Calculation of the optimal value of working capital. Calculation of the turnover ratio of material working capital

5. Indicators of efficiency in the use of working capital

Improving the use of working capital with the development of entrepreneurship is becoming increasingly important, since the material and monetary resources released in this case are an additional internal source of further investment. Rational and efficient use of working capital helps to increase the financial stability of the enterprise and its solvency. Under these conditions, enterprises timely and fully fulfill their settlement and payment obligations, which allows them to successfully carry out commercial activities.

The efficiency of using working capital is characterized by a system of economic indicators, primarily the turnover of working capital.

Working capital turnover refers to the duration of one complete circulation of funds from the moment working capital is converted in cash into inventory until the release of finished products and their sale. The circulation of funds is completed by crediting the proceeds to the enterprise account.

The turnover rate of working capital is calculated using three interrelated indicators:

– turnover ratio (the number of turnovers made by working capital for a certain period (year, half-year, quarter));

– duration of one revolution in days,

– the amount of working capital per unit of products sold.

The calculation of working capital turnover can be carried out both according to plan and actually.

Planned turnover can be calculated only based on standardized turnover of funds; actual turnover can be calculated for all working capital, including non-standardized ones. A comparison of planned and actual turnover reflects the acceleration or deceleration of the turnover of normalized working capital. When turnover accelerates, working capital is released from circulation; when it slows down, there is a need for additional involvement of funds in turnover.

The turnover ratio is defined as the ratio of the amount of revenue from the sale of products, works, services to the average balance of working capital according to the formula (Fig. 7.29):

K ob = R / C,

where P is net revenue from sales of products, works, services, rubles;C – average working capital balances, in rubles.

Rice. 7.29. Methodology for calculating the turnover ratio

The turnover of working capital can also be presented in days, that is, reflect the duration of one turnover (Fig. 7.30).

The duration of one revolution in days is determined by the formula:

O = S: R / D or O = D / K about,

where O is the duration of one revolution in days;C – working capital balances (annual average or at the end of the upcoming (reporting) period), rub.;P – revenue of commercial products (at cost or in prices), rub.;D – number of days in the reporting period.

Rice. 7.30. Calculation of the duration of one revolution in days

To determine the duration of one turnover of receivables, you can use the sales volume indicator at selling prices. First, the sales volume for one day is calculated, and then the urgency of receivables.

The calculation is made using the formula:

OD = DZ: Oh,

where OD is the duration of the receivables turnover (in days);DZ – accounts receivable at the end of the year;O – sales volume for one day.

The period required to convert all working capital into cash is the sum of the duration of one turnover of inventories in days and the urgency (duration) of one turnover of receivables.

The working capital utilization ratio is the inverse indicator of the turnover ratio (Fig. 7.31). It characterizes the amount of working capital per unit (1 ruble, 1 thousand rubles, 1 million rubles) of products sold. At its core, this indicator represents the capital intensity of working capital and is calculated as the ratio of the average balance of working capital to the volume of product sales for the analyzed period. Calculated by the formula:

K z = S / R,

where Kz is the working capital load factor;C – average balance of working capital, rub.;R – revenue (net) from sales of products, works, services, rub.

Rice. 7.31. Load Factor Calculation

Example: Over the past year, the volume of commercial products at cost amounted to 350,000 thousand rubles. The average balance of working capital for the same period is 47,800 thousand rubles. Determine the efficiency indicators for the use of working capital by the enterprise.

The calculation is carried out according to the following sequence:

1. The turnover ratio is determined: 350,000 / 47,800 = 7.3 revolutions. That. During the year, working capital made 7.3 turnovers. In addition, this indicator means that for every ruble of working capital there were 7.3 rubles of sold products.

2. The duration of one revolution is calculated: 360 / 7.3 = 49.3 days

3. The load factor is determined: 47,800 / 350,000 = 0.14.

In addition to the indicated indicators, the return on working capital indicator can also be used, which is determined by the ratio of profit from sales of the enterprise's products to the average balance of working capital (Fig. 7.32).

Rice. 7.32. Return on current assets

Turnover can be defined as general and private.

General turnover characterizes the intensity of use of working capital as a whole for all phases of the circulation, without reflecting the characteristics of the circulation of individual elements or groups of working capital.

Partial turnover reflects the degree of use of working capital in each phase of the circuit, in each specific phase of the circuit, in each group, as well as for individual elements of working capital.

To determine the impact of structural changes, the balances of individual elements of working capital are compared with the volume of marketable products (T), which was taken when calculating the total turnover of working capital. In this case, the sum of the private turnover indicators of individual elements of working capital will be equal to the turnover indicator of all working capital of the enterprise, that is, the total turnover.

The quantitative result of the effectiveness of the use of working capital is their release from circulation (with acceleration of turnover) or additional involvement in economic turnover (with slowdown of turnover of working capital) (Fig. 7.33).

Rice. 7.33. Consequences of acceleration and deceleration of working capital turnover

Release can be absolute or relative.

The absolute release of working capital occurs when the actual balances of working capital are less than the standard or balances of working capital for the previous (base) period while maintaining or increasing the sales volume for this period.

Relative release of working capital occurs in cases where the acceleration of working capital turnover occurs simultaneously with an increase in production volume at the enterprise, as a result, the growth rate of sales outstrips the increase in working capital.

The funds released in this case cannot be withdrawn from circulation, since they are in inventories of goods and materials, ensuring production growth.

Relative release of working capital, like absolute release, has a single economic basis and meaning, or means additional savings for an economic entity and allows for an increase in the scale of business activity without attracting additional financial resources.

Example: It is known that for the previous year, revenue from product sales (in the previous year) amounted to 6,000 million rubles, for the current year (in the tenth year) - 7,000 million rubles. The average balance of working capital in the previous year (OS pg) is 600 million rubles, in the current year (OS tg) – 500 million rubles. The number of days in period D is 360 days. Determine the amount of absolute and relative release of working capital from economic turnover.

The calculation is carried out in the following sequence:

1. Turnover ratios are calculated:

Previous year (KO pg) = 6,000 / 600 = 10 revolutions

Current year (KO tg) = 7,000 / 500 = 14 revolutions

2. The duration of one revolution in days is determined:

In the previous year (D pg) = 360 / 10 = 36 days

In the current year (D tg) = 360 / 14 = 25.71 days

3. Load factors are determined:

Previous year (KZ pg) = 600 / 6000 = 0.1

Current year (KZ tg) = 500 / 7000 = 0.07142

4. To calculate the release of working capital, two methods can be used.

Method 1: The total amount of funds released from economic circulation is calculated using the formula B = (D tg - D pg) ×B tg / D; absolute release: B ab = OS pg – OS tg; relative release: V rel = V – V ab.

According to the problem:

B = (25.71 – 36) ×7000 / 360 = (-200) million rubles.

Wab = 500 – 600 = (-100) million rubles.

Votn = (-200) – (-100) = (- 100) million rubles.

Method 2: The total amount of release from economic circulation is calculated using the formula B = (KZ tg - KZ pg)×B tg; absolute release: B ab = OS pg – (B tg / KO pg); relative release: V rel = (V tg -V pg) / KO tg.

According to the problem:

B = (0.07142-0.1) ×7000 = (-200) million rubles.

Wab = 600 – (7000 / 10) = (-100) million rubles.

Votn = (6000 – 7000) / 10 = (-100) million rubles.

The efficiency of using working capital depends on many factors, which can be divided into external ones, which influence regardless of the interests of the enterprise, and internal ones, which the enterprise can and should actively influence.

External factors include: the general economic situation, tax legislation, conditions for obtaining loans and interest rates on them, the possibility of targeted financing, participation in programs financed from the budget. These and other factors determine the framework within which an enterprise can manipulate the internal factors of working capital.

Significant reserves for increasing the efficiency of using working capital lie directly in the enterprise itself. In the manufacturing sector, this applies primarily to inventories. Being one of the components of working capital, they play a big role in ensuring the continuity of the production process. At the same time, industrial stocks represent that part of the means of production that is temporarily not involved in the production process.

Rational organization of inventories is an indispensable condition for increasing the efficiency of using working capital. The main ways to reduce production inventories come down to their rational use, elimination of excess stocks of materials, improvement of rationing, improvement of supply organization, including by establishing clear contractual terms of supply and ensuring their implementation, optimal selection of suppliers, and smooth operation of transport. An important role belongs to improving the organization of warehouse management.

Accelerating the turnover of working capital allows you to free up significant amounts and thus increase production volume without additional financial resources, and use the freed funds in accordance with the needs of the enterprise.

Explanation of the essence of the working capital turnover indicator

Working capital turnover (English equivalent - Current Asset Turnover) is an indicator of business activity that measures the efficiency of using the company's current assets (cash, inventory of goods, inventories, accounts receivable). The ratio demonstrates the ratio of revenue to the average amount of current assets for the period. The value of the indicator indicates the number of revolutions made by current assets. In fact, an increase in the value of the indicator indicates that the company needs fewer resources in order to maintain the current level of activity. This leads to the release of part of the financial resources, which can be used to intensify current activities. A decrease in turnover leads to an increase in the need for financial resources. In the absence of access to cheap financial resources, this will lead to an increase in the company's financial costs.

Standard value of working capital turnover:

The value of the indicator fluctuates depending on the field of activity of the company, so there is no such standard value. A higher value compared to competitors indicates intensive use of current assets. An increase in the indicator during the study period is a good sign, as it indicates the company’s constant work to improve its inventory management policy, accounts receivable, cash and other current assets.

Directions for solving the problem of finding an indicator outside the standard limits

If the indicator value is low, then the reserves for increasing it can be as follows:

Reducing the amount of inventory to the minimum acceptable level, which will ensure uninterrupted operational processes;

Sales promotion and reduction in the amount of inventories of finished products and goods;

Implementation of measures to accelerate the repayment of accounts receivable;

Formula for calculating working capital turnover:

Asset turnover (for the year) = Revenue (Net income) / Average annual volume of current assets (1)

As with other annual averages, it must be remembered that there are several ways to calculate the average annual amount of current assets. If you have access to internal information of the company, then you should find the average based on the value of the indicator at the end of each working day. If there is monthly reporting, then the value of the indicator at the end of each month is used. If there are only annual reports, then the value at the beginning of the study period and at the end of the study period is used.

Formula for calculating the average annual amount of current assets:

Average annual volume of current assets (the most correct method) = Sum of volumes of current assets at the end of each working day / Number of working days (2)

Average annual volume of current assets (if only monthly data is available) = Sum of volumes of current assets at the end of each month / 12 (3)

Average annual volume of assets (if only annual data is available) = (Volume of assets at the beginning of the year + volume of assets at the end of the year) / 2 (4)

An example of calculating working capital turnover:

Company OJSC "Web-Innovation-plus"

Unit of measurement: thousand rubles.

Current assets turnover (2016) = 900/(134/2+122/2) = 7.03

Current assets turnover (2015) = 885/(122/2+110/2) = 7.63

The data obtained show that the efficiency of use of current assets by the Web-Innovation-plus company is decreasing. If in 2015, for every ruble of current assets, goods and services worth 7.63 rubles were sold, then in 2016 - only 7.03 rubles. The main factor in the decline in the indicator is the constant increase in the amount of receivables for goods and services. Given that sales volume remains relatively stable during the study period, an increase in the amount of receivables for goods and services is a negative phenomenon. To increase the turnover of current assets, it is necessary to take measures to return the company's funds. To eliminate the risk of a problem occurring in the future, it is necessary to develop a comprehensive strategy for commercial lending to clients. As part of the strategy, it is necessary to divide all buyers into groups, depending on the history of cooperation, their financial condition and their importance for the company. The main share of commodity (commercial) loans should fall on the most reliable and important clients.

The student must:

Know

Indicators characterizing the turnover of working capital;

be able to:

Calculate working capital turnover indicators.

Guidelines

To analyze the use of working capital, assess the financial condition of the enterprise and develop a plan of organizational and technical measures to accelerate their turnover and reduce the duration of one turnover, indicators are used that reflect the real process of movement of working capital and the amount of their release.

The estimated need for working capital is directly proportional to the volume of production and inversely proportional to the speed of their circulation (the number of revolutions). The higher the number of turnover of working capital, the less the need for working capital.

The turnover of working capital and the efficiency of their use are characterized by the following indicators:

Turnover ratio working capital shows the number of revolutions made by working capital during the period of time under consideration:

Revolutions or , revolutions

The turnover ratio also characterizes return on working capital and shows what volume of output (in prices or at cost) is provided by one ruble of working capital. The higher the value of the working capital turnover ratio, the more efficiently the working capital of the enterprise is used in the period under review, the higher the return on each ruble invested in working capital.

The time during which working capital completes the circuit, i.e., passes through the production period and the circulation period, is called the period, or the duration of the turnover of working capital. This indicator characterizes average speed of funds movement at the enterprise. It does not coincide with the actual period of production and sale of certain types of products. Duration of one revolution in days (Add) determined by the formula:

Where OS- balances (availability) of working capital:

averages over a period of time (OSSR) or at the end of the period (OSK), rub.;

Qcomrade; Qreal - volume of commercial or sold products, rub.

Stov - cost of commercial products, rub.;

T - number of days in the reporting period (360 in a year, 90 in a quarter, 30 in a month)

Loading factor (consolidation) of working capital (Kz) -- an indicator that is the inverse of the turnover ratio. It characterizes the capital intensity of working capital and shows the amount of working capital that ensures the production of marketable or sold products in the amount of I rubles. (in prices or at cost) and is calculated using the formula:

Rub. OS/RUB

The lower the value of the working capital load factor, the more efficiently the working capital of the enterprise is used in the period under review.

When analyzing the use of working capital, the amount of their absolute and relative release is calculated.

Absolute release working capital. It makes sense to calculate this indicator only when the same volume production according to plan and actually, or with the same volume of production in the reporting and base periods, since when the volume of production changes, the required value (amount) of working capital also changes. Absolute release calculated as the difference between the average balance (availability) of working capital involved in turnover of the subsequent and previous periods

, rub.

This indicator can have either a “plus” or a “minus” sign. If Δ OSabs has a minus sign, then there is a release of working capital, and if Δ OSabs has a plus sign, then funds for this amount are additionally involved in circulation.

For example, in practice, absolute release (with a minus sign) occurs when the actual need for working capital in the reporting period is less than planned, provided the same volume of products is produced.

Relative release working capital takes place only when accelerating working capital turnover, i.e. when reducing the duration of the 1st revolution and an increase in the number of turnover of working capital in the subsequent period of time compared to the previous period. In this case, the volume of production may change:

, rub. or

Rub. or

Qone– one-day production output (in prices or at cost) in the subsequent period (or actual), rub.;

ΔAdd– reduction in the duration of one turnover of working capital in the subsequent period of time compared to the previous period, days.

Minus sign ΔAdd shows that there is a release of working capital.

If Q0 = Q1 or Qpl= Qf, then the value Δ OCotn=Δ OSabs

The most important indicators of the use of working capital in an enterprise are the working capital turnover ratio and the duration of one turnover.

Working capital turnover ratio(Kob) shows how many revolutions the working capital made during the analyzed period (quarter, half-year, year). It is determined by the formula

where Vp is the volume of product sales for the reporting period;

O avg, is the average balance of working capital for the reporting period.

Duration of one revolution in days(D) shows how long it takes for the company to return its working capital in the form of revenue from sales of products. It is determined by the formula

where T is the number of days in the reporting period.

An important indicator of the effective use of working capital is also utilization rate of funds in circulation. It characterizes the amount of working capital advanced for 1 ruble. revenue from product sales. In other words, it represents the working capital intensity, i.e. costs of working capital (in kopecks) to receive 1 rub. sold products (works, services). The utilization rate of funds in circulation is determined by the following formula:

where Kz is the load factor of funds in circulation, kopecks;

100 - conversion of rubles to kopecks.

The load factor of funds in circulation (Kz) is the inverse value of the fund turnover ratio (Kob). The lower the utilization rate of funds, the more efficiently the working capital is used at the enterprise, and its financial position improves.

Example

During the reporting year, the volume of product sales amounted to 20 billion rubles, and the average annual balance of working capital was 5 billion rubles. For the planning period, it is planned to increase the sales volume by 20%, and the turnover ratio by one turnover.

Determine the indicators for the use of working capital in the reporting and planning period and their release.

Solution

1. We determine the indicators of the use of working capital for the reporting period:

2. We determine the indicators for the use of working capital in the planning period:

3. Determine the release of working capital:

where Qo is the need for working capital in the planning period, if there were no acceleration of their turnover;

Qpl - the need for working capital in the planning period, taking into account the acceleration of their turnover.

The turnover of working capital at an enterprise depends on the following factors: the duration of the production cycle; quality of products and their competitiveness; efficiency of working capital management at the enterprise in order to minimize them; solving the problem of reducing material consumption of products; method of supplying and marketing products; structures of working capital, etc. These are the ways to accelerate the turnover of working capital at an enterprise.

See also:

In the article we will analyze 6 main enterprise turnover ratios and calculation formulas for a business plan.

Turnover ratios. Calculation formula

Turnover ratios– financial analysis indicators that reflect the effectiveness of enterprise asset management and characterize the activity and intensity of their use. Unlike profitability indicators, turnover ratios do not use net profit, but revenue from sales (sales) of products. Therefore, turnover indicators characterize the level of business activity, while profitability - the level of profitability for various types of assets. The higher the turnover, the higher the solvency of the enterprise and its financial stability. Turnover ratios show the number of turnovers required to recoup (repay) the capital of an enterprise.

Let's look at the main turnover ratios:

Video lesson: “Calculation of key turnover ratios for OJSC Gazprom”

Asset turnover ratio. Formula

Asset turnover ratio (analogue: total capital turnover ratio) – an indicator characterizing the speed and efficiency of enterprise asset management. The indicator is the ratio of revenue from product sales to the average annual size of assets. The calculation formula is as follows:

There is no generally accepted recommended standard value for this coefficient. This indicator must be analyzed over time. The growth of the indicator, as a rule, is due to an increase in the share of revenue generated by the assets of the enterprise. The table below shows an analysis of the trend in asset turnover.

Current asset turnover ratio

Current asset turnover ratio– shows the effectiveness of managing the current assets of the enterprise and characterizes the activity of their use. Current assets of an enterprise include funds that can be quickly converted into cash: inventories, accounts receivable, short-term financial investments, work in progress. The formula for calculating the indicator is as follows:

There is no standard value for the current asset turnover ratio. The analysis is carried out to assess the nature of the dynamics and direction of the trend. The table below provides an analysis of the trend of the indicator.

Accounts receivable turnover ratio. Formula

Accounts payable turnover ratio

Inventory turnover and cost ratio

Cash turnover ratio

Cash turnover ratio– reflects the activity of cash management and shows the number of circulation cycles of the enterprise’s most liquid assets (cash). The indicator is the ratio of revenue from product sales to the average annual amount of cash. The calculation formula is as follows:

There is no standard value of the indicator in financial practice. The analysis is carried out to assess the direction and nature of the trend. The table below shows the relationship between the trend in the ratio and the financial condition of the enterprise.

Summary

The turnover ratio represents an important group of economic indicators in financial analysis, which make it possible to assess the efficiency of management of various types of assets and capital in an enterprise. The analysis of indicators is carried out to assess the nature of the dynamics over 3-5 years and in comparison with similar companies in the industry.