Working capital of the enterprise

Current assets represent part of the capital of the organization that is invested in current assets. The composition of this part (on material and technical grounds) includes items of labor (fuel, raw materials, materials, etc.), finished products in the company's warehouses, funds in settlements, as well as products for resale and cash. Real components (labor items) of circulating assets are used in each production cycle. At the same time, the objects of labor lose their natural form completely. These working capital are wholly included in the value of the goods produced.

With the help of a portion of the capital that is invested in assets, the continuity of the production process is ensured.

The circuit of circulating assets differs high speed and consists of several stages.

At the procurement stage, capital from the monetary form takes the form of production (becomes the subject of labor, for example).

At the production stage, resources are transformed into services, works or products. As a result, current assets take the form of a commodity.

Further, the sale of products. Thus, the working capital from the commodity form is again transferred to the cash.

Elements of active capital are part of a continuous flow of business transactions. Due to the purchase, production reserves and accounts payable are increasing. The production process leads to an increase in the volume of finished products. Due to the sale, accounts receivable and the amount of funds in the account and in the cash department of the enterprise are increased. This cycle, repeated many times, leads eventually to cash payments and receipts.

Placement of an active part of capital in the production process leads to a separation into circulation funds and production assets.

The latter function during production, and the latter - in the process of circulation, that is, in the sale of finished products and the acquisition of goods as a result of inventory.

To ensure the optimal ratio, it is necessary that a large proportion of production assets should be allocated. The volume of circulation means should be optimal, but not more, to ensure a rhythmic and clear process of circulation.

Production revolutions funds consider stocks (containers, materials, spare parts, raw materials, etc.), expenses of forthcoming periods, work in progress.

The means of circulation include shipped goods, cash, finished goods, accounts receivable and so on.

In accordance with the principles of management and organization of working capital, and also in connection with the need to optimize the volume of reserves, there is a division into circulating assets that are not standardizable and normalized.

The first are elements of circulation funds. They are managed in order to prevent their excessive increase.

The standard working capital is communicated with its own active assets.

Management of the active part of capital as a whole has a close connection with its placement. Different business entities are characterized by different composition and structure of working capital. They depend on the specifics of the organization of the production process, the form of ownership, the peculiarities of production costs. Of no small importance are the relationships with consumers and suppliers, financial condition.

The division of working capital into borrowed and own funds indicates the sources and forms of providing these funds to the organization for temporary or permanent use.

Formation of own assets is carried out with the use of own capital (reserve, statutory and other). Borrowed funds are formed in the form of bank loans, debt.

In addition, funds from additional sources may be attracted.