Национальное кредитное бюро

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7 633 353 companies in system

Explanatory notes

To enjoy an efficient use of the available database one should bear the following features in mind. Firstly, the information provided is mainly tailored in compliance with international standards ( US GAAP namely). Secondly, the order and the setup of balance items particular to the Russian accountancy patterns are mostly retained. Thirdly, the lists of loans obtained and major financial ratios bring necessary details for the analysts. Fourthly, these indicators offer step by step perception of the related companies` position to arrive to final decision on possible credit provision by national or foreign banks. Alongside with the ten ratios normally published in credit profiles another three of them are additionally introduced. To compose rating index of the companies in database an integral ratio of long-term coverage or credit risk is developed.

Group N1.Liquidity ratios

1). Current ratio
Current ratio = current assets / current liabilities

This ratio is widely known and applied while filing reports on companies`activity by Russian and international patterns. In healthy business standard level should be > 2. However many national firms manage to run fluently with 1,5 - 1,7. Under these conditions the rate of 3,0 - 3,4 can be regarded as a reliable point to meet a short term loan by debtors. This ratio exposes a degree of short term stability of potential borrower and his capacity to cover current assets by current liabilities. Alongside with the two supplementary ratios the latter manifests highly liquid assets or near money:

Suplementary ratios
Liquid ratio = (trade debtors <12 months + short term or current financial assets +cash + miscellaneous current assets )/ current liabilities
Absolute ratio = (short term or current financial assets +cash + miscellaneous current assets )

The standard level for the second is > 1 and > 0,2 for the third . The arithmetical mean for the three ratios may show the rating of the related companies in respect to the ability to quickly convert their current assets into cash.

Group N 2 . Leverage ratios

The subsequent three ratios pertain debt -to- net worth situation of the companies concerned.

2) solvency ratio
Solvency ratio = total assets / net worth х 100

net worth = share capital + reserves.As this item ‘net worth ‘ is missing in standard Russian balance sheet it was composed through adequate set of operations.
This ratio highlights the part of assets that might have remained to the shareholders after all creditors ` claims are met. It can otherwise be called “residual value“ in the case of bankruptcy. The standard level is 180-200. According to the most conservative estimate in maximum terms total assets should not exceed by twice the net worth of a firm.

3). fixed assets-to-net worth ratio
Fixed assets-to-net worth = fixed assets / net worth

as distinct from international accountancy fixed assets in Russia comprise UNDER CONSTRUCTION item .
The least liquid assets are contrasted here to stress the highest risk incurred. The standard level for this case amounts to 75-100. A reliable firm have to acquire sufficient net worth to hedge against uncertainty and to cover as a minimum the entire amount of fixed assets in emergency. Both ratios determine indirectly the adequate share of outstanding debt.

4). short term debt ratio
Short term debt ratio =total current liabilities / net worth х 100

Having outlined the shareholders` stake to support the least liquid and long term assets one can easily find some reasonable limits for short term liabilities. The performance of a company is considered to be sound if its net worth has standard level of 150-160 points .The above three ratios reveal the safe confines or framework in borrowing credit resources.

Group N 3. Turnover ratios.

5). assets turnover ratio
Assets turnover ratio = turnover ( sales) / total assets х 100

Standard level can be defined as 280-300 which is equivalent to 121,6 - 130,3 days per a turnover. In Russia another ratio is often applied:

Supplementary ratio
Net current assets turnover ratio = turnover ( sales) / net current assets

total assets — trade creditors ( minus losses if available )
Standard length of net current assets turnover amounts to 85-90 days . To compile realistic rating of companies the weighted mean of total and net current assets must be determined. Normally it amounts to some 100 days or 3,65 х 100 = 365.

Group N 4. Efficiency ratios

The remaining five ratios show to a certain extent the return attributed to the unit of particular resource.

6 ). shareholders return ratio
Shareholders return ratio = profit / net worth х 100

Здесь измеряется отдача в виде прибыли на собственный акционерный капитал. Речь идет о производительности вложений в акции как потенциальной базе для выплаты дивидендов. Никакой нормативной оценки в этом случае не должно быть.
It is considered to be the measure of share capital productivity and potential basis for dividends

7). sales -to-net working capital ratio
sales -to-net working capital ratio = sales / net working capital

This indicator varies substantially in different sectors of economy. In commerce for instance it averages to 23-25 or 12-15 days.

8).assets-to-sales ratio
assets-to-sales ratio = total assets / sales х 100

This ratio brings a reverse expression of ratio N5 , i.e.assets turnover. Its standard level can be fixed at 33-35 days.

9). profit margin ratio
Profit margin = profit / sales х 100

Provisional bottom line is believed to be 0,06 x 100 = 6 % for the profit before paying interest on funds borrowed and taxes. In Russian accounting this ratio iss termed as return on sales which equals profit before taxation divided by turnover. However one should bear in mind that turnover may be sometimes higher than the volume of sales since the first term includes non-purchased self made products of the enterprise in Russia. or equity.

10). return on assets ratio
return on assets ratio = profit/ total assets х 100

No standard level values can be introduced in this case as the figures vary widely among different industries

GENERAL CREDIT RATING

The company’s rating consists of two parts : indicator of financial strength and composite credit appraisal
Example: 2А2
2A - is company size based on net worth or equity and 2 - brings an overall assessment of its creditworthiness.
Composite Credit Appraisal relates to the last financial year
Financial strength is measured by net worth or equity. The following table gives you precise ranking scale.

Ratio	Net Worth from	Net Worth to


5A	450 000 000	и более
4A	315 000 000	449 999 999
3A	225 000 000	314 999 999
2A	157 500 000	224 999 999
1A	112 500 000	157 499 999
A	85 500 000	112 499 999
B	63 000 000	85 499 999
C	45 000 000	62 999 999
D	31 500 000	44 999 999
E	18 000 000	31 499 999
F	9 000 000	17 999 999
G	4 500 000	8 999 999
H	0	4 499 999

N - Negative Net Worth: Negative balance of equity after deduction of intangibles O - Net Worth Undetermined: Accounts unavailable or older than 2 years

The Risk Indicator reflects the probability of failure ranging from 1 to 4
1 - Proceed with transaction - offer extended terms if required
2 - Proceed with transaction
3 - Proceed with transaction but monitor closely
4 - Take suitable assurances before extending credit - e.g. personal guarantees



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