What Is Asset Quality?

Asset quality refers to the quality of a specific asset's role in the enterprise management system. It is specifically manifested in the quality of realization, the quality of being used, the quality of adding value to other asset portfolios, and the quality of contributing to the development goals of the enterprise.

Asset quality

Classification of asset quality:

I. According to

Analysis method of asset quality:

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Evaluation and analysis of asset quality:

I. Asset Profitability Evaluation

Generally speaking, the financial indicators commonly used in evaluating the profitability of enterprises include sales gross profit margin, net sales profit margin, return on equity, return on total assets and other indicators. I believe that although these four indicators can reflect the enterprise to a certain extent The ability to use assets to obtain profits, but comparatively speaking, it is most appropriate to use the rate of return on total assets to evaluate the ability of an enterprise to use assets to obtain profits, and it can best reflect the quality of corporate assets. This is because:

1. The gross sales margin mainly reflects the ability of a company's products or services to obtain gross profit. Gross profit margin of sales 1 (main business income-main business cost) ÷ main business income × 100, the formula reflects how much gross profit can be brought to the enterprise for every hundred yuan of main business income. A high gross profit margin indicates that the company's products or labor services are highly competitive. It may also be that the product or industry is a profiteering product or a profiteering industry. The strong profitability of the product or service is a necessary condition for strong asset profitability.

2. The net sales margin mainly reflects the ability of a company's products or services to obtain a net profit. This ability represents, to a certain extent, the level of business management of a business operator. How much net profit the business income can ultimately bring to the enterprise. A high net profit margin indicates that a company's products or services have a strong ability to earn a net profit. Because the net profit is the difference between the total revenue and the total consumption of the company, the net profit margin of sales often represents the management level of the business operator.

3 The net return rate mainly reflects the capital invested by investors and their ability to accumulate net profit. The net return rate is a net profit ÷ average amount of owner's equity × 100. This formula reflects the effect of capital investment and its accumulation by the business operator's operating investors. This indicator not only reflects the management level of the business operator, but also reflects the ability of the business operator to use financial leverage to earn excess returns for investors.

4 The total return on assets reflects the utilization effect of corporate assets as a whole, indicating the ability of the company to use all its assets to obtain profit. Total return on assets: profit before interest and tax ÷ total average assets × 100, the formula can be understood as the use of every hundred yuan How much profit the asset can make. The formula does not take into account interest expenses and tax factors, covers all assets of the company, regardless of the source of assets, and has a comprehensive perspective. Therefore, it reflects the most comprehensive, comprehensive and true effects of corporate assets and their ability to obtain profits. Is one of the best indicators of asset quality.

Therefore, when evaluating the overall profitability of assets, we should focus on comparing and analyzing the indicators of the total return on assets, while taking into account indicators such as gross sales margin, net sales margin and return on equity.

Evaluation of business operation capabilities

Operating capacity refers to the turnover capacity of corporate assets. Generally, five financial ratios: total asset turnover rate, fixed asset turnover rate, current asset turnover rate, inventory turnover rate and accounts receivable turnover rate can be used to operate the enterprise. Ability to perform layer-by-layer analysis. Operating ability reflects the efficiency of corporate assets and utilization. A company with strong operating ability will contribute to the growth of profitability, and thus ensure that the company has a good solvency. This high-quality asset must be reflected in efficient operating ability.

1. Turnover rate of total assets. The turnover rate of total assets is an important indicator for comprehensively evaluating the operating quality and utilization efficiency of all assets of an enterprise. The turnover rate of total assets is the net income from main operations ÷ average total assets × 100. The total asset turnover rate reflects the net main business income generated by the assets of the enterprise unit, reflects the circulation speed of all assets of the enterprise from input to output cycle in a certain period, and comprehensively reflects the quality and utilization efficiency of all assets of the enterprise. Generally speaking, the higher the turnover rate of total assets, the better the management and management of corporate assets, the more the main business income obtained, the higher the asset utilization efficiency, and the faster the turnover rate.

2. Turnover rate of current assets. The turnover ratio of current assets is another main indicator for evaluating the efficiency of enterprise asset utilization. The turnover ratio of current assets-the net income from main operations ÷ the average total current assets × 100. The turnover rate of current assets reflects the turnover rate of the company's current assets, that is, the utilization efficiency of current assets. The higher the turnover rate, it means that the current assets generate more income, the higher the realized value, the stronger the profitability of the enterprise, and the higher the quality of the current assets. Generally speaking, the high turnover rate of current assets indicates that the company has made three achievements in the use of assets: reasonable holding of monetary funds, fast recovery of receivables, and fast turnover of inventory.

3 Turnover rate of fixed assets. Fixed assets are a type of important assets of an enterprise. They occupy a large proportion of total assets. More importantly, the production capacity of fixed assets is related to the production and quality of the company's products, and then to the profitability of the company. Therefore, how efficient the fixed assets are is crucial to the business. The turnover rate of fixed assets is an indicator used to reflect its utilization efficiency. Turnover rate of fixed assets-Net income from main operations ÷ average net fixed assets value × 100%. If an enterprise wants to increase the turnover rate of fixed assets, it should strengthen the management of fixed assets so that the scale of investment in fixed assets is appropriate and the structure is reasonable. If the scale is too large, the equipment will be idle, asset waste will occur, and the use efficiency of fixed assets will decrease. If the scale is too small, the production capacity will be small, and no scale benefit will be realized.

4 Accounts receivable turnover rate. Accounts receivable turnover rate reflects the realization speed of accounts receivable and is a supplementary explanation of current assets turnover rate. Accounts receivable turnover rate 1 Net main business income ÷ average balance of accounts receivable × 100, accounts receivable turnover days = 360 days ÷ accounts receivable turnover rate. Accounts receivable turnover rate reflects the speed of realization of enterprise receivables and the level of management efficiency. The high turnover rate indicates that the company's account collection is fast and the ageing period is short, which can reduce the collection fees and bad debt losses, thereby increasing the investment income of the company's current assets. Therefore, the high turnover rate of accounts receivable represents the accounts receivable. The quality is high. Of course, the turnover rate is too high, which is not conducive to enterprises to expand sales and increase product market share.

5. Inventory turnover. Inventory turnover rate is a supplementary explanation of the turnover rate of current assets. It is a comprehensive indicator to evaluate the management status of the enterprise from the acquisition of inventory, production to sales recovery. Inventory turnover rate-cost of sales ÷ average inventory × 100, inventory turnover days-360 days ÷ inventory turnover rate. Inventory is one of the most important components of current assets. It not only has a large amount of money, but also has a strong ability to add value. Therefore, the speed of inventory turnover has a direct impact on the solvency and profitability of the enterprise. Generally speaking, the higher the inventory turnover rate, the lower the risk of inventory backlog, the more efficient the use of funds, and the higher the quality of inventory. On the contrary, the low inventory turnover rate indicates that the enterprise has more problems in inventory management and the inventory quality is poor.

Evaluation of asset structure

Asset structure refers to the proportional relationship formed between various types of assets of an enterprise. The efficiency of asset operation depends to a large extent on whether the asset structure is reasonable, that is, whether the resource allocation meets the internal needs of the company's production and operation. Therefore, whether the asset structure is reasonable or not directly affects the profitability of the company's assets.

1. Current assets ratio. The ratio of current assets refers to the ratio of current assets to total assets. Current assets ratio-current assets ÷ total assets × 100%. Current assets represent the short-term funds available to an enterprise. Relatively speaking, it has the characteristics of short liquidation time and fast turnover. Therefore, the higher the ratio of current assets, the greater the proportion of corporate current assets in total assets, the stronger the liquidity and liquidity of corporate assets, and the stronger the company's ability to take risks; however, generally speaking, liquidity Strong assets have weak profitability, so an excessively high ratio of current assets is not a good thing.

2. Fixed assets ratio. The ratio of fixed assets refers to the ratio of fixed assets to total assets. Fixed assets ratio-fixed assets ÷ total assets × 100%. Fixed assets represent the production capacity of an enterprise. The ratio of fixed assets is too low, the scale of the company's production and operation is limited, and economies of scale cannot be formed. It will have an adverse effect on the improvement of the company's labor productivity and the reduction of production costs. Profitability. However, if the ratio of fixed assets is too high, it exceeds the needs of the company, and its growth exceeds the growth of sales, which will not only affect liquidity and liquidity, but also have an adverse impact on the company. At the same time, the enterprise's production and non-production fixed assets should maintain an appropriate ratio. All production fixed assets should be put into use, can run at full capacity, and can fully meet the needs of production and operation. Non-production fixed assets should be able to take up Service responsibilities. Excessive investment in non-productive fixed assets of an enterprise will lead to a low utilization rate of fixed assets, thereby reducing the quality of overall fixed assets and total assets.

3 Non-current assets ratio. Non-current assets refer to all assets except current assets, mainly including fixed assets, long-term investments, intangible assets, long-term deferred expenses and other assets. Non-current assets ratio refers to the ratio of non-current assets to total assets. Non-current assets ratio 1 (fixed assets + long-term investment + intangible assets + long-term deferred expenses and other assets) ÷ total assets × 100. Non-current assets represent the long-term funds available to an enterprise, which require multiple turnovers before they can receive value compensation. Excessive non-current assets will lead to a series of problems: first, generating huge fixed expenses and increasing the risk of loss; second, reducing the turnover rate of assets and increasing the risk of insufficient operations; third, reducing asset elasticity and weakening Enterprise camera adjustment capabilities. Therefore, enterprises should control the ratio of non-current assets to a lower level.

Fourth, asset project analysis

In addition to using the above indicators to make corresponding evaluations of corporate assets, we should also analyze each asset one by one in order to evaluate the quality of assets more accurately. When analyzing asset projects one by one, you should grasp the following issues:

1. Bad debts of receivables

Receivable items include bills receivable, accounts receivable and other receivables. Due to the possibility of bad debts, the assets of receivables are destined to be recovered at a value lower than the book value. The accuracy of the company's provision for bad debts directly affects the quality of such assets.

2. Impairment of some assets

Short-term investments, inventory, long-term investments, construction in progress, fixed assets, intangible assets and other assets may be impaired at the end of the period. The accuracy of the asset impairment provisions provided by the enterprise will also affect the quality of such assets.

3 Appreciation of some assets

Due to the historical cost principle and the principle of prudence, the assets of an enterprise are accounted for at the cost when the enterprise obtains the asset, but over time and changes in the economic environment of the enterprise, the actual value of some assets of the enterprise has exceeded the original column Account cost. For example, a considerable part of the company's fixed assets will increase in value in the future, such as the real estate of the company; short-term investments and long-term investments that do not reflect its huge value-added due to non-circulation and other reasons; once sales are realized, profits can be generated but currently Finished products, semi-finished products, etc. that are valued at historical cost.

4 Purely amortized "assets"

Purely amortized "assets" refer to those related items that are temporarily treated as "assets" due to the requirements of the accrual principle, including items such as pending expenses and long-term deferred expenses. These assets generally cannot provide substantial help for the future of the enterprise, and have no practical use value.

5. The "off-balance sheet assets" that do not reflect net worth on the book, but can be realized by adding value, mainly include:

First, fixed assets that have been depreciated enough but still continue to be used by the enterprise. Second, the enterprise is using it, but it has been amortized to the expense as a low-value consumable at one time, and the asset does not reflect the value on the balance sheet. Third, successful research and development have been achieved. Research and development expenditures of an enterprise are generally treated as expenses for the current period of expenditure. In this way, the successful research and development results will exist outside the report form. This situation often occurs in companies with a long history that value research and development.

The above analysis evaluates asset quality from four aspects: asset profitability indicators, operating capability indicators, asset structure analysis, and asset project analysis. In the specific evaluation of asset quality, attention should be paid to the comprehensive use of the above indicators and factors, because these indicators and Min Su interact with each other, confirm each other, and complement each other. If only some indicators and factors of a company perform well, while other indicators and factors perform poorly, then the quality of the company's assets is likely to have problems.

For example, a company with a strong operating capability indicator and a poor profitability indicator indicates that the enterprise has only efficiency and no benefits, and that the assets of the enterprise are operating ineffectively. If the ratio of a company's current assets is high and the turnover rate of its current assets is low, it is likely to indicate that the company has an excess of current assets that exceeds its normal production needs. Therefore, for any enterprise, only when its assets have strong profitability, high operating efficiency, reasonable asset structure, and large or important asset projects do not have major quality problems This shows that the enterprise asset quality is good.