute release of funds in the amount of 14852 thousand UAH, and reduce the cost of maintaining inventories by 89 thousand UAH, which led to positive changes in the statement of financial performance and improved a number of profitability ratios. liquidity. We also offer to keep part of the released funds in the form of cash in the account (40%), and the rest of the funds to be used to repay accounts payable. These measures will improve the liquidity of the enterprise. The second measure was to refinance a short-term loan, namely to convert it into a long-term loan. The program of Kredobank was used. Thus, according to the calculations, the interest on the loan for the year will be 519.9 thousand UAH, and with the current loan the company pays for the year under the loan agreement 555 thousand UAH. Also, the company will have less credit burden and will be able to translate short-term liabilities into long-term ones, which will have a positive impact on liquidity and solvency. At the end of the section the economic results of design decisions were given. 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