How can companies improve their ability to repay short term debt with cash?

Short-term solvency is generally considered in terms of quick ratio combined with current ratio.

In layman's terms, it is the ratio of assets (e.g., receivables, other receivables) that you can immediately realise to your current liabilities.

If you want to improve, there are many comprehensive factors, simply put, it is to clean up the inventory and improve the remittance cycle and collection rate of receivables. Increase the speed at which cash flow flows.

Extended information: The ways and means of repaying the company's debts are as follows:

1. Monetary repayment.

It can be said that this is the most commonly used and typical way of debt repayment, which is paid directly in currency according to the type and amount of debt. Debts can be repaid by bank transfer or in cash.

2. Repay debts with labor services.

The so-called labor service is labor that provides a certain special use value for others in the form of living labor. This kind of labor does not provide some kind of service in the form of physical form, but in the form of living labor. This kind of service can be to meet people's spiritual needs, or it can meet people's needs for material production.

In today's gradual development of social civilization, the value of labor services is getting higher and higher, and it is also a property of the company, as long as it is agreed by creditors, the company can use labor services to repay debts. However, the specific value of the service and the effect of reimbursement must be agreed upon by both parties.

3. Offset debts with accounts receivable.

The company's account refers to the account accounting of the amount that the enterprise should collect from the purchasing unit due to the sale of goods, materials, provision of labor services, etc., as well as the commercial acceptance bill that cannot be received due for the advance of transportation and miscellaneous expenses and acceptance.

The company's money is circulating, and the money left in the company may not be enough to repay, but the money that has not been recovered in circulation is enough to pay off.

In this case, with the consent of the debtor, the debt can be offset with accounts receivable.

4. Repay debts with shares or debts.

The company's shares are an important property of the company, and as long as they are the company's property, they can be used to pay off debts. The company's external claims can bring certain asset benefits to the company and are also an important part of the company's assets.

Therefore, both the company's shares and the company's claims can be used to repay the creditor's rights, but the shares and the creditor's rights have their own particularities, the value of the shares is easy to change, and the creditor's rights have the risk of not being able to claim debts, so when using the shares and creditor's rights to repay debts, the creditor should examine this.

Only with the consent of creditors can the company repay the debt in shares or debt.

There are three main indicators that reflect the short-term solvency of enterprises: the current ratio.

Quick Ratio and Cash Ratio.

Current Ratio = Current Assets.

Current liabilities. Quick Ratio = (Current Assets Inventories) Current Liabilities.

Cash Ratio = (Monetary Funds.

Current liabilities) The ability of enterprises to repay short-term debts with cash is weakened, is it a weak short-term debt repayment ability?

The cash ratio reflects the ability of a company to repay short-term debt with cash, and a low cash ratio does not represent a current ratio and a quick freeze ratio.

Therefore, the weakening of the ability of enterprises to repay short-term debts with cash does not mean that the short-term solvency is weak.

As can be seen from the above formula, if you want to improve your ability to repay short-term debt with cash (i.e., increase the cash ratio), you need to increase monetary funds or reduce current liabilities.

Ways to improve the solvency of enterprises:

1. Pay attention to the improvement of asset quality under the normal operation of the state, the total assets of the enterprise are generally greater than the total liabilities, due to the restrictive nature of the assets, there are differences in its liquidity, resulting in the difference in the strength of the solvency, therefore, improving the quality of various assets is the basis for improving the solvency of the enterprise.

2. Scientific borrowing is closely linked to optimizing the capital structure and reducing financial risks, the current market competition is particularly fierce, and the capital chain of many enterprises is relatively tight, and there are many ways to borrow in the capital market today, which is no longer a single way to borrow from banks in the past, and can borrow from the capital market, use commercial credit, and even through the issuance of corporate bonds, the introduction of foreign capital, etc.

1. Current ratio = current assets and current liabilities. In general, the higher the current ratio, the stronger the short-term solvency of the enterprise and the more equity of creditors. Based on the long-term experience of Western companies, it is generally believed that the ratio of 2:1 is more appropriate.

2. Quick ratio = liquid assets and current liabilities.

Western companies have traditionally considered a quick ratio of 1 to be a safety standard. The so-called liquid assets refer to the balance of current assets after deducting unstable inventories, expenses to be amortized, and losses on current assets to be disposed of. Therefore, the quick ratio is more accurate than the current ratio and reliably evaluates the liquidity of a company's assets and its ability to repay short-term debts.

Strengthen the internal and external data verification of the enterprise and enhance the accuracy of current accounts. Enterprises should pay effective attention to the current accounts generated by their daily operations. The business, financial and commercial personnel of the enterprise should cooperate with each other to strengthen the daily reconciliation of current accounts.

Through timely reconciliation with customers and businessmen, current account confirmation, etc., regularly and irregularly check data with customers and businessmen, find out the differences as soon as possible, find out the reasons, and promote the unification of the book data of both parties.

With the help of mortgages and other means, it provides protection for the realization of accounts. In order to expand sales, businesses often offer customers a certain line of credit. The indicators for evaluating the credit limit are mainly the scale of the customer, the operating status, and the previous cooperation with the enterprise.

The above indicators reflect the historical situation of customers, but there are still certain risks to the protection of future events such as account collection. Through negotiation, enterprises can enable customers to provide assets such as houses, evaluate assets, sign mortgage contracts, and handle mortgage registration.

Considerations for enhancing short-term solvency.

Current assets are assets that are realised within a business cycle of one year or more. Therefore, the accounts receivable that have not been recovered, the overstocked inventory, the expenses to be amortized, the net loss of current assets to be disposed of, the inventory of the advance receipts, and the prepaid accounts used to purchase or invest long-term assets should be deducted from the current assets.

Secondly, in addition, in addition to the net loss of current assets to be disposed of, the relevant responsible person, the insurer may give a certain amount of compensation or compensation, as well as the residual value of the assets to be disposed of, the part of the realized value of inventory and valuable** that exceeds the book value.

The factors of a company's short-term solvency are as follows:

1. Factors influencing short-term solvency:

1) Current assets: Enterprise assets are the form of resource utilization. The ability of different forms of resource utilization to meet short-term cash requirements varies. Assets can be divided into liquid and long-term assets based on their ability to turn into cash.

Current assets refer to cash and assets that will be converted into cash within one year or more than one business cycle. Due to the high liquidity of liquid assets, the ability to be used for short-term payments is strong;

2) Current liabilities can be divided into current liabilities and long-term liabilities according to the length of the maturity date of the liabilities. Current liabilities are liabilities that fall within an operating cycle with a maturity date of 1 year or more;

3) Working capitalWorking capital refers to the difference between current assets and current liabilities. When examining the liquidity of enterprises, in addition to looking at current assets and current liabilities separately, the two should also be analyzed together.

2. Ratio analysis of short-term solvency;

3. Trend analysis of short-term solvency. The trend analysis of short-term solvency is to compare the relevant financial data of enterprises in several consecutive periods, so as to obtain the trend of changes in corporate liquidity and short-term solvency, mainly including absolute amount analysis, month-on-month analysis, and fixed-base analysis.

Legal basisArticle 184 of the Company Law of the People's Republic of China.

The liquidation team shall exercise the following functions and powers during the liquidation period:

1) Liquidate the company's property, prepare the balance sheet and property list respectively;

2) Notify and announce creditors;

3) To deal with the unsettled business of the company in connection with the liquidation;

4) To settle the taxes owed and the taxes incurred in the process of liquidation;

5) Liquidation of creditor's rights and debts;

6) Dispose of the remaining property of the company after paying off its debts;

7) Participate in civil litigation activities on behalf of the company.