The working capital of the enterprise. How to calculate net working capital
Net working capital is an indicator that demonstrates the presence of liquid assets in a company and is used to analyze the financial solvency of a company. From the point of view of an economist, net working capital and own working capital – similar concepts and, being a characteristic of capital, often mean the same thing (at least in the Anglo-American financial institution draws an analogy between these two terms). We will learn how to find net working capital and talk about the features of this indicator and its significance in the life of the company.
Net working capital in the balance sheet
This capital represents a part of current assets, financed from its own or equivalent borrowed resources. Financiers, not without reason, call this capital a safety cushion, since its presence often saves an enterprise when the need arises. urgent repayment short-term commitments and continuation of work, albeit in a reduced volume.
It is impossible to see the actual value of this indicator in the balance sheet, since the amount of net working capital is calculated, and several balance sheet values serve as the basis for it.
When calculating the amount of net capital, it must be remembered that short-term liabilities (KP) (for example, bank loans) are not taken into account in their composition, since part of the net capital is most often directed to their repayment. This difference will be the size net assets determining the level of financial solvency of the company, and the formula will be as follows:
Net working capital = Current assets (OA) - Short-term liabilities (KP)
Net working capital: formula by balance lines
It is not difficult to find out the amount of net capital according to the compiled balance sheet - only two balance lines are involved in the calculations:
- Line 1200 - the total of the 2nd section, often equal to value equity capital;
- Line 1500 is the result of the 5th section "Short-term liabilities".
Having on hand the values of these lines, they calculate the net working capital according to the formula:
CHK o = OA (p. 1200) - KP (p. 1500)
Analysis of net working capital
The calculated value of the indicator is estimated in terms of absolute and relative values, calculating its total value, structure, profitability and turnover.
A positive value, that is, an excess of working capital over liabilities, indicates the company's solvency, since its own funds enough to carry out the work process without attracting borrowed capital. However, the amount of net working capital should not be too high. The value that does not decrease over several reporting periods indicates:
- about ineffective use of funds: the company does not invest them in the development of production and does not invest in profitable enterprises;
- on the long-term use of long-term borrowed resources in the financing of working capital.
A negative net working capital indicates a lack of equity capital, which could lead to bankruptcy in the future, and the need to attract external financing.
Net equity structure
Net capital is analyzed in the context of the structure of the liquidity of the assets that make it up. There are several levels of liquidity:
- high - balance lines 1240 and 1250;
- middle - line 1230;
- low - line 1210.
When calculating the level of net working capital, attention is paid to the liquidity of assets: the more highly liquid assets in the balance sheet, the more successful it is considered and copes with the payment of obligations.
Return on net working capital
To determine profitability, companies calculate profitability. It shows the profitability of each ruble invested in production and is calculated as a percentage using the formula:
R hk \ u003d (P h / ChK o) x 100%, where
P h - net profit.
Turnover
The net capital turnover is characterized by the calculation of several indicators:
- the turnover ratio, showing the number of capital turnovers for the period under consideration according to the formula K = Vyr / ChK about;
- capital utilization ratio, which determines the amount of working capital invested in obtaining 1 rub. proceeds from sales, according to the formula K = CHK o / Vyr.
Optimization of net working capital
Effective use of net capital - important aspect managing it. Enterprises use various measures:
- reduce the share of assets with low liquidity, reducing the need for production in reserves;
- reducing the cost of raw materials by revising logistics schemes, minimizing transportation and storage costs;
- decrease in the volume of work in progress;
- decrease in the share of accounts receivable and accounts payable and etc.
Net working capital- This is one of the most important coefficients that is used in the financial analysis of a company. The indicator (Net Working Capital, NWC) characterizes the amount of working capital free from short-term obligations. The second name of the coefficient is Working Capital.
Net working capital is necessary to maintain the financial stability of the company. The excess of working capital over short-term liabilities means that the company is able to pay off its short-term liabilities, and has reserves for expanding its activities.
The net working capital of a private equity company differs from its own working capital in that when determining its size, all short-term liabilities are deducted from current assets, the maturity of which will come within a year, regardless of the purpose for which the borrowed funds are used - for the formation of long-term or current assets:
CHOA = OA - KO.
CHOA - net working capital;
ОА - current or current assets;
KO - short-term or current liabilities.
Current assets include those assets that can be recouped within a year if the enterprise is successful. These include:
1. short-term receivables;
2. stocks and raw materials;
3. VAT on those goods that were purchased;
4. financial and monetary investments.
The short-term liabilities of the enterprise include those obligations for which the term of performance is equal to a year with the successful operation of the enterprise. This:
1.various types of debt (to suppliers and buyers, to personnel for remuneration, to government bodies on payment of taxes and fees);
2. loans for a short period; debt on those obligations that have a long-term perspective (here we mean the payment of interest on long-term loans);
3. incomes that are planned to be received in the future period, as well as reserves that are planned for future expenses.
A positive value of net working capital means the availability of financial sources, potentially ready to finance investments in working assets. A negative value means attracting accounts payable as a source of financing in current assets. Negative values should be considered as the presence of problems with the liquidity and financial stability of the small business. Regarding net working capital, it is not possible to establish an optimal level, but at any given moment in time, the value of the PSC should be equal to 0 (which means the full load of capital into current assets).
The return on net working capital is calculated using the formula:
RobK = (PP / SK) * 100%,
where RoBK is the rate of return on working capital. It is reflected as a percentage;
PE - the net profit of the enterprise for this period;
SK - own (net, working) capital for the same period. The return on net working capital can also be called the return on each ruble invested in a business.
Thus, the following conclusions can be drawn.
1. Net working capital and own working capital are not synonyms, but completely different indicators, both in terms of their economic essence, and in size.
2. Net working capital (net current assets) is the part of working capital that remains at the disposal of the organization after the fulfillment of short-term obligations. This indicator characterizes the degree of solvency in the short term. The larger its size and proportion in total amount current assets, the higher the guarantee of repayment of short-term liabilities.
3. The share of net working capital DCh0A and the ratio current liquidity Ktl - interrelated indicators. Their relationship can be represented as follows:
4. To assess financial stability and solvency in the short term, it is advisable to calculate the net working capital free from short-term liabilities, and its share in the total amount of current assets, which will correspond to Western accounting and analytical practice.
CONCLUSION
LIST OF USED LITERATURE:
1. Blank IA Encyclopedia of the financial manager. M.: Omega-L, 2008.
2. Efimova O. V. The financial analysis, M .: Bukhuchet, 2009.
3. Kovalev V. V. Analysis of the balance or how to understand the balance. M .: Prospect, 2010.
4. Lyubushin N. P., Leshcheva V. B., Dyakova V. G. Analysis of financial economic activity... M: UNITY-DANA, 2004.
5. Kovalev V. V. Financial accounting and analysis: conceptual foundations. Moscow: Finance and Statistics, 2004.
6.http: //berg.com.ua/basic/risk-return-tradeoff/
From an economic point of view, the company's own working capital is called net working capital. Speaking in simple words, this wording means the difference between short-term assets and liabilities of the same enterprise.
Formula for calculating net working capital
ChobK = OA - KP
In this case:
- ОА - current assets, which are also called current;
- KP - short-term (current) liabilities.
Separately, it should be noted that it is also customary to classify OA as those assets that will fully pay off within one year, if the enterprise is successful. Current assets include:
- raw materials;
- short-term debt on debit;
- VAT on purchased goods;
- stocks;
- financial investments.
To find out what is the value of current assets, it is necessary to conduct an analysis balance sheet... One of the sections of the asset of the balance sheet of the enterprise is current assets, therefore, in order to calculate the net working capital, you should use the number that fits in line 1200 of the balance sheet and represents the final total for section II.
Short-term liabilities of any company are considered to be those obligations, the term of performance of which is one year, if the company is successful. Among them:
- debts;
- short-term loans;
- debt on liabilities with a long-term perspective;
- income to be received in the future;
- reserves planned for future expenses.
Exists in the balance sheet and separate section, which is called "Short-term liabilities". Therefore, when calculating net working capital, it is necessary to use the total for section V. In the balance sheet, it is reflected in line 1500.
It should be noted that there is nothing good in the fact that the company has too impressive or too meager working capital. A large net working capital indicates that the funds are used inappropriately at the enterprise. And too little capital, on the contrary, means that it cannot even pay its own short-term bills.
When the balance of net working capital goes into the negative, the amount of short-term liabilities begins to exceed the company's own funds, in connection with which it has nothing to pay off its current liabilities. If this happened, it’s time to talk about the possible bankruptcy of the company. In order to prevent this from happening, it is necessary to constantly analyze the working capital, as well as take all the necessary measures to optimize the balance.
How to analyze net working capital
In order for the working capital of the enterprise to be used correctly, it is necessary to constantly monitor the following indicators:
- the amount of working capital, which can be both positive and negative;
- structure. This indicator shows which part of the working capital is occupied by cash, that is, the most liquid assets;
- asset turnover. This is a coefficient that helps to assess the intensity with which working capital is used;
- return on net working capital. This is a coefficient that demonstrates how much profit each penny in working capital brings.
Profitability
There is a special formula, thanks to which you can calculate how profitable the net working capital is. It looks like this: RobK = (PP / SK) × 100%.
In this case:
- ChobK is the company's net working capital;
- PE - the net profit that the company received for a specific time period;
- SK - net (equity) capital for the same period.
ChobK in this case is expressed as a percentage.
Turnover
The turnover of working capital assets can also be calculated. For this, there is the following formula:
Oobk = Vyr / OBK
In this case:
- Oobk - working capital turnover;
- Vyr - income (revenue), which was received from all, without exception, the types of activities carried out by the enterprise;
- OBK is the working capital of the same enterprise for the same period of time.
Net working capital (net working capital) means the difference between working (short-term, current) assets and short-term liabilities (short-term borrowed capital)
Net working capital (net working capital) = working (short-term, current) assets - short-term liabilities (short-term borrowed capital).
The optimal amount of net working capital (net working capital) is determined in accordance with the needs of each specific enterprise and depends on the scale and characteristics of its activities, the rate of turnover of inventories and receivables, on the conditions for granting and attracting loans, on industry specifics and market conditions ... The financial position of the enterprise is negatively affected by both the surplus and the lack of net working capital (net working capital). The excess of the net working capital (net working capital) over the optimal need indicates the ineffective use of resources. Lack of net working capital (net working capital) indicates the inability of the enterprise to timely repay its short-term liabilities and can lead to bankruptcy. In the Russian economic literature for a long period, the term "working capital" is used, which is unreasonably identified both with the concept of "working capital" and with the concept of "net working capital". Working capital is related to the UK Companies Act, which provides for the compilation of accounting statements in two versions: general and managerial, the only difference between which is the placement of operational obligations. In the management version of financial statements intended for internal management, liabilities and assets (primarily current assets) are reduced by the amount of long-term and short-term operating liabilities. Equality of balance is not violated in this case. As a result, in the section "current assets", reduced by the sum of all operating liabilities, the so-called "working capital" is formed.
Working capital refers to the difference between circulating (short-term, current) assets and operating (production) (short-term and long-term) liabilities.
Working capital = circulating (short-term, current) assets - general (short-term and long-term) operating liabilities.
Operating (commercial) liabilities are understood to be the company's obligations arising from its production (operating) activities.
Gender short-term operating liabilities are defined as the company's liabilities arising from its production (operating) activities and having a maturity of less than one year. The short-term production (operational) obligations of the enterprise include: short-term commercial loans, the invoices of which must be paid during the current year; reserves for the payment of taxes; dividends, etc.
Long-term operating liabilities are understood to be the company's liabilities arising from its production (operating) activities and having a maturity of more than one year. Long-term production (operational) liabilities include long-term commercial loans, the invoices of which are not payable during the current year; long term rent, etc.
It should be noted that long-term commercial loans are quite rare. Not all enterprises agree to sell their products with a deferred payment for a period exceeding a year.
Financial liabilities are understood as the company's obligations arising in connection with the attraction of funds on the terms of urgency, payment, repayment.
Short-term financial liabilities are understood as the company's liabilities arising from the attraction of loans, the maturity of which is less than one year.
Long-term financial liabilities are understood as the company's liabilities arising in connection with the attraction of loans, the maturity of which is more than one year.
The classification of the company's liabilities is presented in the table.
Production (operating) liabilities |
Financial liabilities |
|
short-term obligations |
Short-term operating liabilities are understood as the company's liabilities arising from its production (operating) activities and having a maturity of less than a year |
Short-term financial liabilities are understood as the company's liabilities arising in connection with the attraction of short-term loans |
long term duties |
Long-term operating liabilities are understood as the company's liabilities arising from its production (operating) activities and having a maturity of more than a year |
Long-term financial liabilities are understood as the company's liabilities arising from the attraction of long-term loans |
Operating liabilities arise from purchases on credit of raw materials and materials, the cost of which is recorded in the item "inventories". Financial liabilities arise as a result of attracting (on the terms of urgency, payment, repayment) real funds. This is a part of the attracted capital, which is intended to finance the activities of the enterprise. The managerial version of the balance sheet, focusing on financial commitments enterprises, allows thus highlighting:
1) as part of general liabilities - attracted funds intended for financing current assets, i.e. "Working" money, or "working capital";
2) in the management of current assets - the management of real money.
The managerial approach allows you to rationally manage current assets, more accurately determine the needs for financing, not to attract excessive cash capital, thus not reducing the efficiency of the business. The managerial version of the balance sheet is presented in the table.
Management version of the balance
The value of current asset management. Current assets usually account for more than half of the company's assets. Management of current assets (as opposed to management of non-current assets) is an ongoing process. The result of the management of current assets is a change in the level of the total risk of the enterprise.
Analysis of the state and effective use of current assets is carried out on the basis of the following indicators:
1) the value of current assets;
2) the structure of current assets;
3) the turnover of certain items of current assets;
4) profitability of current assets;
5) the duration of the financial and operational (production) cycles.
The efficiency of current asset management largely depends on the ratio of the duration of the financial and operational (production) cycles.
The financial cycle begins from the moment of payment to suppliers of raw materials and materials (repayment of accounts payable) and ends when money is received from buyers for shipped products (repayment accounts receivable).
The operational (production) cycle begins from the moment raw materials and materials arrive at the warehouse of the enterprise and ends at the time of shipment to the buyer finished products.
Thus, the operating (production) cycle is part of financial cycle.
Financial cycle = operational (production) cycle + period of turnover of accounts receivable - period of turnover of accounts payable +/- period of turnover of advances.
The duration of the financial and operational (production) cycles is determined using the turnover indicator, which is understood as the turnover period in days of any asset or liability on the balance sheet.
To determine the duration of the financial cycle, the following turnover indicators are calculated:
1) the period of turnover of receivables;
2) the period of turnover of accounts payable.
The shortening of the financial cycle is achieved by reducing:
1) the period of turnover of receivables;
2) the period of turnover of accounts payable.
To determine the duration of the operating (production) cycle, the following turnover indicators are calculated:
1) stocks of raw materials (period of turnover of stocks of raw materials);
2) work in progress (period of work in progress);
3) finished goods (the period of turnover of stocks of finished goods).
Reducing the operating (production) cycle is achieved by reducing:
1) the period of inventory turnover;
2) the period of the work-in-progress turnover;
3) the period of turnover of finished products.
Items of current assets can be located in the balance sheet of a Western enterprise:
1) either in the order of increasing liquidity;
2) either in decreasing order of liquidity.
As mentioned above, the main items of current assets include:
1) cash;
2) short-term financial investments;
3) accounts receivable;
4) inventories.
Current asset management includes:
1) management of cash and cash equivalents;
2) management of accounts receivable;
3) management of inventories.
Working capital calculated on the basis of data on the assets and liabilities of the company for simple formulas... But the result obtained without detailed information about the structure and sources working capital does not give too much in terms of subsequent analysis. Details are in our article.
The economic content of the concept "own working capital "
When you mention your own working capital first of all, associations arise not with money natural person, but with property and financial resources large firm... A significant part of citizens, who have nothing to do with the economy in their work, are intuitively able to calculate the size working capital, although they may not even be aware of it.
Example 1
Lyudmila Yegorovna worked as a literature teacher all her life and was never interested in the concept of her own working capital... She lives in a small 1-room apartment, earning a salary and no other source of income. Her total monthly earnings, taking into account bonuses and allowances, does not exceed 15,000 rubles. per month.
To determine your working capital Lyudmila Egorovna just needs to compare her monthly cash receipts, possible savings and liabilities.
If we proceed from the fact that Lyudmila Yegorovna is poor as a church mouse and has not saved up for any movable property, did not collect a significant amount of cash, while the monthly rent is 1,800 rubles, and in addition, there is a debt of 1,200 rubles. in front of her neighbor Zinaida Fedorovna, then financial position Lyudmila Egorovna cannot be called satisfactory.
Working capital , as a rule, differs at different times. In order to determine it on the day of receipt wages, you need to deduct all obligations from the amount of the payment for the work.
We get: 15,000 - 1,800 - 1,200 = 12,000 rubles.
Although the considered calculation option has no practical value, it allows you to understand the main meaning of calculating your own working capital... It is easy to see that for this you need to compare the indicators of cash, quickly and medium-term realizable assets and short-term liabilities.
For a better understanding of the issue, it is necessary to dwell in more detail on the procedure for calculating the proper working capital organizations. In addition to simply obtaining a result, it is also necessary to analyze the effectiveness of use working capital in a specific period of time.
Characteristics of the equity capital of a commercial company
Any kind entrepreneurial activity requires the presence at the initial stage of a certain amount of its own funds. As a rule, it consists of the founding contributions of one or more business owners in the form of cash, means of production, cars and real estate. In the future, the entire work of the company is based on them, since without material support it would simply be impossible. At the same time, each type of asset has a different degree of return in the process of use and can be sold over different time periods.
Suppose the manufacturing of plastic containers was chosen as the line of business. For this we have the necessary machines and production areas. However, without the availability of free funds on the current account and at the cash desk, it will not be possible to purchase raw materials, materials, pay for the services of skilled workers, and the idea cannot be implemented.
How to get the necessary amount of money for a successful start and subsequent maintenance of production? There are a lot of options:
- get a loan at interest in a credit institution;
- borrow from a more successful friend;
- sell off the available “surplus” property.
With this list, all possible options are not exhausted, since human ingenuity is limitless and the emergence of new ideas on how to acquire money is quite real.
Working capital is necessary to maintain the continuous operation of the company. He advances it even before receiving the first incoming cash flows at the initial stage and helps to ensure further continuous circulation of materials and resources in production, trade, agriculture or service industry. Calculating size working capital gives the entrepreneur information about his business opportunities, the ability to maintain business processes at the proper level, without unforeseen delays and stops.
The structure of the main formula
The main source for calculating your own size working capital certain balance sheet items serve. In the above example, the most general equity working capital formula:
SOK = OA - TP,
where: ОА - current assets;
TP - current liabilities.
The given elements of the formula are fully consistent with sections 2 and 5 of the balance sheet. Section 2 contains a total of 6 positions corresponding to the most liquid part of the company's property. Liquidity should be understood as the ability to quickly sell existing assets and receive cash in return.
According to the specified criterion, current assets can be conditionally divided into groups:
- Absolutely liquid. Cash on accounts, short-term deposits, demand deposits. These assets do not require additional investment of time for implementation, but can immediately be used in the course of business activities as a means of payment. You can dispose of them by simply issuing required documents according to the appropriate form for the bank. Their main distinctive feature that no additional time is needed to convert them into cash.
- Liquid. This can include inventories, stock balances of finished products in the warehouse, receivables and input VAT, and other assets. They are slightly slower to transform into cash and require some effort and time to implement. At the same time, at the onset of difficult times, they can help to pay off debts in a timely manner.
All these types of assets are included in the 1st part of the formula for calculating own working capital... The second part of the formula reflects short-term liabilities. Let's consider them in more detail below.
Short-term liabilities and working capital
The relationship between the company's current liabilities and the amount working capital is the reverse. In other words, the greater the value of the company's current liabilities, the less the amount of its own working capital.
Section 5 of the balance sheet "Short-term liabilities" includes 5 items. Most attention financial service companies require short-term interest-bearing loans and loans. Their servicing assumes the greatest possible accuracy, and any delays in payments on them entail losses to the company in the form of imposing penalties on it according to the contract.
Unpaid debts to counterparties or employees can also cause quite significant financial losses. So:
- Delay in the payment of wages is fraught with the need to bear additional costs to pay employees compensation. The Labor Code of the Russian Federation stipulates that its size must be at least 1/300 discount rate The Central Bank of the Russian Federation, and as much as possible can be limited only by the conditions prescribed in collective agreement companies. Such payments will increase the non-productive costs of the enterprise, and as a result, there may simply not be enough financial resources to maintain the technological process.
- Violation of the deadlines for paying taxes or errors in determining their amount also entail the imposition of fines and an increase in the company's losses.
All such risks must be regularly assessed and measures taken to prevent losses.
The uncontrolled growth of short-term debt leads to an increase in the need for funds, which directly affects the lack of resources to ensure current operations company and reduces its size working capital.
In addition to the above formula, there is 1 more algorithm for determining the size of the proper working capital using other balance sheet indicators. It also needs to be considered in more detail.
An alternative algorithm for calculating the amount of equity working capital
The formula discussed above is not the only one possible. In economic practice, quite often they use a different calculation option using sections 1, 3 and 4 of the balance sheet. It looks like this:
SOK = KR + DP - VA,
where: КР - part of own funds, reflected in the section "Capital and reserves";
DP - long-term liabilities from section 4;
VA - non-current assets from section 1.
The company's equity capital has a fairly strong effect on the amount of working capital. The best way to look at this relationship is with an example.
Example 2
If an entrepreneur, who decided to create a company, limited himself to the minimum authorized capital provided for opening an LLC, already at the beginning of his activity he would have problems with working capital.
This is due to the fact that permitted by law authorized capital LLC is minimally limited to 10,000 rubles, and this amount is clearly not enough for the purchase of raw materials, materials or goods, payment for trade or production space, and hiring personnel.
The newly-minted businessman would have to try hard to find resources to increase working capital to the required level. Large sum the authorized capital, on the contrary, removes a significant part of the problems at the stage of starting a business, allows you to fully finance all the current needs of a young company.
In addition to the authorized capital, the company's own funds also include reserve, additional capital, retained earnings and revaluation made on non-current assets. For the 2nd variant of the calculation in section 4, the amounts of long-term loans, borrowings, accounts payable, estimated liabilities, deferred tax liability and other long-term liabilities. We can say that it is fully involved in the formula.
Next, you just need to add the data from the specified articles of sections 3 and 4 and subtract from them the amount of fixed assets, intangible assets from section 1. The result of the calculation will be the sum of its own working capital companies.
To better understand both techniques, it is best to refer to the example below.
Sample application of methods for calculating own working capital
Both calculation options working capital should lead to an identical result, despite the fact that different items of the company's balance sheet are used.
Example 3
As the initial data, we will take the balance sheet data as of 12/31/2015, given below.
Article title |
Amount, rub. |
|
Assets |
||
1. Non-current assets |
||
Fixed assets |
||
2. Current assets |
||
Stocks |
||
Accounts receivable |
||
Financial investments (except cash equivalents) |
||
Cash and cash equivalents |
||
Balance |
||
Passive |
||
3. Capital and reserves |
||
Statutory fund |
||
Profit before distribution |
||
4. Long-term liabilities |
||
Borrowed funds |
||
5. Short-term liabilities |
||
Accounts payable |
||
Balance |
According to the 1st algorithm, the calculation should look like this:
SOK = (150,000 + 120,000 + 50,000 + 40,000) - 373,000 = 13,000 rubles.
According to the 2nd algorithm, we get:
SOK = (50,000 + 17,000 + 420,000) - 500,000 = 13,000 rubles.
In the methodological literature, own working capital can be defined as net working capital or working capital. This is due to the fact that this term denotes the amount of the company's resources in monetary terms after the repayment of short-term obligations involved in the firm's commodity-money circulation.
But whatever the name of this part of the company's funds, this is a key characteristic of the organization's capital, which serves as an indicator of its overall financial health.
The goals of determining the company's own funds
Calculating the size of its own working capital, you can first of all determine how much of your own funds is directed to servicing current assets. In this case, the indicator obtained in this way can take both positive and negative values or turn out to be equal to 0.
If the sum of current assets turns out to be less than 0, this indicates a bad financial condition firms, because the funds available to it are not enough to pay off even short-term debts. In the event of minimal market shocks, it may find itself in an unenviable position.
What are the reasons for this state of affairs? They can be completely different:
- low level of asset management in general;
- excessive enthusiasm for investments in non-current assets, in particular in unfinished construction;
- a significant increase in buyers' debts;
- lack of profit (growth in assets) for a long time;
- other reasons.
Excessively high value of the size of its own working capital also should not be perceived as positive. Excessive value indicates ineffective use of the company's assets. This can be expressed, for example, in attracting bank loans in a larger volume than necessary, or thoughtless use of net profit. Get the amount equal to 0 working capital possibly in newly created companies or firms that actively attract credit resources for their current activities.
By conducting regular level surveys own working capital, the company can timely influence it in order to maintain its optimal value. Measures that improve the parameters of working capital include:
- reduction of material leftovers in warehouses;
- timely control over the collection of receivables and the prevention of delays.
List possible actions is wide enough and should be applied by managers depending on the specific situation on the basis of detailed information on the structure of assets and liabilities.
Based on the balance sheet data, you can calculate the size own working capital on a specific date. There are 2 formulas for this, each of which gives the correct result, but when using different reporting items. The total amount of calculations fully characterizes the amount of funds allocated for the current financial servicing of the company's current assets, maintaining its basic detail.
In the process of examining the state and overall size own working capital, you can evaluate the results of its application and develop measures to improve its structure, directions of use, search for ways to increase or, on the contrary, decrease to the optimal level.
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