The ratio of own working capital reveals whether the company has enough of its own funds, which are necessary for its financial stability. The presence of capital by an economic entity is one of the most important conditions for the productive activity of an enterprise. It belongs to the group of coefficients that determine the financial stability of the organization.
Own funds show the level of liquidity and solvency, as well as how the company is able to close its obligations at the moment, realizing current assets. Securing own working capital is extremely important for the positive functioning of the enterprise.
In the absence of such, we can say that all current assets are formed at the expense of borrowed capital. This happens when there is a lack of own sources.
The Ratio of own working capital supposedly should be more than one tenth. With a smaller value, it can be said that the business entity does not have enough of its own money in order to finance current activities. It should be noted that the value of this indicator is very tough, it is very difficult for Russian enterprises to achieve it.
The Ratio of own working capital is calculated in the following ways:
Kosos = SobObsr / OA;
either Kosos = (Sobkap - VnesheobA) / ObA;
or Kosos = (KR + DBP + RPR - VNA) / BOTH,
Where:
- SobOobSr - it's own funds;
- SobKap - equity;
- VnesheobA - non-current assets;
- KR - the result of the section on capital and reserves;
- DBP - income in future periods;
- RPR - reserves for future expenses;
- BOTH are current assets.
The meaning of the second formula is as follows: the difference in the numerator is the financing of the most liquid (non-current) assets, using the most sustainable sources - own. In addition, part of the working capital must remain in order to ensure the financial activities of the company.
The Ratio of security of current assets with own funds can also be determined using the balance:
Kosos = (490 - 190) / 290 (in lines).
This ratio is not applicable in Western countries. It was introduced into Russian practice to determine the bankruptcy (or insolvency) of an economic entity.
Factors that determine how much a business entity is provided with its own funds are identified as a result of correlation and regression analyzes. As a result, the following are most interconnected with the coefficient under consideration:
- current liquidity ;
- profitability of sales;
- inventory turnover;
- labor productivity.
The ratio of own working capital, along with these indicators, helps to compile the overall financial picture of the organization. And this is the most important characteristic of the enterprise. Thus, the competitiveness of the business entity, its potential capabilities are determined, and the degree of guarantee of the economic interests of the company and its partners is also assessed. If an enterprise is financially stable, then among organizations of the same profile it is able to attract more investments, receive loans, choose suppliers and select qualified specialists.