FINANCIAL STATEMENT ANALYSIS

FINANCIAL STATEMENT ANALYSIS

“Short-Term Debt To Total Debt Ratio”

A.    Definition

Financial statement analysis is the process of reviewing and evaluating a company’s financial statements (such as the balance sheet or profit and loss statement), there by gaining an understanding of the financial health of the company and enabling more effective decision making.

B.     Categories of financial ratios

1.      Liquidity Ratios

2.      Solvency Ratios

3.      Profitability Ratios

4.      Activity Ratios

5.      Coverage Ratios

C.     Solvency Ratios

           Solvency ratio is a class of financial metrics that is used to determine a company’s ability to pay off its debt. Solvency analysis is used to measure a company's financial position in the long term. Solvency aspects including the critical issue for the company because it can lead to financial difficulties which led to bankruptcy. In this case includes an analysis of the overall assets and the overall liabilities, and equity. Therefore, solvency analysis is closely related to the assessment of the overall funding decisions made ​​by the management company.
  In this analysis, there are several analytical tools: 

—  Financial leverage ratio

—  total debt ratio

—  total debt to equity capital ratio

—  long-term debt to equity capital ratio

—  short-term debt to total debt ratio

—  common-size

D.    Short-term debt to total debt ratio

 
      Formula Short-term debt to total debt ratio:

RHJPTH =    Short Term Debt

                         Total Debt

Example:

Tahun	Short term debt (Rp)	Total Debt (Rp)	RHJPTH
2008	7.874.135	11.644.916.	0,68
2009	7.225.966	10.453.748	0,69

E.     Conclusion

          Conclusion is in every Rp. 1; total debt, there are Rp. 0,68; Short-term debt or company have 68% short-term debt and 32% long-term debt.

          Results of these calculations indicate that in 2008, the company was likely solvable as long-term debt financing is smaller than the short-term debt financing. Likewise in 2009, the company was likely solvable as long-term debt financing is smaller than the short-term debt financing. It also indicates that the funding policy adopted by the company management is more likely to have implications for the liquidity of the company.