List five post balance sheet events that affect long term solvency

Events after the balance sheet date include adjustments after the balance sheet date and non-adjusting events after the balance sheet date.

1. The adjustment events after the balance sheet date of the enterprise usually include the following items:

1) The litigation case is closed after the balance sheet date, and the court judgment confirms that the enterprise already has existing obligations at the balance sheet date, and it is necessary to adjust the projected liabilities previously recognized in connection with the litigation case, or to recognize a new liability.

2) Conclusive evidence is obtained after the balance sheet date that an asset has been impaired at the balance sheet date or that the amount of impairment originally recognized for the asset needs to be adjusted.

iii) The cost of the purchase of the asset or the income from the sale of the asset before the balance sheet date is further determined after the balance sheet date.

iv) Fraud or errors in the financial statements are discovered after the balance sheet date.

2. Non-adjusting events after the balance sheet date:

The financial statements of an enterprise that are not adjusted after the balance sheet date shall not be adjusted.

Non-adjusting events that occur after the balance sheet date usually include the following:

1) Major litigation, arbitration, or undertaking after the balance sheet date.

2) Significant changes in assets**, tax policies, and foreign exchange rates after the balance sheet date.

3) Significant loss of assets due to natural disasters after the balance sheet date.

iv) Balance sheet date issuance** and bonds and other large borrowings.

5) Capital reserve is converted into capital after the balance sheet date.

6) Significant losses incurred after the balance sheet date.

7) Business combination or disposal of subsidiaries after the balance sheet date.

It is from here that matters related to long-term solvency should be selected.

It is generally believed that the indicators that reflect the company's solvency mainly include: current ratio, quick ratio, asset-liability ratio, cash debt ratio, etc.

By calculating the current ratio and quick ratio of a business, it is possible to understand the ability of a company to repay its short-term debts; By calculating the debt-to-asset ratio, it is possible to understand the ability of a business to repay its long-term debts. It is generally believed that the company's current ratio is greater than 2, the quick ratio is greater than 1, and the asset-liability ratio is less than 50% (less than 60% in China) is reasonable, indicating that the company's solvency is strong.

However, the author believes that a simple analysis of a company's solvency index cannot reflect the company's true solvency, but should be analyzed in conjunction with the company's profitability.

ICBC's internal evaluation indicators of solvency:

1. Short-term solvency evaluation indicators: current ratio, quick ratio, inventory turnover ratio, accounts receivable turnover ratio, current asset turnover ratio, cash inflow from operating activities, main business income, net cash inflow from operating activities, total liabilities, and growth rate of main business income.

2. Long-term solvency evaluation indicators: asset-liability ratio, profit growth rate, return on total assets, return on net assets, interest protection multiple, net assets growth rate, and total debt edbit.

To sum up, the comprehensive scoring will also be taken into account such as the prosperity of the industry and the background of related parties.

Answer]: c, d

Off-balance sheet factors that affect long-term solvency include: long-term leases (i.e., operating leases buried in them), debt guarantees, and pending litigation. Non-current assets that are ready to be liquidated quickly are off-balance sheet factors that affect short-term solvency.

Note: This question asks about off-balance sheet factors, i.e., factors that are not reflected in the financial statements, and the liabilities formed by the financial lease will be reflected in the balance sheet, so option A is not the answer.

Answer]:BAnswer】B

Analysis] Financial leasing is an on-balance sheet factor that affects the long-term solvency of the world; Available bank credit lines and long-term assets that are ready to be liquidated quickly are off-balance sheet factors that affect short-term solvency. The liabilities formed by the operating lease are not reflected in the balance sheet, and when the operating lease amount of the enterprise is relatively large, the term is relatively long or recurrent, it forms a kind of long-term financing, which must be paid in cash when due, which will have an impact on the long-term solvency of the enterprise. Therefore, large long-term operating leases are off-balance sheet factors that affect long-term solvency.

Answer]: B. Financial leasing is an on-balance sheet factor that affects long-term solvency; Available bank credit lines and long-term assets that can be quickly liquidated are off-balance sheet factors that affect short-term solvency. When the operating lease amount of the enterprise is relatively large, the term is relatively long or regular, it forms a kind of long-term financing, which must be paid in cash when due, which will have an impact on the long-term solvency of the enterprise. Therefore, the large amount of long-term operating leases of the first lead is an off-balance sheet factor that affects the solvency of the long-term liabilities of the company.

Solvency refers to the solvency of an enterprise on its maturing debts, including the actual repayment of maturing debts during the short bridge period and the expected repayment of future debts. Solvency analysis plays an increasingly important role in promoting the development of enterprises.

Long-term solvency refers to the degree to which an enterprise repays debts with a term of one year or more than one business cycle, which reflects the rationality of the enterprise's capital structure and the ability to repay the principal and interest of long-term liabilities. For the analysis of the company's long-term solvency, it is generally customary to calculate financial indicators such as asset-liability ratio, property rights ratio, tangible net debt ratio, interest guarantee multiple and other financial indicators through financial statements, and then make a judgment: long-term solvency is strong, average or weak.

Although the ratio analysis in the table has its own advantages, such as the measurability and easy acceptance of the data indicators, it will be limited by many objective conditions according to the standard data analysis of the indicators.

Therefore, to truly understand a company's long-term solvency, it is also important to pay attention to off-balance sheet factors that are not covered by some accounting systems.

For example, once a pending lawsuit is lost, it will have a long-term impact on the company; Operating leases into fixed assets for long-term use.

The off-balance sheet factors that affect the long-term solvency of an enterprise are ().

a.Long-term operating leases.

b.Long-term financing leases.

c.Contingent liabilities that are not recorded.

d.Guarantee loans for other businesses.

Correct Answer: Long-term operating lease; Contingent liabilities that are not recorded. Guarantee loans for other businesses.

Among the following items, the matters that affect the long-term solvency of the enterprise are (ABCD).

a.Pending Litigation.

b.Debt guarantees.

c.Long-term leases.

d.Contingent liabilities.

Answer: ABCD.

Options A, B, and C are the cosmetic factors that affect long-term solvency and are therefore the answers to this question. Contingent liabilities can become long-term liabilities, so option D is also the answer.

Through the analysis of solvency, the ability and risk of the enterprise to continue to operate can be examined, which is helpful for the future income of the enterprise. The solvency of enterprises includes two aspects: short-term solvency and long-term solvency.

1.Short-term solvency analysis.

Short-term solvency refers to the degree of guarantee that an enterprise can repay its current liabilities in full and in a timely manner with its current assets, that is, the ability of an enterprise to repay its current liabilities with its current assets.

It reflects the ability of an enterprise to repay its daily maturing debts, and is an important indicator to measure the current financial ability of an enterprise, especially the ability to realize current assets. The short-term solvency of a company is mainly measured by the current ratio, quick ratio and cash flow liabilities.

2.Long-term solvency analysis.

Long-term solvency refers to the ability of an enterprise to repay long-term debts, which mainly include: long-term borrowings, bonds payable, long-term payables, professional payables, projected liabilities, etc.