In addition, there is a need in the planning of financial resources for ancillary and subsidiary, housing and public utilities, welfare institutions and other non-industrial nature. Defining the needs of current assets through their normalization. Normalization of working capital presupposes that many factors that affect the economic activity of enterprises. The enterprises production sphere to them include: terms of the supply business inventories: the number of suppliers, delivery time, the amount of transit parties, the number of items of goods, forms of payment for material values; organization of the production process: the duration of the production cycle, expenditure allocations for the production cycle, the range of output; terms of sales: the number of consumers of finished products, their remoteness, destination products, subject to its transportation, forms of payment for shipped products. [17, sec. 148 - 147]
Turnover ratio is defined as the ratio of current annual turnover of their annual average number of revolutions and indicates who made the working capital for the period. The more turns carry current assets, the more effectively they are used: [C. 78 Makarovska EP]
K_ob = O_r / S_ob (2.1)
where Kob - turnover ratio; Or - an annual turnover of circulating assets; Sob - the average value of current assets. In ratio of applying auxiliary parameters, such as playing one turnover includes the number of days during which current assets make one turn and load factor of current assets. As far as the following formulas: [10, sec. 78]
O_t = D_n / K_ob (2.2)
K_z = S_ob / O_r (2.3)
That's where - playing one turnover; Days - Number of days in a year (usually take 360); Circuit - the load factor of current assets. Load factor current assets enables to estimate the amount of current assets to 1 USD sales. Less current means used for the production of products sold per 1 USD, the rational and better use them. Actually, all three indices are identical, but each of them differently expressed: the first - in quality ratio, the second - in the days of turnover, the third - in terms of money. Thus, the auxiliary parameters are derived from the ratio of the same and characterize the effectiveness of current assets, just with different positions [2, sec. 239] Planning of working capital is subject to estimates of production costs and non-production needs and business plan that covers and connects the industrial and financial performance, creating just that the conditions for successful business operations and business development.
The purpose of the functioning of current assets is to maintain continuity of the production process. But this continuity may in each case supported by the different amount of current assets. At the same time know that this must achieve a minimum number. To evaluate the efficiency of current use of certain figures (turnover ratio, load factor, the length of one turnover, profitability) and to increase efficiency - appropriate methods (optimization of inventory and work in progress, reducing the duration of the production cycle, improvement of logistics; acceleration time of production). This acceleration of turnover contribute: first, to increase production per unit operating costs of the enterprise and, secondly, the release of drugs, and therefore - to create additional reserves to expand production In accordance with the composition, structure and availability of working capital and planned production volume of business can make profits with minimal costs. If underreporting of working capital available to supply disruptions and production process, reducing output and income of arrears and debt, other negative phenomena in economic activities.
The excess of current assets leads to the accumulation of over dimensional inventory of raw materials, erosion of savings, and conditions for use of working capital for other purposes. [11, sec. 289 - 291] Management of working capital consists in ensuring the continuity of the process of production and sales with the least amount of working capital. This means that the company's current assets should be distributed throughout all stages of the cycle in the appropriate form and in a minimal but sufficient. In today's environment where businesses are self-financed in full, the correct definition of requirements for working capital is of particular importance.
The process of developing commercially reasonable quantities of working capital needed for normal operation of the enterprise, called the valuation of current assets. Thus, standardization of working capital is to determine the amounts of working capital needed to form a permanent minimum and at the same time, sufficient material values, the minimum balance in progress and other current assets. Normalization of working capital facilitates the identification of internal reserves, shortening the production cycle, faster realization of finished products. [10, sec. 174] Pertain to the working capital that are in inventory, work in progress, quantities of finished products to the enterprise. This normalized working capital. Other elements of working capital are called irregular. In the process of normalization of working capital define norms and standards of working capital. Normalization value of current assets is as follows.
First, the correct definition of the standard working capital provides continuity and uninterrupted production process. Second, regulation of working capital enables efficient use of working capital for each enterprise. Thirdly, the right of the established norms of working capital depends on the plan of production, sales, profits and profitability. Fourth, comprehensive standards of working capital contribute to strengthening the economy, and minimize business risk. Rate of working capital in relation to raw materials and semifinished products purchased includes: transport of reserve time for acceptance, unloading, sorting, storing materials, technology stock, current (warehouse) stock; warranty (insurance) stock.
Transport stock is defined as the difference between being in the way of cargo from suppliers to customers and post run time of settlement documents and their clearance by the shipper and the banks handling the location of the provider and consumer. [17, sec. 151] If the raw materials delivered to the consumer before the arrival of payment documents (or these processes overlap in time), the vehicle stock is not established. Preparatory stock - this time for acceptance, unloading, sorting, storing materials.
Technology stock includes the time for preparatory operations (timber drying, grinding scrap, cutting out materials), unless they are part of the production cycle. Rate of technological stock is determined by concrete conditions of each enterprise and a period of preparatory operations. Current stock - floating rate funds in the stock of the current depends on the frequency and regularity of supply of materials, uniformity of consumption in production. What they often come to the consumer, the smaller will be the current stock. In the normal working capital, normally included average current stock of 50% duration interval between deliveries. The interval is determined based on supply contracts with suppliers or based on actual data on the flow of the previous period. [17, sec. 151 - 152] 2.2. Own sources and management of working capital
Generally, the minimum needs in current assets covered by such own sources: the authorized capital (fund), contributions from special revenue funds in the value of , targeted funding and target revenues (from the budget, sectoral and inter-budgetary funds), the gain constant liabilities. Companies that are in force, form the revolving funds from the budget, equity contributions of the founding members, contributions of foreign participants (for joint ventures), the proceeds from the issue of securities.
These funds are included in the statutory fund start-ups. [18, sec. 162] According to the sources of working capital divided into: own funds, including: share capital, share capital, additional capital is invested, other additional capital, surplus, retained earnings, earmarking; liabilities, short-term bank loans, current long-term debt obligations. We know that quite a number of objective reasons (inflation, output growth) in the enterprise's always a need for additional working capital. Because the company uses borrowed money: banking and commercial loans, bond loans. Along with bank loans sources of working capital may also be commercial loans of other companies and organizations that are issued as loans, promissory notes, trade credits, advances. Companies also use investment tax credits, that is temporarily deferred tax liability. For the investment tax credit company enters into an agreement with the Tax Administration; attracted additional sources, which include: accounts payable for goods, works, services, and ongoing commitment to advances received, payments to the budget, payments, insurance payments, with remuneration of members, other current liabilities, provisions for doubtful debts, charitable and other income [11, sec. 389] The order of the formation of a current asset in the business depends on ownership, the basis for the functioning of the enterprise, its specific organizational structure and other factors. Dimensions and enriching their own floating funds annually in the financial plan. However, the size of their current assets that are fixed by now, is not constant.
The financial condition of the enterprise depends on how quickly the funds invested in assets, converted to real money. The most important indicators of economic activity - income and the volume of sales - are directly dependent on the speed of rotation of working capital.
Acceleration of rotation of working capital is important for stability of the financial condition of the company, due to three main reasons:
- The speed of rotation of funds depends on the annual turnover for the company with a small amount of working capital, but uses them effectively, could do the same turnover as a company with more funds, but with less speed;
- Reversibility associated with the relative size of cost reduction which reduces unit costs;
- Accelerating the turnover of this or that stage cycle costs (for example, reducing time spent on materials in stock) to accelerate the turnover leads to other stages.
The system of management of working capital based on the following principles: granting independence to disposal companies, working capital management, ie operational independence in the use of working capital; identify needs and planned allocation of working capital for individual elements and units, ie the calculation of the optimal requirements for working capital, which would ensure the continuity of the production process, performance targets for the development of norms rhythmic work of long duration and annual requirements); adjustments calculated and applicable regulations including requirements management, change: output, prices for raw materials, suppliers and customers; rational system of financing of working capital, ie the formation of working capital from their own resources and raised funds in amounts that provide the normal financial state enterprises; rational control over the deployment and use of working capital, ie, analyze the efficiency of circulation of funds that are used to accelerate their rotation. [15, c. 285]
The objectives of working capital management company are: assessment of current assets of the company; identifying the need for different types of current assets (working capital rationing); analysis of major trends (working capital turnover, return on working capital, etc.); study and numerical calculation of the basic factors on the value of circulating capital, the need for them and their reversibility; identify, study and use of reserves efficiency of working capital; provide comprehensive information for management decisions. Working capital management should ensure the search for compromise between the risk of loss of liquidity and efficiency.
This is reduced to solve two important tasks:
1. Ensuring solvency. The company, which has a sufficient level of working capital, may face the risk of insolvency.
2. Ensuring an acceptable volume, structure and profitability of assets. It is known that various different levels of current assets differently affect the earnings. For example, high levels of production and inventory accordingly requires significant operating costs, while diverse range of finished products can further enhance sales volumes and increase revenues.
Each decision is concerned with determining the level of funds, accounts receivable and inventory, should be considered as a position of profitability of this type of assets and positions of the optimal structure of current assets. Value analysis of current assets is that it is an instrument of effective working capital management company. [14, c. 312] The availability of sufficient working capital enterprises optimal structure - a necessary prerequisite for its normal functioning and financial stability in a market economy. Lack of sources of working capital resulting in underfunding of economic activities and financial difficulties. The presence of extra sources of working capital in the company promotes the creation of excessive stocks of commodity-material values are , distraction of working capital from commercial trade, and reduce liability for purposeful and rational use of both its own and borrowed funds. In svoyucherhu effectiveness of the organization and management of circulating capital depends on the level and consistency of processes orhanizatsiynosti analysis of circulating capital in the previous period, working capital planning, monitoring implementation and management decisions for how to improve working capital.
2.3 Indicators of current assets
The state of working capital primarily characterized by the presence of a certain date. Comparison of actual availability of working capital with the standards help to define their own lack or excess of current assets. For some basic parameters that characterize the financial position of enterprises established normative values, theoretically or derived from expert estimates. Some of the financial status largely depends on the type of activity, technology, fitness industry, etc., for example, the business of actual availability of working capital with the standards help to define their own lack or excess of current assets.
A lack of working capital means current assets exceeding the standard on their actual presence. It may be the fault of the enterprise, other enterprises, the changes in conditions is not taken into account in a timely manner (such as failure to increase funding standard of its own working capital), natural disasters and other causes. Surplus of own current assets created in the enterprise in excess of current assets over the size required for the satisfaction of minimum needs of the resource. It can arise from over-plan profit; incomplete contribution payments to the budget; free revenues (a) inventory of other organizations, using partial profits for the purposes provided in the financial plan, and others. [17, sec. 167 - 168]
Economic performance of current assets are assets ratio, fondomistkist, profitability, turnover, co coefficient turnover, size, release (freeze). Assets ratio - an indicator that characterizes the level of manufacture, gross tion (commodity) production per unit of current assets. He is determined by dividing the gross output or product-language production in terms of value of current assets of USD 1000 Fondomistkist - an indicator that characterizes the size of current assets that are used in the production unit of gross (single automated imple ) products. He is determined by dividing the value of current assets to USD 1000 produced or sold products.
Yield - an indicator that characterizes the level of return com-Unto production costs or its components, including their turnover assets. Determined by dividing the volume balance profit for 1000 USD annual average of current assets. [18, sec. 209 - 210] To characterize the efficiency of working capital to enterprises use different indices, the most important of which is speed. It is calculated in days and is characterized by a period for which the company's current assets make one revolution.
SD = O / R (2.4)
where O - rotation term working capital (days);
C - average normalized working capital balances (USD);
D - length of period for which the calculated rotation (days);
R - sales volume (USD)
To characterize the efficiency of working capital available rotation rate, determined by the formula:
K_o = P / S (2.5)
where co - rotation ratio of current assets; R - the volume of sales (USD); C - average normalized working capital balances (USD).
This figure indicates the number of turns of working capital during the reporting period. The more engaged in working capital turnover, the better they are used. Load factor working capital is calculated by this formula:
K_z = C / R (2.6)
where circuit - the load factor working capital (the cop). He describes the value of current assets to 1 USD. sales. Less working capital accounted for 1 USD. sales, the better they are used. To characterize the efficiency of working capital efficiency coefficient can be used. It is calculated by the formula: