A revolving fund is a rational allocation of the resources of an enterprise

The revolving fund is the share of production assets of the organization, fully consumed for the production cycle and paying for its value as a result of the sale of the product. Consider the structure, composition, indicators of working capital in this article in more detail.

We will expand the concept and structure of revolving funds

Revolving fund is the presented cost of a material, raw materials, all industrial-material stocks for manufacturing of a product, transportation, storage. Separate two groups of real elements OF:

1. Materials and raw materials for the manufacture of the product. That is, those items that are not yet involved in production.
2. Unfinished production.

Under the concept and definition of working capital is also understood the financial evaluation of values that are used for a short time. The enterprise is fixed in the balance sheet among assets (short-term). Production reserves and production, which is not completed, are divided into different financing groups:

1. Stocks are advanced with receipt at the disposal of the subject directly.
2. Incomplete production is financed in three ways:

• On the full cost of already expended or future work (materials, electricity, fuel);
• On depreciation, partial cost;
• On wages.

The revolving fund is the material, technical, labor and other means that participate in the production and sales process. This is a short and clearer definition.

Use of revolving funds

Effective and efficient work of an organization is to obtain maximum benefit with less production costs. In order for the enterprise to work successfully, a clear and precise allocation of working capital is necessary . The functioning of revolving funds is influenced by many factors:

• Characteristics of products produced;
• Features and individuality of technical and material support;
• The amount of expenditures in relation to the previous period (progressivity of norms);
• Stocks and ratios of work in progress;
• Strength and quality of the product.

The main task of any organization is to get the highest quality product at the lowest costs for production.

Indicators of circulating funds

According to four main indicators, it is possible to evaluate both the production process and the result of using circulating production assets.

Main factors:

1. The turnover ratio means the number of committed revolutions in a certain amount of time.
2. Duration of one revolution. Shows how much time is spent for 1 production cycle.
3. Specific consumption of materials and raw materials. The total amount of raw material that was spent per product (per unit).
4. Material consumption. The amount of financial resources spent on the production of the first unit of the product.

Conclusion

The revolving fund is a kind of indicator of the competent distribution of tangible and intangible resources. The more thoroughly everything is distributed, the more rational and more profitable the enterprise works.