Enterprises work for profit. By optimizing the performance of working capital, they are able to reduce costs and cost of finished products. This increases the competitiveness of goods and services, while increasing profitability. Therefore, to assess the work of the organization, certain indicators are used. In particular, the efficiency of the use of working capital. Analysts based on data obtained in this way can optimize the organization of production.
General concept
Current assets are resources that are involved in the sphere of circulation and production to ensure a continuous technological cycle and the sale of finished products. They include circulation funds and production assets.
In the first case, these are funds that are directly involved in the implementation of the circulation of resources, and in the second they are assimilated during one production cycle and form the cost price.
The effectiveness of the use of working capital lies in their ability to quickly turn into cash and return in the form of profit back. This cycle consists of the stage of procurement of components, creation of goods and their implementation.
Sources of formation
The speed of circulation of production resources is influenced by many factors. For this, indicators of the use of working capital should be considered in the context of their structure. This allows you to determine which article has a greater impact on the overall picture, and which less.
Analyzing the use of working capital, the financial service should conduct an assessment based on a consideration of the sources of formation of these assets. Capital allocated to the organization of production activity may be either own or borrowed.
Own financial sources do not require payment for their use in circulation. Therefore, they are preferable to use. But to expand its capabilities, the company can channel paid sources of financing into current assets. The profit from such events should be higher than the fee for using the capital of creditors.
Rationing
The amount of working capital should be monitored by financial analysts and adjusted based on production needs. Excessive accumulation will lead to irrational use of the company's capital, and a lack of resources will cause downtime and disruptions during the technological cycle and the sale of goods.
To assess the effectiveness of the use of working capital, a standardization technique is used. Based on the features of production, the optimal amount of each article of production assets is established. It should be equal to the minimum required level of resource consumption.
Turnover
One of the most important indicators of the appropriate use of working capital is considered the turnover ratio. It provides information on how quickly invested in production. financial resources processed and returned to the company in the form of profit. The faster this process is, the more cost-effective the production.
Analysis of the use of working capital is not without calculating this indicator. It provides information to the analyst about the number of cycles that capital manages to complete over a given period. The more of them, the faster the company made a profit in the reporting period.Consequently, its total amount will also be higher.
The turnover ratio is found by the following formula:
KO = BP / OS environment, where BP - revenue from sales of products, OS environment. - the average number of current assets for the reporting period.
OS environment = (OS (beginning of period) + OS (end of period)) / 2
Further, the analyst can determine the number of days that the company needs to conduct one full cycle.
Turnover duration
The working capital ratios used by the financial services of the company in their analytical activities suggest the calculation of the length of the period for which one full cycle occurs.
Depending on the scope of the company, it can be calculated monthly, quarterly or per year.
For the calculation take a coefficient showing the number of cycles in the reporting period, and compare it with the duration of this period of time. The formula will look like this:
D = T / KO, where T is the number of days in the period.
Comparing these indicators in dynamics, we can conclude whether funds were released or additionally attracted into circulation. With the acceleration of this process, the company has the opportunity to channel available funds to other important needs.
Load factor
Assessment of the use of working capital involves calculating the amount of resources allocated to receive 1 RUB. sales revenue. Such an analysis enables the company management to find ways to improve the use of working capital in the future.
The load factor is found by the following formula:
KZ = OS environment / BP
If you multiply the result by 100, you can get the working capital intensity in percentage terms. This reflects the profitability of using financial resources to get more bargaining power.
Calculation Example
In order to correctly understand how the indicators of the use of working capital are calculated, it will be more correct to calculate this technique using an example.
In the reporting period, the company received revenue from sales in the amount of 20 thousand rubles, while the average number of current assets amounted to 5 thousand rubles. When planning, the financial service provided for an increase in sales by 20%. Moreover, it was calculated that the turnover ratio would accelerate exactly 1 time.
It is necessary to determine the amount of funds released from circulation. The calculation will be as follows:
KO = 20/5 = 4 vol.
D = 360/4 = 90 days.
In the planning period, the number of revolutions will be 1 more. So, they are planned to complete 5 cycles in total. Each of them will be equal to 72 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 = 24/4 - 24/5 = 1.2 thousand rubles.
The company can invest these funds in the modernization of equipment or the development of new production technologies.
Ways to improve performance
To optimize the work of financial sources, the enterprise management should consider the following ways of using working capital.
It is possible to rationally use the available resources if they are rationed and reasonably reduced. To do this, excess stocks can be eliminated. In some cases, it is necessary to improve the approach to standardization itself, to make it close to the conditions of production.
The procurement service and warehousing may also require increased management attention. Improving the organization of her work will help reduce turnover.
The use of new technologies and equipment also helps to accelerate turnover.
Having considered the main indicators of the use of working capital, it is possible to conclude that their application allows management to identify constraints and eliminate them in the future at all stages of the cycle. Obtaining a larger amount of revenue from sales directly depends on this.
