The economic situation of any enterprise to a large extent depends on how quickly invested by them in the development of production, turn into money. In economic science, such a "transformation" is characterized by the concept of turnover, and therefore the analysis of working capital of the enterprise is a very important factor in the economic success of economic activity. The reasons for this dependence are that the turnover speed directly determines:
- the amount of advanced capital;
- interest payments for the use of credit;
- the need to attract additional investment resources;
- the amount of the cost of ensuring ownership of resources and their storage;
- the amount of taxes paid.
That is why, the analysis of working capital of the enterprise allows for the efficient management of assets, and, in addition, is considered as a tool to timely meet the need for them.
The length of the period in circulation is determined by a number of factors, which, in particular, include the sphere of activity of the company and its industry focus, as well as the size of the enterprise
In its most general form, current assets represent some part of the total capital that is used to replenish current assets. To this part of the capital belong the objects of labor, the finished goods produced by the enterprise , as well as cash at the current stage of turnover. Their peculiarity is that these resources, as a rule, have very high parameters of turnover, and therefore significantly differ from fixed capital. Actually this explains their functional purpose - working capital, primarily designed to serve the interests and needs of current production. The fact is that if we consider, for example, material components, the analysis of the enterprise’s working capital should take into account that these elements lose their natural form during the production process and are fully included in the cost of the final product.
In itself, the turnover of this capital includes three main stages: procurement, production and implementation. As a rule, each economic activity begins with money that is used to acquire a certain amount of resources for production or trade. At this stage, current assets are converted into production and are transferred from the material form to production. At the production stage, resources are converted into commodity form, respectively, and working capital as well. Well, and finally, at the implementation stage, current assets are converted into cash. It is the analysis of the enterprise’s working capital that should establish how much of them are in the production sphere and which is in the circulation sphere. It is intended to give a professional assessment of the volumes of shipped products, receivables, in a word, all the elements of the working capital structure.
Rational management is possible only on the basis of its compliance with certain principles of the use of working resources: ensuring the optimal structure, economical spending, stockpiling, rational distribution and redistribution, minimizing the time spent in stocks. These principles essentially capture those tasks that the modern methodology of working capital analysis is designed to provide. For example, objective results of an analysis of their structure can provide significant resource savings on funding needs. To assess them, the following indicators are used:
- net assets characterizing the parameters of the needs of the enterprise in such a resource as working capital;
- liquidity indicators reflecting the general financial condition in terms of working capital potential. According to some parameters, they are conditional; therefore, they should be used with caution in the analysis of working capital.
Working capital is the most important resource for the effective current functioning of the enterprise. In this operation, the main components are such stages of the economic process as production and sale. Analysis and indicators of the effective use of working capital are designed to optimize precisely these stages, first of all.