Each enterprise located in a market economy segment works for profit. To ensure that its amount is as large as possible, management makes a number of decisions that contribute to the optimization of all indicators. Collect the necessary information helps the financial and analytical service of the enterprise.
One of the most important areas of her work is the study of such an indicator as working capital turnover. The profit volume directly depends on its speed. After a qualitative analysis of the company’s activities in terms of working capital movement indicators, it is possible to track negative trends in the development of the company and eliminate them in the future.
The total value of working capital
Working capital represents the resources allocated to circulation funds and production assets to facilitate the business continuity of various organizations.
This property of the enterprise forms assets, which during one cycle transfer the full value of the products. In this case, revolving funds lose their material form. The time during which one production cycle occurs reflects the turnover ratio of working capital of the enterprise.
The capital cycle goes through three stages. At the procurement stage, financial sources are invested in the resources necessary for the manufacture of products. Next comes the production stage. Raw materials, materials, etc. are converted into finished goods. The last stage is marketing. The company receives cash resources that reflect the result of its activities.
Current assets structure
Working capital turnover deserves increased attention from financial managers and management. This indicator reflects how fast the production cycle is. It involves circulation funds and production assets.
To find ways to accelerate the turnover of working capital, reducing the duration of this period, you must understand what resources are involved in the cycle.
Production assets are involved in the production process in their material form and are consumed in full. They include fuel, raw materials, containers, semi-finished products of our own production, wearing items, and future spending.
Circulation funds are responsible for servicing capital flows. These include financial sources invested in stocks, unpaid shipped products, money in accounts and cash registers, as well as settlement finances. The coefficient determining the turnover of working capital of enterprises, largely depends on the size of the above resources.
Working capital
The main criterion for organizing the production process is its continuity, coherence and speed. Calculating the turnover ratio of working capital according to the formula below, financial analysts must determine the optimal amount of resources.
This is their minimum size, capable of ensuring the full production of finished products. For this, rationing of working capital is carried out. This procedure is carried out at the time of the current planning. This takes into account all the features of the functioning of the investigated object.
Rationing
Optimal indicators of working capital turnover are achieved with the rational use of resources. For the smooth functioning of the enterprise, the consumption rates and quantities of raw materials, fuel, semi-finished products, etc. are determined.
If there are insufficient resources, downtime will occur. This will lead to underfulfillment of planned programs. And too much accumulation contributes to the irrational use of financial sources. Funds frozen in revolving funds could be used to purchase new equipment, research, etc.
Therefore, rationing performs a very important function, reducing the period of turnover of working capital. Planning is carried out taking into account the conditions of production as responsibly as possible.
Efficiency mark
Working capital is formed from different sources. They can be net profit of the company, credit funds of banks, commercial deferrals of payment, capital of shareholders, budget injections, accounts payable.
At the same time, both paid and free sources are used. Therefore, finances directed into circulation should be more profitable than the fee for attracting them. To carry out a full analysis, such indicators of working capital turnover are calculated:
- turnover ratio;
- duration of one cycle;
- load factor.
For the process of optimizing this area, it is important to ensure the best balance between profitability and solvency, own and borrowed financial sources. Therefore, the analysis is performed globally.
Without optimizing the capital structure, which is reflected in Form 1 “Balance” of financial statements, it is not possible to obtain a satisfactory result.
Calculation Formulas
To assess working capital apply a certain system of indicators. Initially, the analyst determines the total number of cycles that occur in the study period. From this point of view, the turnover of working capital, the formula of which is given below, is defined as follows:
- Kob = Sales revenue: Average working capital.
For such an analysis, the data of forms 1 and 2 will be required. The presented calculation based on the formula will have the following form:
- Cob = s. 2110 form 2: (p. 1100 (beginning of the period) + p. 1100 (end of the period)): 2.
To present this indicator in days, the turnover of working capital, the formula of which is presented below, looks like this:
- T = D: Cob, where D is the number of days in the study period (maybe 360, 90 or 30 days).
For companies producing seasonal goods, such calculations must be performed quarterly or monthly. So rationing will be easier. To calculate which component influences more strongly on the slowdown of one cycle, it is necessary to determine the partial turnover.
Each group included in current assets is calculated separately according to the presented formulas.
Calculation Example
To better understand how to calculate the turnover of working capital, you need to consider the analysis of an example. If it is known that in the study period (year) the company received revenue from sales by 20% less, this indicates a malfunction of its capital.
At the same time, the analyst determined that the average number of current assets increased in the current period from 200 to 240 thousand rubles. The impact of such changes reflects the turnover ratio for the past and present periods. The calculation in the current period will be as follows:
- Kob1 = (1 - 0.2) BP0: Sob1 = 0.8 BP0: 240.
For the previous period, the indicator will be like this:
- Kob0 = BP0: Sob0 = BP0: 200.
The coefficient of change in turnover is determined as follows:
- d = Kob1: Kob0 = 0.8 BP0: 240: BP0: 200 = 0.67.
It can be concluded that the production cycle decreased by 33%. With a more detailed study of the structure of current assets, it is possible to find ways to solve this problem. Additional resources froze in circulation.
Release or involvement in circulation
Slowing down or accelerating the turnover of working capital leads to the attraction or release of financial resources.To calculate the amount of these funds, the following formula is used:
- OS = BP (end of period): D x (T (end of period) - T (beginning of period)).
Economic effect Such changes make it clear to the analyst whether the resources were rationally used in the study period. If the cycle accelerated, with the same amount of working capital, the company received more profit due to the manufacture of more finished products.
Acceleration paths
To increase the speed of one cycle, there are certain ways. The working capital turnover is facilitated by the introduction of new technology and modern scientific developments into the technological process. 
Production should be as mechanized as possible, automated. This leads to a reduction in time spent on one technological operation. New equipment makes more finished products faster. You should also study the rationality of logistics.
The marketing process may also need to be optimized. If the company has a large amount of receivables, it is necessary to revise the calculation procedure. For example, the transition to a cashless system will speed up the process somewhat. The study of particular indicators will help determine at what stages of the cycle delays occur. Management must necessarily control turnover. If negative trends are detected, they are eliminated as quickly as possible.
By optimizing the turnover of working capital, the company more efficiently uses its resources. This results in a larger amount of income.
