Analysis of turnover of working capital and its importance for assessing the financial sustainability of the enterprise

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2020-07-03 01:24:07

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Current assets (OS) – these are assets of the enterprise or company, which can regular intervals to the resume and serve to support the activities in this current time. If this minimum turnover is one turnover at least. Can be used and other indicators of turnaround time. This may be calendar year, fiscal year, or production cycle of the enterprise. It is important to analyze the structure of working capital to understand their role in the economic process.

According to the traditional classification in their composition there are two categories: working capital and funds circulation. The first category includes production stocks, unfinished production and semi-finished products, as well as funds planned for use in future periods.

Inventories include spare parts, raw materials, various additional industrial materials, etc. Their size is set for reasons of ensuring smooth operation of the company.

Work in progress — are materials, parts and products that are still in the production process.

The costs of developing promising technologies and marketing make up a group of deferrals.

Produce an analysis of sources of formation of circulating assets as funds for the treatment of:

finished product

- already shipped the goods to the consumer;

all funds in the accounts;

- the funds in the payments to consumers and suppliers.

This structure shows a share of some specific operating system components in a common set of tools.

The management OS is a fairly urgent problem. Analysis of turnover of working capital is increasingly becoming a subject of research within the economic science. This is because the economic practices of the most demanded unique solutions, the most modern concepts and techniques of financial management. It is the analysis of turnover of working capital is adequate to determine the financial condition of the company or of the company, opportunities to properly assess the liquidity indicators, which are more and more dependent on business activity and the asset is used.

As they participate in the formation of a significant proportion of liquid assets, the effective value of the OS needs to ensure the stable operation of the enterprise. In this case, the criteria of this effectiveness are the indicators in the minimum time period of treatment and its speed. During this period, should happen the conversion of circulating capital into real money.

The Need for investment is directly proportional to the velocity of circulation. Therefore, the lower the turnover rate, the higher the need of the business or organization to leverage resources. And this, in turn, reduces the stability of the enterprise in the conditions of unstable market and its attractiveness for foreign investors.

Effective control of OS was achieved when the analysis of working capital turnover shows that their values are at the level of 58-75% of total assets.

In Addition, since the OS is designed, primarily, for maintenance and continuity of the current production, the analysis of turnover of working capital makes it possible to quickly restructure the entire system with the OS to give it a more advanced configuration, corresponding to modern requirements of financial management.

In short, the role and importance of professional analysis of OS becomes a necessary tool of management strategy and method of rapid response to changes in the dynamically changing market conditions.


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ZH: https://tostpost.com/zh/business/45752-analysis-of-turnover-of-working-capital-and-its-importance-for-assessi.html






Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."

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