Usage performance indicators working capital are determined by calculating the turnover ratio, the average duration of one turnover and the amount of released working capital as a result of accelerating their turnover.
To analyze the use of working capital, estimates financial condition enterprises and the development of 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 the 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 (number of revolutions). The greater the number of revolutions, the less the need for working capital.
Working capital turnover ratio (turnover rate) calculated:
where RP - volume of products sold per year, rub.
The introduction of the achievements of scientific and technological progress and a clear organization of logistics and sales have a great influence on the acceleration of turnover. Average duration of one revolution defined:
,
where T lane - time of the planned period, days.
The reciprocal of the turnover rate shows the amount of working capital advanced for 1 rub. proceeds from the sale of products. This ratio characterizes the degree of loading of funds in circulation and is called working capital utilization factor:
.
The lower the value of the load factor of working capital, the more efficient use of working capital.
The amount of release of working capital as a result of accelerating their turnover defined:
,
where T cd- duration of the planning period, calendar days;
Planned or base time of one turn, days;
Actual (reported) turnover time, days;
Acceleration of the turnover of one turnover, days.
The release of working capital can be absolute and relative. Absolute Release occurs when the actual need is less than the planned one, i.e., this is the difference between the planned need for a given period and the actual sum of the average balances of normalized working capital. Relative release - This is the difference between the planned and estimated need for working capital.
Absolute release of working capital can also be calculated through the turnover ratio by the formula:
.
Relative release of working capital calculated by formula.
One of the most important performance indicators production activities company, is the asset turnover. After all, the faster the values go through the full production cycle, the more efficient the functioning of the enterprise. The release of working capital is the financial result of accelerating the turnover of current assets. Consider what are current assets, as well as what role the release of working capital plays.
Valuable property of the organization used in the implementation process economic activity, can be classified depending on the degree of liquidity, that is, the ability to quickly turn into a monetary equivalent, as well as how long the period of use of the asset is. If we are talking about non-current assets, then we cannot talk about them as liquid values. This category includes machinery and equipment, permanent structures, intangible assets and other property with similar characteristics. The use of such assets exceeds one calendar year and is transferred to the cost of production in installments.
Working capital has diametrically opposite characteristics. This category values are largely determined by significant liquidity (with the exception of uncollectible receivables and stale stocks of material assets).
The cost of working capital is transferred to the manufactured products in full. The use of this category of property for the most part does not exceed the duration of one production cycle or one calendar year.
What is the amount of released working capital?
In the case when, in the process of doing business, by rationalizing the use of working capital, a reduction in the need for them is achieved, we can talk about the release of working capital (the formula for calculating will be presented below).
The value of the process of release of assets for the company cannot be underestimated, since the actual savings in material costs is one of the basic sources of cost reduction, increase in profitability and the level of real profit.
Absolute and relative release of working capital
At its core, in practice, there is a relative release of working capital and absolute.
The absolute release of working capital is a direct reduction in the organization's need for current assets. This type of cost reduction occurs when the balance of assets is significantly lower than the standard established by the company, or the amount noted in previous periods.
As for the relative release of working capital (we will consider the formula below), this indicator considers the relationship between reducing the number of working capital of the company and increasing the value of the company's commercial output. This type release takes place in those cases when the process of accelerating the passage of the cycle of current assets is carried out simultaneously with an increase in the amount of marketable products released. At the same time, the rate of production growth should significantly outpace the increase in the balance of assets.
In order to determine the amount of released working capital, both in absolute and relative terms, it is enough to use mathematical calculation formulas. Let's consider each of them.
The absolute release of working capital - the formula - can be represented as follows:
Absolute release = (Duration of 1 turnover in the base period - Duration of 1 turnover in the reporting period) / Volume of current assets / Period.
In this case, the relative release will be determined using the formula:
Relative release = Volume of current assets in the base period * Growth rate of manufactured products - Volume of current assets in the reporting period.
Thus, it will not be difficult to determine the release of working capital, both in absolute and relative terms, when using the following formulas for calculation.
The process of absolute release occurs when the actual need for assets is much lower than planned. At the same time, it will be necessary to compare the real need for assets relevant for the previous period and their planned need, provided that production volumes either remain at the current level or increase.
Relative release manifests itself in the form of a reduction in the real value of the company's assets in the period under review in comparison with the results achieved earlier.
Consider how the amount of released working capital is determined using a practical example.
This year, the real V of output was achieved - 1200 tr, while the volume of all current assets amounted to 1500 tr, the planned V of production for the next year - 2000 tr. provided that the asset turnover will be increased by 5 days.
- Let's define turnover:
O \u003d 1500 / (1200 / 360) \u003d 45 days;
- The amount of working capital:
OS \u003d 20000 * 45 / 360 \u003d 2500 tr;
- The amount of working capital in the next year:
OS \u003d 2000 * (45 - 5) / 360 \u003d 2220 tr.
- Relative release of assets:
RH = 2500 - 2220 = 280 tr.
The calculation of the relative and absolute release of current assets using the above formulas allows organizations to speed up the process of turnover of existing assets and identify hidden reserves, which, in turn, will ensure the emergence of free cash resources that the company can direct to business development without attracting third parties. sources of financing activities.
The most important indicators of the effectiveness of the use of working capital with the speed of their turnover (turnover ratio) and the duration of one turnover in days.
Working capital turnover ratio shows the number of turnovers that these funds carry out for the planned period. This coefficient is determined by the formula
where R- volume sold in planning period products in current wholesale prices for the year (quarter), UAH; - the average balance of working capital, that is, the monetary calculation of the amount of working capital that is simultaneously at the enterprise in all six forms, UAH.
example 3
The annual volume of sold products is UAH 10 million. At the same time, the energy company operates with the amount of working capital (the average balance of working capital) in the amount of UAH 0,500,000. Thus, during the year, working capital will turn around times.
The turnover ratio shows the amount of products sold falls on one ruble of working capital.
Working capital utilization factor in turnover characterizes their amount per one hryvnia of sold products:
The duration of one turnover of working capital (average turnover period) shows during what period (in how many days) working capital makes one turnover. The value of this indicator in days can be determined:
where D- the number of days in the planning period.
example 4
If for a year ( D\u003d 365 days) working capital made 20 revolutions (\u003d 20), the duration of one revolution is \u003d 365/20 \u003d 18.2 days.
Formula (3.9) can be represented in another form:
Now we can equate the right parts of both expressions - (3.7) and (3.10):
(3.11)
The resulting formula clearly illustrates the principle known not only to economists: "Time - money!". In our case, the right side of the formula contains time, and the left side contains money.
Release of working capital called the relative decrease in the need for working capital, due to the acceleration of their turnover, which ensures the preservation or increase in the existing level of sales of products.
Note
Formula (3.11) makes it possible to master the depth economic processes occurring at the enterprise, to come closer to understanding one of the main secrets of the economy forms the formula "Time - money!".
Indeed, even appearance formulas (3.11), where only cost indicators, and on the right - time factors, give a chance
understand that there is a direct relationship between the cost of funds and the cost of time.
Directions for the implementation of this connection can be traced in the following:
The same result in terms of increasing the volume of sales can be achieved by: a) increasing the average balance of working capital at a constant speed of their rotation; b) increasing the rate of turnover of working capital with their volume unchanged (reducing the turnover period)
In terms of its economic result, saving time is equivalent to saving money: a decrease in the turnover period of working capital makes it possible, without losing the volume of sales, to refuse part of the working capital or, while maintaining their balance, to increase the volume of sales;
The shortage of working capital can be compensated to a certain extent by saving time: it is necessary to make working capital rotate faster, reducing the periods for the supply of raw materials, production, and the sale of finished goods;
Any slowdown in the course of working capital turnover cycles makes you pay for it with money; in order not to lose the volume of sales, the company is forced to "inflate" working capital; it is here, as a rule, that wages are delayed, this is what prevents its timely increase.
Absolute Release shows a direct decrease in the need for working capital.
example 5
If the average working capital amounted to UAH 200 million last year, and UAH 195 million this year, then the absolute release is UAH 5 million. This does not take into account the change in the volume of products sold.
Relative release characterizes both the change in the value of working capital and the change in the volume of sales. To determine it, you need to calculate the need for working capital for the reporting period (year), based on the actual turnover and sales volume for the specified period and turnover in days for the previous period (year). The difference shows the amount of the release of working capital.
example 6
Determine the relative release of working capital, if there is such data for the enterprise for 2011-2012 pp. (Million UAH):
solution
Turnover period in days for 2011. - 10 360/36 = 100 (days). The need for working capital in 2012. With a rotation speed corresponding to the turnover in 2011 and the volume of sales in 2012, it is 40 100/360 = 11.1 (million hryvnia).
Considering that the average balance of working capital for 2012 amounted to UAH 9,500,000, the relative release is UAH 1,600,000 (11.1 - 9.5).
These indicators can be calculated as a whole for all working capital and for their individual elements (the so-called element-by-element turnover of funds).
The need for working capital is directly dependent not only on the volume of production (sales), but also on the duration of the turnover. For the reduction of the turnover period, working capital is released from circulation, and, conversely, an increase in the turnover period causes the need for additional funds.
In cases where the relative release of working capital, due to the acceleration of turnover, exceeds the additional need for funds necessary to ensure an increase in production volumes, there is an absolute release of working capital. If, however, the additional need for working capital associated with the increase in production is greater than the amount released as a result of the acceleration of turnover, we can only speak of a relative release of working capital. It determines the size of the reduction of this additional requirement. The amount of working capital released due to the acceleration of turnover characterizes the improvement in the use of working capital.
5. Indicators of the effectiveness of the use of working capital
Improving the use of working capital with the development of entrepreneurship is becoming increasingly important, since the material and financial resources released in this case are an additional internal source of further investment. Rational and efficient use of working capital contributes to financial stability enterprise and its solvency. Under these conditions, the enterprise timely and fully fulfills its settlement and payment obligations, which allows it to successfully carry out commercial activities.
The efficiency of the use of working capital is characterized by a system economic indicators, primarily the turnover of working capital.
Under the turnover of working capital is understood the duration of one complete circulation of funds from the moment of the transformation of working capital into monetary form to production stocks and before exit finished products and its implementation. The circulation of funds ends with the transfer of proceeds to the account of the enterprise.
The turnover rate of working capital is calculated using three interrelated indicators:
- turnover ratio (the number of turnovers made by working capital for certain period(year, half year, quarter));
- the duration of one revolution in days,
- the amount of working capital per unit of products sold.
The calculation of the turnover of working capital can be carried out both according to the plan and actually.
The planned turnover can be calculated only for the normalized turnover of funds, the actual one - for all working capital, including non-standardized ones. Comparison of planned and actual turnover reflects the acceleration or deceleration of the turnover of normalized working capital. With the acceleration of turnover, working capital is released from circulation, with a slowdown, there is a need for additional involvement of funds in circulation.
The turnover ratio is defined as the ratio of the amount of proceeds from the sale of products, works, services to the average balance of working capital according to the formula (Fig. 7.29):
K about \u003d P / C,
where P is the net proceeds from the sale of products, works, services, rubles;C - average balances of working capital, in rubles.
Rice. 7.29. Methodology for calculating the turnover ratio
The turnover of working capital can also be presented in days, that is, reflect the duration of one turnover (Fig. 7.30).
The duration of one revolution in days is determined by the formula:
O \u003d C: R / D or O \u003d D / K about,
where O is the duration of one revolution in days;C - balances of working capital (average annual or at the end of the upcoming (reporting) period), rubles;P - revenue of marketable products (at cost or in prices), rubles;D - the number of days in the reporting period.
Rice. 7.30. Calculation of the duration of one turnover in days
To determine the duration of one turnover of receivables, you can use the indicator of sales in selling prices. First, the volume of sales for one day is calculated, and then the urgency of the receivables.
The calculation is made according to the formula:
OD = DZ: Oh,
where OD is the duration of the turnover of receivables (in days);DZ - accounts receivable at the end of the year;O is the volume of sales per day.
The period required for the circulation of all working capital in cash, consists of the duration of one inventory turnover in days and the urgency (duration) of one receivables turnover.
The working capital utilization factor is the reciprocal of the turnover ratio (Fig. 7.31). It characterizes the amount of working capital per unit (1 ruble, 1 thousand rubles, 1 million rubles) of sold products. At its core, this indicator represents the capital intensity of working capital and is calculated as the ratio of the average balance of working capital to the volume of product sales for the analyzed period. Calculated according to the formula:
K z \u003d C / P,
where K z - working capital utilization factor;C - average balance of working capital, rub.;P - proceeds (net) from the sale of products, works, services, rub.
Rice. 7.31. Load Factor Calculation
Example: Over the past year, the volume of marketable products at cost amounted to 350,000 thousand rubles. The average balance of working capital for the same period is 47,800 thousand rubles. Determine the performance indicators for the use of working capital by the enterprise.
The calculation is carried out in the following sequence:
1. The turnover ratio is determined: 350,000 / 47,800 = 7.3 turns. That. for the year, working capital made 7.3 rounds. In addition, this indicator means that for every ruble of working capital, 7.3 rubles of sold products accounted for.
2. The duration of one revolution is calculated: 360 / 7.3 = 49.3 days
3. The load factor is determined: 47,800 / 350,000 = 0.14.
In addition to these indicators, the indicator of return on working capital can also be used, which is determined by the ratio of profit from the sale of the company's products to the average balances of working capital (Fig. 7.32).
Rice. 7.32. Return on current assets
Turnover can be defined as general and as private.
General turnover characterizes the intensity of the use of working capital in general for all phases of the circulation, without reflecting the features of the circulation of individual elements or groups of working capital.
Private turnover reflects the degree of use of working capital in each phase of the cycle, in each specific phase of the cycle, in each group, as well as for individual elements of working capital.
To determine the impact of structural changes, the balances of individual elements of working capital are compared with the volume of marketable products (T), which was taken when calculating total turnover working capital. In this case, the sum of the indicators of private turnover of individual elements of working capital will be equal to the indicator of the turnover of all working capital of the enterprise, that is, the total turnover.
The quantitative result of the efficiency of the use of working capital is their release from circulation (with an acceleration of turnover) or additional involvement in economic turnover (with a slowdown in the turnover of working capital) (Fig. 7.33).
Rice. 7.33. Consequences of acceleration and deceleration of working capital turnover
Release can be absolute or relative.
Absolute release of working capital takes place when the actual balance of working capital is less than the standard or the balance of working capital for the previous (base) period while maintaining or increasing the volume of sales for this period.
The relative release of working capital takes place in cases where the acceleration of the turnover of working capital occurs simultaneously with the growth in production at the enterprise, as a result, the growth rate of sales outstrips the increase in working capital.
The funds released at the same time cannot be withdrawn from circulation, as they are in inventories of goods and materials, which ensure the growth of production.
The relative release of working capital, like the absolute one, has a single economic basis and value, or means for the economic entity additional cost savings and allows for an increase in the scale entrepreneurial activity without any additional financial resources.
Example: It is known that for the previous year, the proceeds from the sale of products (in pg) amounted to 6,000 million rubles, for the current year (in tenge) - 7,000 million rubles. The average balance of working capital in the previous year (OS pg) - 600 million rubles, in the current year (OS tg) - 500 million rubles. The number of days in period D is 360 days. Determine the magnitude of the absolute and relative release of working capital from economic turnover.
The calculation is made in the following sequence:
1. The turnover ratios are calculated:
Previous year (KO pg) = 6,000 / 600 = 10 revolutions
Current year (KO tg) = 7,000 / 500 = 14 turns
2. The duration of one revolution in days is determined:
In the previous year (D pg) = 360 / 10 = 36 days
In the current year (D tg) = 360 / 14 = 25.71 days
3. Load factors are determined:
Previous year (KZ pg) = 600 / 6000 = 0.1
Current year (KZ tg) = 500 / 7000 = 0.07142
4. Two methods can be used to calculate the release of working capital.
Method 1: The total amount of release of funds from the economic turnover is calculated according to the formula V = (D tg - D pg) × V tg / D; absolute release: V ab = OS pg - OS tg; relative release: B rel = B - B ab.
According to the task:
B \u003d (25.71 - 36) × 7000 / 360 \u003d (-200) million rubles.
Vab = 500 - 600 = (-100) million rubles
Votn \u003d (-200) - (-100) \u003d (- 100) million rubles.
Method 2: The total amount of release from economic circulation is calculated by the formula B = (KZ tg - KZ pg) × V tg; absolute release: V ab \u003d OS pg - (V tg / KO pg); relative release: V rel = (V tg -V pg) / KO tg.
According to the task:
B \u003d (0.07142-0.1) × 7000 \u003d (-200) million rubles.
Vab \u003d 600 - (7000 / 10) \u003d (-100) million rubles.
Votn \u003d (6000 - 7000) / 10 \u003d (-100) million rubles.
The efficiency of the use of working capital depends on many factors, which can be divided into external factors that influence regardless of the interests of the enterprise, and internal factors that the enterprise can and should actively influence.
To external factors include: general economic situation, tax legislation, conditions for obtaining loans and interest rates on them, the possibility of targeted financing, participation in programs financed from the budget. These and other factors determine the scope within which an enterprise can manipulate internal factors working capital.
Significant reserves for increasing the efficiency of the use of working capital lie directly in the enterprise itself. In manufacturing, this applies primarily to inventories. Being one of the components of working capital, they play an important role in ensuring the continuity of the production process. At the same time, inventories represent that part of the means of production that is temporarily not involved in the production process.
Rational organization production stocks- an indispensable condition for increasing the efficiency of the use of working capital. The main ways to reduce inventories are reduced to their rational use, eliminating excess stocks of materials, improving rationing, improving the organization of supply, including by establishing clear contractual terms of supply and ensuring their implementation, optimal selection of suppliers, and streamlined transport. Important role belongs to the improvement of the organization of warehouse management.
Accelerating the turnover of working capital allows you to release significant amounts and thus increase the volume of production without additional financial resources, and use the released funds in accordance with the needs of the enterprise.
One of the most important indicators of the efficiency of the company's production activities is the turnover of assets. After all, the faster the values go through the full production cycle, the more efficient the functioning of the enterprise. The release of working capital is the financial result of accelerating the turnover of current assets. Consider what are current assets, as well as what role the release of working capital plays.
The valuable property of an organization used in the course of business activities can be classified depending on the degree of liquidity, that is, the ability to quickly turn into a cash equivalent, as well as how long the period of use of the asset is. If we are talking about non-current assets, then we cannot talk about them as liquid values. This category includes machinery and equipment, permanent structures, intangible assets and other property with similar characteristics. The use of such assets exceeds one calendar year and is transferred to the cost of production in installments.
Working capital has diametrically opposite characteristics. This category of values is largely determined by significant liquidity (with the exception of uncollectible receivables and stale stocks of material assets).
The cost of working capital is transferred to the manufactured products in full. The use of this category of property for the most part does not exceed the duration of one production cycle or one calendar year.
What is the amount of released working capital?
In the case when, in the process of doing business, by rationalizing the use of working capital, a reduction in the need for them is achieved, we can talk about the release of working capital (the formula for calculating will be presented below).
The value of the process of release of assets for the company cannot be underestimated, since the actual savings in material costs is one of the basic sources of cost reduction, increase in profitability and the level of real profit.
Absolute and relative release of working capital
At its core, in practice, there is a relative release of working capital and absolute.
The absolute release of working capital is a direct reduction in the organization's need for current assets. This type of cost reduction occurs when the balance of assets is significantly lower than the standard established by the company, or the amount noted in previous periods.
As for the relative release of working capital (we will consider the formula below), this indicator examines the relationship between a decrease in the amount of working capital of a company and an increase in the amount of marketable products produced by an enterprise. This type of release takes place in cases where the process of accelerating the passage of the cycle of current assets is carried out simultaneously with an increase in the amount of marketable products produced. At the same time, the rate of production growth should significantly outpace the increase in the balance of assets.
In order to determine the amount of released working capital, both in absolute and relative terms, it is enough to use mathematical calculation formulas. Let's consider each of them.
The absolute release of working capital - the formula - can be represented as follows:
Absolute release = (Duration of 1 turnover in the base period - Duration of 1 turnover in the reporting period) / Volume of current assets / Period.
In this case, the relative release will be determined using the formula:
Relative release = Volume of current assets in the base period * Growth rate of manufactured products - Volume of current assets in the reporting period.
Thus, it will not be difficult to determine the release of working capital, both in absolute and in relative terms, when using the following formulas for calculation.
The process of absolute release occurs when the actual need for assets is much lower than planned. At the same time, it will be necessary to compare the real need for assets relevant for the previous period and their planned need, provided that production volumes either remain at the current level or increase.
Relative release manifests itself in the form of a reduction in the real value of the company's assets in the period under review in comparison with the results achieved earlier.
Consider how the amount of released working capital is determined using a practical example.
This year, the real V of output was achieved - 1200 tr, while the volume of all current assets amounted to 1500 tr, the planned V of production for the next year - 2000 tr. provided that the asset turnover will be increased by 5 days.
- Let's define turnover:
O \u003d 1500 / (1200 / 360) \u003d 45 days;
- The amount of working capital:
OS \u003d 20000 * 45 / 360 \u003d 2500 tr;
- The amount of working capital in the next year:
OS \u003d 2000 * (45 - 5) / 360 \u003d 2220 tr.
- Relative release of assets:
RH = 2500 - 2220 = 280 tr.
The calculation of the relative and absolute release of current assets using the above formulas allows organizations to speed up the process of turnover of existing assets and identify hidden reserves, which, in turn, will ensure the emergence of free cash resources that the company can direct to business development without attracting third parties. sources of financing activities.