Inventory turnover ratio on the balance sheet. Asset turnover – balance sheet formula. Working capital turnover value

To produce products, the means of labor alone (machines, devices, equipment) are not enough. In addition to them and the labor of the enterprise’s employees, source material, raw materials, workpieces are also needed - what the finished product is created from during the production process - objects of labor. And in order to be able to buy these items of labor from suppliers and pay workers, the enterprise needs money. Objects of labor and monetary resources together form working capital of the enterprise. Management, determining the optimal size, writing off working capital for production - all these are important and pressing issues for any enterprise. You will find answers to them and indicators of working capital in this article.

Working capital: concept, composition and role in production

Working capital- these are the funds of the enterprise advanced to the circulation funds and working production assets.

Working capital– this is a valuation of circulating assets and circulating production assets.

The main purpose of working capital is... make a turnover! During this process, working capital changes its material form to monetary form, and vice versa.

Circulation of working capital of an enterprise: money - goods, goods - money.

For example, an enterprise has some funds that it spends on the purchase of raw materials. This is the first transformation: money (not necessarily cash) was transformed into material objects - inventories (parts, blanks, materials, etc.).

Inventory is then processed through the production process, entering the work-in-process (WIP) stage and eventually becoming finished goods. These are the second and third transformations - reserves have not yet turned into cash for the enterprise, but have already changed their form and role.

And finally, the finished products are sold externally (sold to consumers or resellers) and the enterprise receives money, which it can again spend on purchasing resources to resume the production process. And everything is repeated again in the second round. This is the fourth conversion of finished products into cash.

Working capital turnover– the most important indicator. The faster the enterprise’s funds turn over, the smaller the time gap between investments in production and receipt of return - revenue (and with it profit).

It is important that the working capital of an enterprise, unlike fixed assets, participates in the production cycle only once and at the same time completely transfers its value to the finished product! This is what mainly distinguishes working capital.

Working capital includes various groups of items of labor and cash. Collectively, they are all divided into two large groups: circulating production assets and circulation funds. Read more about them below.

Composition of working capital:

Working production assets - include:
a) production (warehouse) inventories- objects of labor still awaiting entry into production. Include:
- raw materials;
- basic materials;
- purchased semi-finished products;
- components;
- auxiliary materials;
- fuel;
- container;
- spare parts;
- rapidly wearing and low-value objects.

b) inventories in production- objects of labor that have entered production, but have not yet reached the stage of finished products. Inventory in production includes the following types of working capital:
- work in progress (WIP) - processed products that have not yet been completed and have not arrived at the finished goods warehouse;
- deferred expenses (FPR) - costs that the enterprise incurs at the moment, but they will be written off to cost in a future period (for example, the costs of developing new products, creating prototypes);
- semi-finished products for own consumption - semi-finished products (for example, spare parts) produced by the enterprise itself exclusively for internal needs.
Circulation funds – these are the enterprise’s funds associated with the sphere of circulation, that is, with servicing trade turnover.
Circulation funds consist of the following elements:

a) finished products:
- finished products in warehouse;
- shipped products (goods on the way; products shipped but not yet paid for).

b) cash and settlements:
- cash in hand (cash);
- funds in the current account (or on deposit);
- income-generating assets (funds invested in securities: shares, bonds, etc.);
- accounts receivable.

The percentage ratio between individual groups or elements of working capital is working capital structure.

For example, in the production sector, the share of circulating production assets is 80%, and circulation funds are 20%. And in the structure of industrial inventories in industry, the first place (25%) is occupied by basic materials and raw materials.

The structure of an enterprise’s working capital depends on the industry, the specifics of the organization of production (for example, the introduction of the same logistics concepts greatly changes the structure of working capital), supply and sales conditions, and many other factors.

Sources of formation of working capital of the enterprise

All sources of working capital of the enterprise can be divided into three large groups:

– the company sets their size independently. This is the minimum amount of reserves and cash sufficient for the normal functioning of production and sales, and timely settlements with counterparties.
Own sources of working capital formation:
- authorized capital;
- Extra capital;
- Reserve capital;
- accumulation funds;
- reserve funds;
- depreciation deductions;
- retained earnings;
- other.

An important indicator here is the company’s own working capital or, in other words, the working capital of the enterprise.

Own working capital (working capital) is the amount by which an enterprise’s current assets exceed its short-term liabilities.
Borrowed working capital– cover the temporary additional need for working capital.
As a rule, the borrowed source of working capital here is short-term bank loans and borrowings.
Attracted working capital– they do not belong to the enterprise, they were received by it from outside, but are temporarily used in circulation.
Attracted sources of working capital: the enterprise's accounts payable to suppliers, wage arrears to employees, etc.

The enterprise's need for its own working capital is determined in the process of rationing.

In this case it is calculated working capital standard using one of the special methods (direct counting method, analytical method, coefficient method).

This is how the rational volume of working capital used in the sphere of production and circulation is determined.

Methods for writing off working capital for production

There are various ways to write off an enterprise's working capital for production, each of which has its own advantages and disadvantages. Basic methods:

FIFO method(from the English “First In First Out” - “first to come, first to leave”) - inventories are written off to production at the price of those stocks that arrived at the warehouse first. Moreover, within the framework of the FIFO method, it does not matter how much the working capital written off for production actually cost.
LIFO method(from the English “Last In First Out” - “last to come, first to leave”) - inventories are written off to production at the price of those stocks that were the last to arrive at the warehouse. With the LIFO method, the cost of write-off inventories is also not important, since they will be taken into account at the price of the last ones received at the warehouse.
At the cost of each unit- that is, each unit of working capital is written off to production at its cost (so to speak, “by the piece”).
An example of writing off inventories using this method: accounting for jewelry, precious metals, etc.
At average cost– the average cost is calculated for each type of inventory and, based on it, the inventory is written off to production.
At Russian enterprises this is perhaps the most common practice.

Optimal amount of working capital

One of the most important issues is the definition optimal amount of working capital, for example, the volume of warehouse stocks. To find the optimal supply of working capital for an enterprise, special methods are used (ABC analysis, Wilson model, etc.). The theory of inventory management and logistics deals with this problem (for example, the Just-in-Time concept strives to minimize inventory almost to zero).

Optimal amount of working capital- this is their level at which, on the one hand, the uninterrupted process of production and its implementation is ensured, and on the other hand, additional and unjustified costs do not arise.

At the same time, both large and small working capital of an organization (inventories) have their pros and cons.

Large amount of working capital (pros and cons):

ensuring an uninterrupted production process;
availability of safety stock in case of supply disruptions;
purchasing supplies in large quantities allows you to get discounts from suppliers and save on transportation costs;
the opportunity to benefit from rising prices by purchasing resources in advance at a lower price;
large amounts of money allow you to timely pay suppliers, pay taxes, etc.

large reserves mean a high risk of spoilage;
the amount of property tax increases;
inventory maintenance costs are rising (additional warehouse space, personnel);
immobilization of working capital (they are in fact “frozen, withdrawn from circulation, and do not work).

Small amount of working capital (pros and cons):

minimal risk of inventory spoilage;
the costs of maintaining inventories are reduced (less warehouse space, personnel and equipment are required);
acceleration of turnover of working capital.

the risk of production disruptions due to untimely deliveries (after all, then the warehouse simply will not have the required amount of inventory);
increasing the risks of untimely settlements with suppliers, creditors, and the tax budget.

Turnover ratio and working capital turnover

The efficiency of using working capital and its condition can be analyzed using indicators such as turnover ratio (working capital ratio) and turnover.

Working capital turnover ratio(Kvol.) – a value showing how many full revolutions the working capital made during the analyzed period of time.

The working capital turnover ratio is calculated (a tautology, but what can you do) as the ratio of the volume of products sold to the average value of the enterprise's working capital for the year. That is, this is the amount of products sold per 1 ruble of working capital:

where: To ob. – working capital turnover ratio;

RP – products sold for the year (annual sales revenue), rub.;

OBS avg. - average annual balance of working capital (according to the balance sheet), rub.

Turnover(T vol.) - the duration of one full revolution in days.

The turnover of working capital is calculated using the following formula:

where: T vol. – turnover of working capital, days;

T p. – duration of the analyzed period, days;

To ob. – working capital turnover ratio.

Acceleration of turnover allows you to bring additional funds into circulation, increase the return on their use, and reduce the period between investment and profit.

Slowing turnover– a sign of “freezing” of resources, their “stagnation” in inventories, work in progress, finished products. Accompanied by the diversion of funds from circulation.

Let's summarize. Working capital is the most important component of economic activity, without which it is simply impossible to produce products and sell goods to consumers. This is a kind of “blood” in the “organism” of the enterprise, feeding its “organs” (workshops, warehouses, services). And the efficiency of working capital, the efficiency of their use, has a huge impact on the economic results of the company.

Galyautdinov R.R.

The student must:

Know

Indicators characterizing the turnover of working capital;

be able to:

Calculate working capital turnover indicators.

Guidelines

To analyze the use of working capital, assess the financial condition of the enterprise and develop a plan of organizational and technical measures to accelerate their turnover and reduce the duration of one turnover, indicators are used that reflect the real process of movement of working capital and the amount of their release.

The estimated need for working capital is directly proportional to the volume of production and inversely proportional to the speed of their circulation (the number of revolutions). The higher the number of turnover of working capital, the less the need for working capital.

The turnover of working capital and the efficiency of their use are characterized by the following indicators:

Turnover ratio working capital shows the number of revolutions made by working capital during the period of time under consideration:

Revolutions or , revolutions

The turnover ratio also characterizes return on working capital and shows what volume of output (in prices or at cost) is provided by one ruble of working capital. The higher the value of the working capital turnover ratio, the more efficiently the working capital of the enterprise is used in the period under review, the higher the return on each ruble invested in working capital.

The time during which working capital completes the circuit, i.e., the production period and the circulation period pass, is called the period, or the duration of the turnover of working capital. This indicator characterizes average speed of funds movement at the enterprise. It does not coincide with the actual period of production and sale of certain types of products. Duration of one revolution in days (Add) determined by the formula:

Where OS- balances (availability) of working capital:

averages over a period of time (OSSR) or at the end of the period (OSK), rub.;

Qcomrade; Qreal - volume of commercial or sold products, rub.

Stov - cost of commercial products, rub.;

T - number of days in the reporting period (360 in a year, 90 in a quarter, 30 in a month)

Loading factor (consolidation) of working capital (Kz) -- an indicator that is the inverse of the turnover ratio. It characterizes the capital intensity of working capital and shows the amount of working capital that ensures the production of marketable or sold products in the amount of I rubles. (in prices or at cost) and is calculated using the formula:

Rub. OS/RUB

The lower the value of the working capital load factor, the more efficiently the working capital of the enterprise is used in the period of time under consideration.

When analyzing the use of working capital, the amount of their absolute and relative release is calculated.

Absolute release working capital. It makes sense to calculate this indicator only when the same volume production according to plan and actually, or with the same volume of production in the reporting and base periods, since when the volume of production changes, the required value (amount) of working capital also changes. Absolute release calculated as the difference between the average balance (availability) of working capital involved in turnover of the subsequent and previous periods

, rub.

This indicator can have either a “plus” or a “minus” sign. If Δ OSabs has a minus sign, then there is a release of working capital, and if Δ OSabs has a plus sign, then funds for this amount are additionally involved in circulation.

For example, in practice, absolute release (with a minus sign) occurs when the actual need for working capital in the reporting period is less than planned, provided the same volume of products is produced.

Relative release working capital takes place only when accelerating working capital turnover, i.e. when reducing the duration of the 1st revolution and an increase in the number of turnover of working capital in the subsequent period of time compared to the previous period. In this case, the volume of production may change:

, rub. or

Rub. or

Qone– one-day production output (in prices or at cost) in the subsequent period (or actual), rub.;

ΔAdd– reduction in the duration of one turnover of working capital in the subsequent period of time compared to the previous period, days.

Minus sign ΔAdd shows that there is a release of working capital.

If Q0 = Q1 or Qpl= Qf, then the value Δ OCotn=Δ OSabs

Working capital- this is a set of funds advanced to create circulating production assets and circulation funds that ensure the continuity of the company.

Composition and classification of working capital

Revolving funds- these are assets that, as a result of its economic activities, completely transfer their value to the finished product, take a one-time participation in, changing or losing their natural material form.

Working production assets enter production in their natural form and are entirely consumed during the production process. They transfer their cost completely to the product they create.

Circulation funds associated with servicing the process of circulation of goods. They do not participate in the formation of value, but are its carriers. After completion, production of finished products and their sale, the cost of working capital is reimbursed as part of (work, services). This creates the possibility of systematically renewing the production process, which is carried out through the continuous circulation of enterprise funds.

Structure of working capital- this is the ratio between the individual elements of working capital, expressed as a percentage. The difference in the structures of working capital of companies is determined by many factors, in particular, the characteristics of the organization’s activities, business conditions, supply and sales, location of suppliers and consumers, and the structure of production costs.

Working production assets include:

(raw materials, basic materials and purchased semi-finished products, auxiliary materials, fuel, containers, spare parts, etc.);
with a service life of no more than one year or a cost of no more than 100 times (for budgetary organizations - 50 times) the established minimum wage per month (low-value wearable items and tools);
unfinished production and self-made semi-finished products (labor items that have entered the production process: materials, parts, components and products that are in the process of processing or assembly, as well as self-made semi-finished products that have not been fully completed by production in some workshops of the enterprise and are subject to further processing in other workshops of that the same enterprise);
Future expenses(immaterial elements of working capital, including costs for the preparation and development of new products that are produced in a given period, but are allocated to products of a future period; for example, costs for the design and development of technology for new types of products, for the rearrangement of equipment).

Circulation funds

Circulation funds— enterprise funds operating in the sphere of circulation; an integral part of working capital.

Circulation funds include:

enterprise funds invested in finished product inventories, goods shipped but not paid for;
funds in settlements;
cash in hand and in accounts.

The amount of working capital employed in production is determined mainly by the duration of production cycles for the manufacture of products, the level of technology development, the perfection of technology and labor organization. The amount of circulating media depends mainly on the conditions for the sale of products and the level of organization of the supply and marketing system.

Working capital is the more mobile part.

In every Circulation of working capital goes through three stages: monetary, production and commodity.

To ensure an uninterrupted process at the enterprise, working capital or material assets are formed, awaiting their further production or personal consumption. Inventories are the least liquid item among the items of current assets. The following methods of inventory valuation are used: for each unit of purchased goods; by average cost, in particular, by weighted average cost, moving average; at the cost of the first purchases; at the cost of the most recent purchases. The unit of accounting for working capital as inventory is a batch, a homogeneous group, and an item number.

Depending on their purpose, inventories are divided into production and commodity. Depending on the functions of use, stocks can be current, preparatory, insurance or warranty, seasonal and carryover.

Safety stocks- a reserve of resources intended for the uninterrupted supply of production and consumption in cases of a decrease in supplies compared to those provided.
Current stocks— stocks of raw materials, materials and resources to meet the current needs of the enterprise.
Preparatory supplies- Cycle-dependent inventories are required if raw materials are to undergo any processing.
Carryover stocks- part of unused current inventories that are carried over to the next period.

Working capital is located simultaneously at all stages and in all forms of production, which ensures its continuity and uninterrupted operation of the enterprise. Rhythm, coherence and high performance largely depend on optimal amounts of working capital(working production assets and circulation funds). Therefore, the process of rationing working capital, which relates to current financial planning at the enterprise, is of great importance. Rationing of working capital is the basis for the rational use of a company's economic assets. It consists in developing reasonable norms and standards for their consumption, necessary to create constant minimum reserves and for the uninterrupted operation of the enterprise.

The working capital standard establishes the minimum estimated amount that is constantly required by the enterprise to operate. Failure to fill the working capital standard may lead to a reduction in production and failure to fulfill the production program due to interruptions in production and sales of products.

Standardized working capital— the size of inventories, work in progress and balances of finished products in warehouses planned by the enterprise. Working capital stock norm is the time (days) during which OBS are in production inventory. It consists of the following stocks: transport, preparatory, current, insurance and technological. Working capital standard is the minimum amount of working capital, including cash, necessary for a company or firm to create or maintain carry-over inventories and ensure continuity of work.

Sources for the formation of working capital can be profits, loans (bank and commercial, i.e. deferred payment), share capital, share contributions, budget funds, redistributed resources (insurance, vertical management structures), accounts payable, etc.

The efficiency of using working capital affects the financial results of the enterprise. When analyzing it, the following indicators are used: the availability of own working capital, the ratio between own and borrowed resources, the solvency of the enterprise, its liquidity, turnover of working capital, etc. Turnover of working capital is understood as the duration of the sequential passage of funds through individual stages of production and circulation.

The following indicators of working capital turnover are distinguished:

turnover ratio;
duration of one revolution;
working capital load factor.

Funds turnover ratio(turnover speed) characterizes the amount of revenue from sales of products by the average cost of working capital. Duration of one revolution in days is equal to the quotient of dividing the number of days for the analyzed period (30, 90, 360) by the turnover of working capital. The reciprocal of the turnover rate shows the amount of working capital advanced per 1 ruble. revenue from product sales. This ratio characterizes the degree of utilization of funds in circulation and is called working capital load factor. The lower the working capital load factor, the more efficiently working capital is used.

The main goal of managing enterprise assets, including working capital, is to maximize profit on invested capital while ensuring stable and sufficient solvency of the enterprise. To ensure sustainable solvency, the enterprise must always have a certain amount of money in its account, which is actually withdrawn from circulation for current payments. Part of the funds should be placed in the form of highly liquid assets. An important task in terms of managing working capital of an enterprise is to ensure an optimal balance between solvency and profitability by maintaining the appropriate size and structure of current assets. It is also necessary to maintain an optimal ratio of own and borrowed working capital, since the financial stability and independence of the enterprise and the possibility of obtaining new loans directly depend on this.

Analysis of working capital turnover (analysis of the organization’s business activity)

Working capital- these are funds advanced by organizations to maintain the continuity of the production and circulation process and returned as part of the proceeds from the sale of products in the same monetary form with which they began their movement.

To assess the efficiency of using working capital, working capital turnover indicators are used. The main ones are the following:

average duration of one revolution in days;
the number (number) of turnovers made by working capital during a certain period of time (year, half-year, quarter), otherwise - the turnover ratio;
the amount of employed working capital per 1 ruble of products sold (working capital load factor).

If working capital goes through all stages of the circulation, for example, in 50 days, then the first turnover indicator (the average duration of one turnover in days) will be 50 days. This indicator approximately characterizes the average time that passes from the moment of purchasing materials to the moment of sale of products made from these materials. This indicator can be determined using the following formula:

P is the average duration of one revolution in days;
SO - average balance of working capital for the reporting period;
P - sales of products for this period (less value added tax and excise taxes);
B is the number of days in the reporting period (in a year - 360, in a quarter - 90, in a month - 30).

So, the average duration of one turnover in days is calculated as the ratio of the average balance of working capital to the one-day turnover of product sales.

The average duration of one turnover in days can be calculated in another way, as the ratio of the number of calendar days in the reporting period to the number of turnovers made by working capital during this period, i.e. according to the formula: P = V/CHO, where CHO is the number of turnovers made by working capital during the reporting period.

Second turnover indicator- the number of turnovers made by working capital during the reporting period (turnover ratio) - can also be obtained in two ways:

as the ratio of product sales minus value added tax and excise taxes to the average balance of working capital, i.e. according to the formula: NOR = R/SO;
as the ratio of the number of days in the reporting period to the average duration of one revolution in days, i.e. according to the formula: NOR = W/P .

The third indicator of turnover (the amount of employed working capital per 1 ruble of sold products or otherwise - the working capital load factor) is determined in one way as the ratio of the average balance of working capital to the turnover of product sales for a given period, i.e. according to the formula: CO/R.

This figure is expressed in kopecks. It gives an idea of how many kopecks of working capital are spent to obtain each ruble of revenue from product sales.

The most common is the first turnover indicator, i.e. average duration of one revolution in days.

Most often, turnover is calculated per year.

During the analysis, the actual turnover is compared with the turnover for the previous reporting period, and for those types of current assets for which the organization sets standards - also with the planned turnover. As a result of this comparison, the magnitude of the acceleration or deceleration of turnover is determined.

The initial data for the analysis are presented in the following table:

In the analyzed organization, turnover slowed down, both for standardized and non-standardized working capital. This indicates a deterioration in the use of working capital.

When the turnover of working capital slows down, there is an additional attraction (involvement) of them into circulation, and when it accelerates, working capital is released from circulation. The amount of working capital released as a result of the acceleration of turnover or additionally attracted as a result of its slowdown is determined as the product of the number of days by which turnover accelerated or slowed down by the actual one-day sales turnover.

The economic effect of accelerating turnover is that an organization can produce more products with the same amount of working capital, or produce the same volume of products with a smaller amount of working capital.

Accelerating the turnover of working capital is achieved through the introduction of new equipment, advanced technological processes, mechanization and automation of production into production. These measures help reduce the duration of the production cycle, as well as increase the volume of production and sales of products.

In addition, to accelerate turnover, the following are important: rational organization of logistics and sales of finished products, adherence to savings in the costs of production and sales of products, the use of forms of non-cash payments for products that help speed up payments, etc.

Directly when analyzing the current activities of an organization, the following reserves for accelerating the turnover of working capital can be identified, which consist in eliminating:

excess inventories: 608 thousand rubles;
goods shipped but not paid for on time by buyers: 56 thousand rubles;
goods in safe custody from buyers: 7 thousand rubles;
immobilization of working capital: 124 thousand rubles.

Total reserves: 795 thousand rubles.

As we have already established, the one-day sales turnover in this organization is 64.1 thousand rubles. So, the organization has the opportunity to accelerate the turnover of working capital by 795: 64.1 = 12.4 days.

To study the reasons for changes in the rate of turnover of funds, it is advisable, in addition to the considered indicators of general turnover, to also calculate indicators of private turnover. They relate to certain types of current assets and give an idea of the time spent by working capital at various stages of their circulation. These indicators are calculated in the same way as inventories in days, but instead of the balance (inventory) on a certain date, the average balance of a given type of current asset is taken here.

Private turnover shows how many days on average working capital remains at a given stage of the circulation. For example, if the private turnover of raw materials and basic materials is 10 days, this means that on average 10 days pass from the moment the materials arrive at the organization’s warehouse to the moment they are used in production.

As a result of summing up private turnover indicators, we will not get an overall turnover indicator, since different denominators (turnovers) are taken to determine private turnover indicators. The relationship between the indicators of private and general turnover can be expressed by the terms of total turnover. These indicators make it possible to establish what impact the turnover of individual types of working capital has on the overall turnover indicator. The components of total turnover are defined as the ratio of the average balance of a given type of working capital (assets) to the one-day turnover of product sales. For example, the term for the total turnover of raw materials and basic materials is equal to:

The average balance of raw materials and basic materials is divided by the daily turnover for product sales (less value added tax and excise taxes).

If this indicator is, for example, 8 days, then this means that the total turnover due to raw materials and basic materials accounts for 8 days. If you sum up all the components of the total turnover, the result will be an indicator of the total turnover of all working capital in days.

In addition to those discussed, other turnover indicators are also calculated. Thus, the inventory turnover indicator is used in analytical practice. The number of turnovers made by inventories for a given period is calculated using the following formula:

Works and services (minus and) are divided by the average value under the item “Inventories” of the second asset section of the balance sheet.

Acceleration of inventory turnover indicates an increase in the efficiency of inventory management, and a slowdown in inventory turnover indicates their accumulation in excessive amounts, ineffective inventory management. Indicators are also determined that reflect the turnover of capital, that is, the sources of formation of the organization’s property. So, for example, equity capital turnover is calculated using the following formula:

Product sales turnover for the year (minus value added tax and excise taxes) is divided by the average annual cost of equity capital.

This formula expresses the efficiency of using equity capital (authorized, additional, reserve capital, etc.). It gives an idea of the number of turnovers made by the organization's own sources of activity per year.

Turnover of invested capital is the turnover of product sales for the year (minus value added tax and excise taxes) divided by the average annual cost of equity capital and long-term liabilities.

This indicator characterizes the efficiency of using funds invested in the development of the organization. It reflects the number of revolutions made by all long-term sources during the year.

When analyzing the financial condition and use of working capital, it is necessary to find out from what sources the financial difficulties of the enterprise are compensated. If assets are covered by stable sources of funds, then the financial condition of the organization will be stable not only at a given reporting date, but also in the near future. Sustainable sources should be considered own working capital in sufficient amounts, non-declining balances of carry-over debt to suppliers on accepted payment documents, the payment terms of which have not arrived, constantly carry-over debt on payments to the budget, a non-declining part of other accounts payable, unused balances of special-purpose funds (accumulation funds and consumption, as well as the social sphere), unused balances of targeted financing, etc.

If the organization’s financial breakthroughs are covered by unstable sources of funds, it is solvent at the reporting date and may even have free funds in bank accounts, but in the near future it will face financial difficulties. Unsustainable sources include sources of working capital that are available on the 1st day of the period (the balance sheet date), but are absent on dates within this period: undue debt for wages, contributions to extra-budgetary funds (above certain sustainable values), unsecured debt to banks for loans for inventory items, debt to suppliers for accepted payment documents, the payment terms of which have not arrived, in excess of the amounts classified as sustainable sources, as well as debt to suppliers for uninvoiced supplies, debt for payments to the budget in excess of amounts classified as sustainable sources of funds.

It is necessary to make a final calculation of financial breakthroughs (i.e., unjustified spending of funds) and sources of covering these breakthroughs.

The analysis ends with a general assessment of the financial condition of the organization and the drawing up of an action plan to mobilize reserves to accelerate the turnover of working capital and increase liquidity and strengthen the solvency of the organization. First of all, it is necessary to assess the organization’s provision with its own working capital, their safety and use for their intended purpose. Then an assessment is made of compliance with financial discipline, solvency and liquidity of the organization, as well as the completeness of use and security of bank loans and loans from other organizations. Measures are being planned for more efficient use of both equity and borrowed capital.

The analyzed organization has a reserve for accelerating the turnover of working capital for 12.4 days (this reserve is noted in this paragraph). To mobilize this reserve, it is necessary to eliminate the reasons causing the accumulation of excess reserves of raw materials, basic materials, spare parts, other inventories and work in progress.

In addition, it is necessary to ensure the targeted use of working capital, preventing their immobilization. Finally, receiving payments from buyers for goods shipped to them that were not paid on time, as well as the sale of goods held in custody by buyers due to refusal to pay, will also speed up the turnover of working capital.

All this will help strengthen the financial condition of the analyzed organization.

Indicators of the availability and use of working capital

Working capital is consumed in one production cycle, materially enters the product and completely transfers its value to it.

The availability of working capital is calculated both on a specific date and on average for the period.

Indicators of the movement of working capital characterize its changes during the year - replenishment and disposal.

Working capital turnover ratio

It is the ratio of the cost of products sold for a given period to the average balance of working capital for the same period:

To turnover= Cost of products sold for the period / Average balance of working capital for the period

The turnover ratio shows how many times the average balance of working capital was turned over for the period under review. In terms of economic content, it is equivalent to the capital productivity indicator.

Average turnover time

Determined from the turnover ratio and the analyzed time period

Average duration of one revolution= Duration of the measurement period for which the indicator is determined / Working capital turnover ratio

Working capital consolidation ratio

The value is inversely proportional to the turnover ratio:

To fastening= 1 / To turnover

Consolidation ratio = average working capital balance for the period / cost of goods sold for the same period

In terms of economic content, it is equivalent to the capital intensity indicator. The consolidation coefficient characterizes the average cost of working capital per 1 ruble of sales volume.

Working capital requirement

The enterprise's need for working capital is calculated based on the coefficient of fixation of working capital and the planned volume of product sales by multiplying these indicators.

Provision of production with working capital

It is calculated as the ratio of the actual working capital stock to the average daily consumption or average daily need for it.

Accelerating the turnover of working capital helps to increase the efficiency of the enterprise.

Task

According to the data for the reporting year, the average balance of the enterprise's working capital amounted to 800 thousand rubles, and the cost of products sold during the year at the current wholesale prices of the enterprise amounted to 7,200 thousand rubles.

Determine the turnover ratio, the average duration of one turnover (in days) and the coefficient of consolidation of working capital.

To turnover = 7200 / 800 = 9
Average turnover time = 365 / 9 = 40.5
K securing collective funds = 1/9 = 0.111

Task

During the reporting year, the average balance of the enterprise's working capital was 850 thousand rubles, and the cost of products sold during the year was 7,200 thousand rubles.

Determine the turnover ratio and the working capital consolidation ratio.

Turnover ratio = 7200 / 850 = 8.47 revolutions per year
Consolidation coefficient = 850 / 7200 = 0.118 rubles of working capital per 1 ruble of products sold

Task

The cost of products sold in the previous year amounted to 2,000 thousand rubles, and in the reporting year compared to the previous year it increased by 10% with a reduction in the average duration of one turnover of funds from 50 to 48 days.

Determine the average balance of working capital in the reporting year and its change (in%) compared to the previous year.

Solution

Cost of products sold in the reporting year: 2000 thousand rubles * 1.1 = 2200 thousand rubles.

Average balance of working capital = Volume of products sold / Turnover

To turnover = Duration of the analyzed period / Average duration of one turnover

Using these two formulas we derive the formula

Average balance of working capital = Volume of products sold * Average duration of one turnover / Duration of the analyzed period.

Average balance of average in the previous year = 2000 * 50 / 365 = 274
Average balance Total average in the current year = 2200 * 48 / 365 = 289

289/274 = 1.055 In the reporting year, the average balance of working capital increased by 5.5%

Task

Determine the change in the average working capital retention ratio and the influence of factors on this change.

K consolidation = average working capital balance / cost of goods sold

To consolidate the concern, the base period = (10+5) / (40+50) = 15 / 90 = 0.1666
To assign to the concern reporting period = (11+5) / (55+40) = 16 / 95 = 0.1684

Index of general change in anchorage coefficient

= CO (average balance)_1 / RP (sold products)_1 - CO_0/RP_0 = 0.1684 - 0.1666 = 0.0018

Index of change in the consolidation coefficient from changes in the average balance of working capital

= (SO_1/RP_0) - (SO_0/RP_0) = 0.1777 - 0.1666 = 0.0111

Index of change in the consolidation coefficient from changes in the volume of products sold

= (SO_1/RP_1) - (SO_1/RP_0) = -0.0093

The sum of the individual indices must equal the total index = 0.0111 - 0.0093 = 0.0018

Determine the general change in the balance of working capital, and the amount of released (involved) working capital as a result of changes in the speed and change in sales volume.

Average change in working capital balance = 620 - 440 = 180 (increased by 180)

General index of changes in the balance of working capital (CO) = (RP_1*continued 1.turnover_1 / days in the quarter) - (RP_0*continued 1.turnover_0 / days in the quarter)

Duration of 1 turnover in the reporting quarter = 620*90/3000 = 18.6 days
Duration of 1 revolution in the previous quarter = 440*90/2400 = 16.5 days

Index of changes in operating assets from changes in the volume of products sold

= RP_1*prod.1ob._0/quarter - RP_0*prod.1ob._0/quarter = 3000*16.5/90 - 2400*16.5/90 = 110 (increase in the balance of working capital due to an increase in the volume of products sold )

Index of changes in operating assets from changes in the turnover rate of working capital

= RP_1*cont.1ob._1 / quarter - RP_1*cont.1ob._0/quarter = 3000*18.6/90 - 3000*16.5/90 = 70

The director of a company, who only has indicators of profit and overall profitability before his eyes, cannot always understand how to adjust them in the right direction. In order to have all the control levers in your hands, it is absolutely necessary to also calculate the turnover of working capital.
The picture of the use of working capital consists of four main indicators:

Duration of turnover (determined in days);
How many times do working capital turn over in the reporting period;
How much working capital is there per unit of products sold;

Let's consider the calculation of this data using the example of an ordinary enterprise, as well as the calculation of a number of important coefficients for understanding the significance of turnover indicators in the overall picture of the company's success.

Turnover ratio

The main formula determining the rate of turnover of working capital is as follows:

Cob is the turnover ratio. It shows how many turnovers of working capital were made during a specific period of time. Other designations in this formula: Vp - volume of product sales for the reporting period;
Osr is the average balance of working capital for the reporting period.
Most often, the indicator is calculated for the year, but absolutely any period needed for analysis can be selected. This coefficient is the rate of turnover of working capital. For example, the annual turnover of a mini-store of mobile phones was 4,800,000 rubles. The average balance in circulation was RUB 357,600. We get the turnover ratio:
4800000 / 357600 = 13.4 revolutions.

Duration of turnover

It also matters how many days one revolution lasts. This is one of the most important indicators, which shows how many days later the company will see the funds invested in turnover in the form of cash proceeds and will be able to use them. Based on this, you can plan both making payments and expanding your turnover. The duration is calculated as follows:

T is the number of days in the analyzed period.
Let's calculate this indicator for the above digital example. Since the company is a trading company, it has a minimum number of days off - 5 days a year; for the calculation we use the figure of 360 working days.
Let's calculate how many days later the company could see the money invested in turnover in the form of revenue:
357,600 x 360 / 4,800,000 = 27 days.
As you can see, the turnover of funds is short; the management of the enterprise can plan payments and use of funds to expand trade almost monthly.
To calculate the turnover of working capital, the profitability indicator is also important. To calculate it, you need to calculate the ratio of profit to the average annual balance of working capital.
The enterprise's profit for the analyzed year amounted to 1,640,000 rubles, the average annual balance was 34,080,000 rubles. Accordingly, the profitability of working capital in this example is only 5%.

Load factor of funds in circulation.

And one more indicator necessary to assess the speed of turnover of working capital is the load factor of funds in circulation. The coefficient shows how much working capital is advanced per 1 ruble. revenue. This is the working capital intensity, which shows how much working capital must be spent for the company to receive 1 ruble of revenue. It is calculated like this:

Where Kz is the load factor of funds in circulation, kopecks;
100 - conversion of rubles to kopecks.
This is the opposite of the turnover ratio. The smaller it is, the better the use of working capital. In our case, this coefficient is equal to:
(357,600 / 4,800,000) x 100 = 7.45 kopecks.
This indicator is an important confirmation that working capital is used very rationally. The calculation of all these indicators is mandatory for an enterprise that seeks to influence operational efficiency using all possible economic levers.
In Forecast NOW! can be calculated

Turnover in monetary and natural units both for a specific product and for a group of products, and by section - for example, by suppliers
Dynamics of changes in turnover in any necessary sections

An example of calculating the turnover rate by product groups:

Assessing the dynamics of changes in turnover by product/group of products is also very important. At the same time, it is important to correlate the turnover schedule with the service level schedule (how much we satisfied consumer demand in the previous period).
For example, if turnover and the level of service are declining, then this is an unhealthy situation - you need to study this group of products more carefully.
If turnover increases, but the level of service decreases, then the increase in turnover is most likely due to smaller purchases and an increase in shortages. The opposite situation is also possible - turnover decreases, but in this calculation the level of service - customer demand is ensured by large purchases of goods.
In these two situations, it is necessary to evaluate the dynamics of profit and profitability - if these indicators grow, then the changes taking place are beneficial for the company; if they fall, it is necessary to take action.
In Forecast NOW! It’s easy to assess the dynamics of turnover, service level, profit and profitability - just carry out the necessary analysis.
Example:

Since August, there has been an increase in turnover with a decrease in the level of service - it is necessary to evaluate the dynamics of profitability and profit:

Profitability and profit have been falling since August, we can conclude that the dynamics of changes are negative

The effective functioning of any enterprise is impossible without the competent and rational use of working capital. Depending on the type of activity, stage of the life cycle, or even the time of year, the amount of working capital an organization has may vary. However, it is the availability and proper use of these resources that determines how successful and long-lasting the activities of any business entity will be.

In order to assess the correct use of a company's working capital, there are many coefficients that analyze the speed of circulation, sufficiency, liquidity and many other equally significant characteristics. One of the most important indicators necessary to determine the financial condition of an organization is the working capital turnover ratio.

Turnover ratio (K rev), or turnover rate, shows how many times during the period of time under study the enterprise is able to completely turn over its own working capital. Thus, this value characterizes the efficiency of the company. The larger the value obtained, the more successfully the company uses its available resources.

Formula and calculation

The turnover ratio shows the number of revolutions made by working capital during the period of time under consideration. It is calculated as:

Where:

Q p is the volume of products sold at the organization’s wholesale prices excluding VAT;
F ob.av. – the average balance of working capital found during the period under study.

If we recall the approximate form of the cash circulation cycle at an enterprise, it turns out that the money that an organization invests in the work of its company returns to it after some time in the form of finished products. The company sells these products to its customers and again receives a certain amount of money. Their value is the income of the organization.

Thus, the general scheme “money-product-money” implies the cyclical nature of the company’s activities. The turnover ratio in this case shows how many similar turnovers the organization’s funds can make in a certain period of time (most often in 1 year). Naturally, for the effective and fruitful operation of an enterprise it is necessary that this value was as large as possible.

Necessary indicators for calculation

The working capital turnover ratio can be determined using the data presented in the financial statements of the organization. The quantities needed to determine it are shown in the first and second forms of financial statements.

So, in the general case, the volume of products sold is calculated as the revenue received by the organization in one cycle (since in most cases an annual coefficient is used for analysis, in the future we will take into account the time period t=1). Revenue for the specified period is taken from the income statement (formerly the income statement), where it is shown in a separate line as the amount received by the enterprise from the sale of work, goods or services.

The average balance of working capital is found from the second section of the balance sheet and is calculated as:

Where F 1 and F 0 are the amounts of the company’s working capital for the current and past periods of time. Note that if the calculations use data for 2013 and 2014, then the resulting coefficient will represent the rate of funds turnover specifically for 2013.

In addition to the turnover ratio in economic analysis, there are other values that analyze the turnover rate of an organization's working capital. Many of them are also closely related to this indicator.

Thus, one of the values accompanying the turnover ratio is duration of one revolution (T rev). Its value is calculated as the quotient of dividing the number of days corresponding to the analyzed period (1 month = 30 days, 1 quarter = 90 days, 1 year = 360 days) by the value of the turnover ratio itself:

Based on this formula, the duration of one revolution can also be calculated as:

Another important indicator used when analyzing the financial condition of an organization is utilization rate of funds in circulation K load. This indicator determines the amount of working capital required to receive 1 ruble of revenue from product sales. In other words, the coefficient shows how many percent of the organization’s working capital falls on one unit of the final result. Thus, in another way the load factor can be called the capital intensity of working capital.

It is calculated using the following formula:

As can be seen from the methodology for calculating this indicator, its value is the inverse of the value of the turnover ratio. And this means that the lower the load indicator, the higher the efficiency of the organization.

Another generalizing factor in the efficiency of using working capital is the value profitability (R ob.av.). This ratio is characterized by the amount of profit received for each ruble of working capital and shows the financial efficiency of the organization. The formula for calculating it is similar to the values used to find the turnover ratio. However, in this case, instead of revenue from sales of products, the enterprise’s profit before tax is used in the numerator:

Where π is profit before tax.

Also, as in the case of the turnover ratio, the higher the return on capital value, the more financially stable the enterprise’s activities.

Turnover ratio analysis

Before moving on to analyzing the turnover ratio itself and looking for ways to increase the efficiency of an organization, let’s define what is generally meant by the concept of “working capital of a company.”

Working capital of an enterprise is understood as the amount of assets that have a useful life of less than one year. Such assets may include:

stocks;
unfinished production;
finished products;
cash;
short-term financial investments;
accounts receivable.

In most cases, the turnover ratio in a company has approximately the same value over a long period of time. This value may depend on the types of core activities of the company (for example, for trade enterprises this indicator will be the highest, while in the field of heavy industry its value will be quite low), its cyclical nature (some companies are characterized by a surge in activity in certain seasons) and many other factors.

However, in general, in order to change the value of this ratio and increase the efficiency of using the company’s assets, it is necessary to competently approach the working capital management policy.

Thus, a reduction in inventories can be achieved through a more economical and rational use of resources, reducing the material intensity of production and the amount of losses. In addition, significant improvements can be achieved through more efficient supply management.

The amount of work in progress is reduced by rationalizing the production cycle and reducing the cost of inventory. And reducing the amount of finished products in stock can be achieved with the help of more advanced logistics and aggressive marketing policies of the organization.

Note that a positive impact on even one of the values presented above already has a significant impact on the turnover ratio. In addition, it is possible to achieve an increase in the efficiency of using working capital at an enterprise in indirect ways. Thus, the value of the indicator will be higher with an increase in the organization’s profit and sales volumes.

If, when plotting the dynamics of the turnover ratio over a long period of time, one can note a stable decrease in its value, this fact may be a sign of a deterioration in the financial condition of the company.

Why might it be declining?

There are several reasons for reducing the turnover ratio. Moreover, its value can be influenced by both external and internal factors. For example, if the general economic situation in the country worsens, the demand for luxury goods may fall, the appearance of new models of electrical equipment on the market will reduce the demand for old ones, and so on.

There may also be several internal reasons for a decrease in turnover rate. Among them it is worth highlighting:

errors in working capital management;
logistics and marketing errors;
growth of the company's debt;
use of outdated production technologies;
change in the scale of activity.

Thus, most of the reasons for the deterioration of the situation at the enterprise associated with management errors and low qualifications of workers.

At the same time, in some cases, the value of the turnover ratio may decrease due to the transition to a new level of production, modernization and the use of new technologies. In this case, the value of the indicator will not be associated with the low efficiency of the company.

Let's consider a certain organization "Alpha". Having analyzed the company’s activities for 2013, we learned that revenue from sales of products at this enterprise amounted to 100 thousand rubles.

At the same time, the amount of working capital was equal to 35 thousand rubles in 2013 and 45 thousand rubles in 2012. Using the data obtained, we calculate the asset turnover ratio:

Since the resulting coefficient is 2.5, we can note that in 2013 the Alpha company had the duration of one turnover cycle:

Thus, one production cycle of the Alpha enterprise takes 144 days.