Turkey has experienced several crises between 1991 and 2020, some internally and some externally, for various reasons such as political, economic or, finally, a global epidemic such as covid 19. Similar crises will occur in the future.

When we analyze the problems that arise in our business world during these crisis periods, we see that they encounter almost the same problems.
The most important of these problems are;
“Excess Borrowing, Currency Risk, Financial Control and Risk Management.”
In general, as in Turkey, the majority of our companies in Gaziantep are growing with debt. It carries out its investments by borrowing much more than its own resources and generally makes this borrowing in foreign currency (YP-USD/EURO) due to the interest rate.

In normal periods, our companies do not have financial problems. Banks try to increase their credit limits by visiting companies without waiting for the companies to arrive, and encourage companies to use loans. In times of crisis, banks are not very enthusiastic to give loans, visits to companies are reduced, they do not increase new limits, they put forward new conditions and interest rates even when using existing limits. , this is a normal situation in terms of banking, after all, everyone takes a new position according to the current risk situation.

In times of easy access to finance, there are real and invisible problems, and in times of crisis, foreign financial resources are difficult to reach, so companies whose finance and cash management deteriorate experience problems. There will always be borrowing in business life, but borrowing in foreign currency by a firm that does not have foreign currency income means that it carries exchange rate risk at all times.

Firms with a foreign exchange balance (-) and whose foreign currency debts are more than their receivables are those that carry exchange rate risk. Our companies, whose exchange rate risk is not at an affordable rate, are faced with the risk of melting their assets and capitals, which were created with years of labor and accumulation, due to a depreciation in one day, and the ratio of the company's active assets to debt coverage decreases.

Our companies must establish “Financial Control and Risk Management Systems” in every period. Due to its importance, this issue was explained in detail in a previous column.
In business life, borrowing will be in every period, the important thing is the ratio of our debts to our assets.
Two ratios are very important. These,

1-Leverage Ratio:
Financial Leverage Ratio = Total Liability / Total Assets (Assets)
The leverage ratio reveals how much of the company's assets are covered by foreign resources. If this ratio is high, it means that the firm is financed with a high amount of debt, the firm's margin of safety is narrow for the lenders, and the firm is under a high interest burden due to its high indebtedness.
A high level of indebtedness indicates that the firm may be in distress and carries risks during the interest and principal repayment obligation. The generally accepted rate is (0.50).

2- Current Ratio
The current ratio, which reveals the ability of an enterprise to meet its short-term debts, is calculated by proportioning current assets to short-term debts. It is sufficient for the current ratio to be (2) in developed countries. In developing countries such as Turkey, 1.50 is an acceptable ratio for the current ratio.
Current Ratio = Current Assets / Short Term Liabilities
The current ratio reveals whether the net working capital of the enterprise is sufficient by revealing the general liquidity situation of the enterprise. The current ratio is also called the working capital ratio.
(Net Working Capital = Current Assets-KVYK)
If the current ratio is less than (1.50), we should also look at the inventory turnover and receivables turnover to be sure whether the liquidity situation is bad or not. If the stock turnover and receivables turnover of the company with a low current ratio are high, the company may not have difficulty in paying its short-term debts. When we analyze the problems that arise in our business world during these crisis periods, we see that they encounter almost the same problems.
The most important of these problems are;
“Excess Borrowing, Currency Risk, Financial Control and Risk Management.”
In general, as in Turkey, the majority of our companies in Gaziantep are growing with debt. It carries out its investments by borrowing much more than its own resources and generally makes this borrowing in foreign currency (YP-USD/EURO) due to the interest rate.

In normal periods, our companies do not have financial problems. Banks try to increase their credit limits by visiting companies without waiting for the companies to arrive, and encourage companies to use loans. In times of crisis, banks are not very enthusiastic to give loans, visits to companies are reduced, they do not increase new limits, they put forward new conditions and interest rates even when using existing limits. , this is a normal situation in terms of banking, after all, everyone takes a new position according to the current risk situation.

In times of easy access to finance, there are real and invisible problems, and in times of crisis, foreign financial resources are difficult to reach, so companies whose finance and cash management deteriorate experience problems. There will always be borrowing in business life, but borrowing in foreign currency by a firm that does not have foreign currency income means that it carries exchange rate risk at all times.

Firms with a foreign exchange balance (-) and whose foreign currency debts are more than their receivables are those that carry exchange rate risk. Our companies, whose exchange rate risk is not at an affordable rate, are faced with the risk of melting their assets and capitals created with years of labor and accumulation due to depreciation in one day, and the ratio of the company's active assets to debt coverage decreases.

Our companies must establish “Financial Control and Risk Management Systems” in every period. Due to its importance, this issue was explained in detail in a previous column.
In business life, borrowing will be in every period, the important thing is the ratio of our debts to our assets.
Two ratios are very important. These,

1-Leverage Ratio:
Financial Leverage Ratio = Total Liability / Total Assets (Assets)
The leverage ratio reveals how much of the company's assets are covered by foreign resources. If this ratio is high, it means that the firm is financed with a high amount of debt, the firm's margin of safety is narrow for the lenders, and the firm is under a high interest burden due to its high indebtedness.
A high level of indebtedness indicates that the firm may be in distress and carries risks during the interest and principal repayment obligation. The generally accepted rate is (0.50).

2- Current Ratio
The current ratio, which reveals the ability of an enterprise to meet its short-term debts, is calculated by proportioning current assets to short-term debts. It is sufficient for the current ratio to be (2) in developed countries. In developing countries such as Turkey, 1.50 is an acceptable ratio for the current ratio.
Current Ratio = Current Assets / Short Term Liabilities
The current ratio reveals whether the net working capital of the enterprise is sufficient by revealing the general liquidity situation of the enterprise. The current ratio is also called the working capital ratio.
(Net Working Capital = Current Assets-KVYK)
If the current ratio is less than (1.50), we should also look at the inventory turnover and receivables turnover to be sure whether the liquidity situation is bad or not. If the stock turnover and receivables turnover of the company with a low current ratio are high, the company may not have difficulty in paying its short-term debts.