Average annual cost of circulating assets: the formula for calculating the balance

The firm's assets are the value expression of resources that ensure the production process. The company's property complex includes non-current assets (administrative and production buildings, equipment, machinery, vehicles), as well as working capital, in the structure of which there are such types of property as:

• money in cash and on bank accounts;

• stocks - commodities, raw materials, manufactured products, goods for sale and other MPZ;

• debts of debtors for goods delivered / not yet paid;

• short-term financial investments and other assets.

All current assets are accumulated in the second section of the balance sheet and are considered as negotiable, i.e., participating in the turnover.

The article will deal with such an idea as the average annual cost of circulating assets. We will find out how this indicator is calculated and what it means.

Revolving production assets in balance sheet

As already noted, in the balance hierarchy, current assets are collected in the second section of the BO-1 report. To each type of property there corresponds a separate line:

▪ 1210 - MPZ;

▪ 1220 - VAT on purchased property;

▪ 1230 - liabilities of debtors;

▪ 1240 - fin. attachments;

▪ 1250 - cash, cash equivalents;

▪ 1260 - other.

The total final cost of working capital is fixed in line 1200 of the balance sheet. It accumulates the absolute value of the balances of funds in the company for each position at the beginning of a given analyzed period and its end. In accounting, the value of assets on the balance sheet is called the balance sheet.

Carrying value of property

Economists analyze the book value based on the research objectives. For example, when it is necessary to find out the size of the balance of property as a whole for a section or for each individual item, determine the dynamics (increase or decrease in the value of assets) and on the basis of a comparison of absolute indicators draw conclusions about the status of working capital for a certain date. In addition to internal users of information available in the financial statements, companies are required to inform various external users - founders, creditors, insurers, investors, providing them with various information, including the availability of assets.

Where the value of the book value is used

Information is very necessary about the book value of assets in the analysis of the company's economic activity - the main tool in assessing the company's production and financial condition. With the help of this indicator, intra-firm coefficients are calculated:

▪ profitability of assets, determining the amount of profit received for each ruble invested in the purchase of raw materials and production;

▪ asset turnover, indicating the effectiveness of their use.

Comparing the initial and final values that determine the cost, the economist can draw conclusions about the growth or decrease in the number of current assets in monetary terms for a given period, determine the relative values that characterize the growth rates of the indicators of each row of the second section of the balance sheet. However, the figures only provide information on the availability of property on a certain date, not always reflecting the real picture, because in the life of an enterprise the intensity of work is not the same, and this leads to uneven purchasing and expenditure of working capital, for example, in companies that depend on the seasonality of the cycles. It is more expedient to analyze the state of assets for short periods of time or to calculate such an indicator as the average annual value of current assets. The value of this indicator is calculated for the production of a multitude of economic calculations.

For what is the average annual cost of circulating assets

An in-depth analysis of changes in the structure and composition of assets, including current assets, is impossible without calculating the average value of property by year. How is the average annual cost of working capital calculated? Analysts turn to the line of balance 1200, and if it is necessary to calculate any one type of property, for example stocks, to the line corresponding to this position. The calculation formula is as follows:

- О _ср = (О _н + О _к ) / 2,

Where О _н - the amount of working capital at the beginning of the analyzed period, О _к - at the end of the period, 2 - the number of reporting dates.

Example calculation

Let's consider on an example how the average annual cost of circulating assets is calculated (the formula on balance). The initial data are presented in the table of balance values of circulating assets.

Table of indicators of current assets of the company for 2016

Indicators	Line code	On December 31, 2015	As of December 31, 2016
Productive reserves	1210	5200	5450
VAT on purchased property	1220	242	210
Receivables	1230	510	620
Cash	1250	2460	3020
Total for the 2nd section of the balance sheet	1200	8412	9300

We calculate the value of the above formula on the basis of balance data:

About _ср = (8411 + 9300) / 2 = 8856 thousand rbl. - average current assets in the year (line in the balance sheet of 1,200) amounted to 8,856 thousand rubles.

By applying the same calculation algorithm, the average annual cost of material working capital (thousand rubles) is calculated according to the positions:

▪ stocks (page 1210) - О _ср = (5200 + 5450) / 2 = 5325 thousand rubles;

▪ VAT on purchased materials - О _ср = (242 + 210) / 2 = 226 thousand rubles;

▪ accounts receivable - О _ср = (510 + 620) / 2 = 565 thousand rubles;

▪ funds - О _ср = (2460 + 3020) / 2 = 2740 thousand rubles.

The average annual cost of circulating assets, the formula for calculating which is presented in the review, is used by economists to calculate the coefficients that demonstrate the financial condition of the company, the level of stability, and determine the causes (positive and negative) that led to the changes. Based on the findings of analysts, the company's management makes decisions on the further management of available resources.

The formula for calculating the average chronological

A variation of the average arithmetic value, to which the average annual value refers, is the average chronological, calculated by the totality of the values at different moments or for different time intervals. In mathematics, it is used to find the average level in the dynamic series. In accounting, the average chronological is more detailed characterizes the value of an individual asset at equal intervals of time. The calculation formula is as follows:

About _{cp / xp} = (½ x O ₁ + O ₂ + O ₃ + ... + O _{n -1 x} ½) / n-1, where

O - the balance for a certain date, n - the number of reporting dates.

Calculation of the average chronological

Returning to the example given above, we will supplement the initial data on the cost of inventories at the beginning of each month:

- As of January 1, 2016 - 5200 thousand rubles;

- As of February 1, 2016 - 4,960 thousand rubles;

- As of March 1, 2016 - 5460 thousand rubles;

- As of April 1, 2016 - 5530 thousand rubles;

- As of May 1, 2016 - 5360 thousand rubles;

- As of June 1, 2016 - 4,980 thousand rubles;

- on July 1, 2016 - 4,890 thousand rubles;

- As of August 1, 2016 - 4780 thousand rubles;

- As of September 1, 2016 - 4,980 thousand rubles;

- on October 1, 2016 - 5,180 thousand rubles;

- As of November 1, 2016 - 5450 thousand rubles;

- As of December 1, 2016 - 5,550 thousand rubles;

- As of January 1, 2017 - 5450 thousand rubles.

Calculate the average chronological by the MPZ quarterly for 2016:

• 1 sq. M. About _{ср / хр} = (1/2 х 5200 + 4960 + 5460 + ½ х 5530) / 4-1 = 5261,66 thousand rbl .;

• 2 sq. M. About _{ср / хр} = (1/2 х 5530+ 5360 + 4980 + ½ х 4890) / 4-1 = 5183.33 thousand rubles;

• 3 sq. M. About _{ср / хр} = (1/2 х 4890 + 4780 + 4980 + ½ х 5180) / 4-1 = 4931.66 thousand rubles;

• 4 square meters. About _{ср / хр} = (1/2 х 5180 + 5450 + 5550 + ½ х 5450) / 4-1 = 5438,33 thousand rbl .;

Thus, the average size of reserves for the first quarter is 5261.66 thousand rubles, for the second - 5183.33 thousand rubles, for the third - 4.931.66 thousand rubles, for the 4th - 5438 , 33 thousand rubles. Analyzing the obtained number series, the economist can make a conclusion about the availability of reserves in each quarter, establish the dynamics of changes depending on the company's activities or industry. Calculating the average chronological value, the values of the indices are obtained, undoubtedly, more accurate. These values, used in economic calculations, give the most realistic indicators. This is important primarily for internal users - the company's management. Absolute indices of book value of assets are quite sufficient for external users.

Calculation of the turnover ratio

A general indicator of the use of circulating funds in the company is the turnover ratio, defined as the ratio of turnover (revenue) to the average value of working capital for the year:

К _{об / р} = В: О _ср , where В - revenue, О _ср - average annual cost of circulating assets. The formula shows the number of committed revolutions of the average balance of funds invested in current assets in the production process.
Using the example above and supplementing it with information from the Profit and Loss Statement about the amount of revenue (326,000 thousand rubles), we calculate the turnover ratio:

К _об = 326 000/8856 = 36,8 times, that is, for the year the means invested in production in the amount of the average balance are 36.8 times.

In addition, turnover is calculated in days, that is, they learn how many days the enterprise will receive revenue equal to the indicator, as the average annual cost of working capital. The calculation is carried out according to the formula:

- To _{rev / dn} = 365 / K _{rev / p} .

To _{об / дн} = 365 / 36,8 = 9,92 days it will be necessary for the company to get the proceeds in the amount of the average cost of circulating assets for the year.

The normal value of the coefficients

For turnover values, no general normative values are established. Analyze coefficients usually in dynamics or in comparison with similar industry companies. We only note that a very low coefficient indicates excessively accumulated working capital, which should intensify the work to increase the liquidity of assets.