Solvency & company

Solvency refers to the company’s long-term capacity to keep up it stability over the long term (Brigham and Houston, 2002). Normally measured by the debt to equity ratio, with the formula of having the total debt of the company divided by its total equity; solvency assures investors that the company is not to just to exist in the short term but it must also have a long life to recover long term investments which takes years to produce the needed returns.

The debt to equity ratios of Efes are 1. 21 and 0. 96 for the years 2008 and 2007 respectively. The ratio increase from 2007 to 2008 as proof of increased borrowing of the company as supported by the increase in current liabilities and non-current liabilities. The increase of the debt ratio of 1. 21 means that the value the company investment by stockholders is exceeded by what it borrows by about more than 20%. See Table 1. It could still be place to company to have a good solvency.

Good solvency is a proof of good capital structure Efes the company was still able to consistently increase liquidity which should normally suffer because of increased borrowing.

It also means, in simple terms, that the company is able to manage its long terms risk that its profitability was enough to provide funds not only to pay currently maturing obligations but also to provide good amount of dividends annually to investors amount 126 million liras in 2008 from 107 million liras in 2007 (Anadolu Efes, 2009a). 3. Conclusion It can be concluded that has a long way to go.

Given its strategic opportunities where it could sustain its long term & profitable organic growth, capture opportunities for further value creation, and focus on consumer for stronger market positions the company may indeed be a company to invest with. Given also its strengths of strong positions in favorable markets, brands/innovations, effective cost management, and strong sales & production platform which the company can make use as it takes advantage of its opportunities, the company could be facing a very good future.

To balance the tendency to be optimistic while ensuring the accomplishment of its mission, vision, and strategic objectives, the company has its social responsibility as way of making sure that it could sustain its growth over the long-term. Such company’s strengths are supported based on the review of its 2008 financial statements where the company has exhibited, profitability, management efficiency, liquidity and solvency.