Enterprises operate to generate net profit. For this, management must relentlessly control all production systems. By optimizing the performance indicators of the use of working capital, it is possible to reduce costs and cost. Therefore, in order to assess the correctness of the organization of work of current assets, certain indicators are used.
General concept
Current assets of the enterprise are resources that are involved in the production sector to ensure a continuous technological cycle and the sale of finished goods and services. They include circulation funds and production assets.
The first of them are resources that participate in the implementation of the circulation of funds, and the second are processed during the full cycle and determine the formation of cost.
Performance indicators for the use of working capital have the ability to quickly turn into cash and return in the form of bargaining to the organization.
Current assets
Various events affect the speed of the circulation of production resources. For this, performance indicators for the use of working capital of an enterprise should be considered from the perspective of their structural elements. This makes it possible to find out which article has a great influence on the general value, and which - the minimum.
Analyzing the use of current assets, specialists should make an assessment based on a consideration of the sources that formed this property. The capital that takes part in the organization of continuous activity may be borrowed (paid) or own (free).
Own financial sources are cheaper, therefore it is preferable to send them into circulation. But to expand its technology programs, an organization can attract paid sources of capital. The profit from such actions should be greater than the payment of interest on the use of creditors' funds.
Rationing
The amount of current assets should be monitored by financial analysts. Based on the needs of production, it can be adjusted. Too much fundraising will cause irrational use of funding sources, and lack of resources will result in downtime and failures at each stage of the production cycle.
To assess the effectiveness of the organization of work of assets, an approach such as rationing is applied. Based on the features of the functioning of the enterprise, the optimal quantity for each article is determined. It should correspond to the minimum necessary border of resource consumption.
Calculation of turnover
One of the most informative indicators of the correct organization of the work of current assets is the calculation of the turnover ratio. He presents a report on how fast financial sources directed to production are consumed and returned to the company in the form of profit. The shorter the time the full cycle lasts, the more profitable the production becomes.
Payment performance indicators the use of working capital is not complete without such a study. It enables the financial manager to conclude on the number of cycles that capital performs for the period under review. The more of them, the faster the organization accumulates profits in the reporting year. For this reason, the total net income will also be higher.
The turnover ratio is determined as follows:
KO = P / OSwithwhere P is the total bargaining for the entire period, OSwith - the average value of the working part of the balance sheet for the year.
Further, the analyst has the opportunity to find out the number of days that is necessary for the implementation of one full cycle.
Turnover duration
Indicators characterizing the efficiency of the use of working capital provide information on the time of circulation of the company's property. The methodology used by the financial service in its analytical studies involves determining the length of the period for which one full cycle passes.
Depending on the industry in which the company operates, it can be calculated monthly, quarterly or per year.
For research, a coefficient is taken that reflects the number of cycles in the considered period, and is compared with the duration of this time period. The formula for this is as follows:
D = DP / KO, where DP is the number of days in a period.
Considering these indicators in dynamics, one can come to the conclusion that funds were additionally attracted or released from circulation. With the acceleration of the process, the enterprise has the opportunity to use free resources in other important areas of its activities.
Loading
Key performance indicators for the use of working capital comprise another assessment tool. He calculates the resources involved in obtaining 1 rub. products sold. Such an analysis provides an opportunity for management to find ways to optimize the use of current assets in the future.
The load factor is determined as follows:
KZ = OSwith/R.
If you multiply the resulting value by 100, you can express the working capital ratio in percent. This will reflect the profitability of using financial sources to obtain greater sales profit.
Calculation Example
To correctly understand how to study the performance indicators of the use of working capital of the organization, it would be wise to see this technique on a concrete example.
The company in the last period received sales revenue in the amount of 25 thousand rubles, and the average amount of working capital was 4 thousand rubles. In developing the plan for next year, the financial service determined that after a series of events, sales would increase by 20%. Moreover, it was found that the turnover ratio will accelerate by 1.
It is necessary to determine the amount of resources freed from the turnover. The calculation will be as follows:
KO = 25/4 = 5 vol.
DT = 360/5 = 72 days.
Next year, the number of revolutions should be 1 more. So, there are a total of 6. Each of them will be equal to 60 days.
If the revenue in the planning period increases by 20%, it will be equal to 24 thousand rubles. The release of funds will be:
BC = 24/5 - 24/6 = 0.8 thousand rubles.
An enterprise can invest these resources in mastering new technologies or upgrading equipment.
Ways to improve
To optimize the structure of finances in assets, managers should study all approaches. This will improve working capital efficiency indicators.
It is possible to deliberately spend the available finances during their rationing. To do this, it is possible to eliminate excess reserves. Sometimes it is necessary to improve the standardization procedure itself, to make it close to the requirements of production.
Warehousing and supply services also require special management attention. The use of new equipment, developments, technologies also leads to an acceleration of the flow of finance.
Having studied the main indicators of the effectiveness of the use of working capital, it must be said that their use enables management to find constraints and get rid of them in the future. When planning and analyzing invariably apply the presented approach to improve the performance of any enterprise.
