Current Assets of the Enterprise

The current assets of the enterprise are those monetary resources that are advanced to circulating funds (the sphere of production), as well as circulation funds (the sphere of circulation). In turn, revolving funds consist of inventories, work in progress and semi-finished products of their own manufacture and future expenses.

Any enterprise engaged in production activities has working capital necessary to ensure the continuity of the production and sale of manufactured products.

The given financial resources of the enterprise are temporarily in stocks of commodity and material assets, securities, accounts receivable, money resources, short-term obligations and within one production cycle (or calendar year) can be turned into cash.

The current assets of the enterprise in content include objects of labor that are involved in the production process with the ultimate goal of output. Their absence or deficiency can lead to interruptions or stoppage of production.

Unlike fixed assets, negotiable assets are in constant motion. They make a circuit to ensure the continuity of production processes.

Circulating assets pass through 3 stages of circulation: 1 - monetary, 2 - industrial, 3 - commodity.

At the first stage, with the help of circulating assets, the production reserves are financed, which helps to ensure the rhythm of the technological processes. Then (the second stage), circulating assets go directly to production in order to advance semi-finished products, work in progress and finished goods, as well as future expenses. At the third stage of the circulation, these funds enter the sphere of circulation and, as a result of the sale of products, they again acquire a monetary form.

All these three stages are interrelated. Correct ratio of stages accelerates the turnover of funds and increases the efficiency of work. The monetary difference between the amounts of funds at the first and last stage of the turnover shows the financial result of the enterprise's activity.

The efficiency of the enterprise depends on the size and structure of working capital. It is important to correctly determine the optimal need for them to be able to make a profit with minimal costs. Underestimation of the size of current assets can lead to instability of the financial state of the enterprise, and overestimation - to irrational use.

Formed circulating assets of the company originally from the statutory fund. The size of their enterprise is set independently at the level of the standard, which means their minimum, but sufficient for production activity volume.

The largest share is occupied by working capital, directed to the maintenance of production processes and the initial stages of the sale of products. This part of the funds is subject to special attention and constant monitoring of the financial services of the enterprise.

Working capital resumes with a certain regularity.

According to the source of education, the current assets of the enterprise are divided into the following groups: own, borrowed and attracted.

Own circulating assets of the enterprise play a major role in the circulation of funds and ensure the property and operational independence of the enterprise. This part of the funds is formed at the stage of establishment of the enterprise (statutory fund). Further, they can be replenished by profit and sustained liabilities.

Borrowed funds are used to reduce the general needs of the economy in the means, as well as to stimulate their effectiveness. These funds are formed due to short-term bank loans.

Funds can also be formed by raising funds (foreign investment).

All groups of working capital should be properly correlated to ensure the financial independence of the enterprise.