Structure and turnover of current assets

The revolving funds are the totality of monetary funds that are advanced for the creation of circulation funds and production assets, which ensure the continuity of the economic activity of the enterprise.

The difference in the structure of the funds of individual companies is due to various factors, including the conditions for doing business, the terms of sale and supply, the features of the activity, the location of consumers and suppliers, and the structure of production costs.

Circulating assets include objects of labor such as material, raw materials, fuel and so on, means of labor that have a service life of not more than a year and a cost of not more than 100 minimum wages, semi-finished products, work in progress.

The aggregate size of current assets used in production is mainly determined by the duration of the production cycle, the perfection of technology, the level of technology development, the organization of labor.

Circulating assets in each circuit are consistently three stages: money, production and commodity.

The effectiveness of the use of current assets in the company's operations affects the financial results. In the analysis of efficiency, such indicators as turnover of circulating assets, firm's solvency, the ratio between borrowed and own funds and so on are used. The analysis of this indicator allows to evaluate the efficiency of the enterprise and the profitability of production, identify potential risk areas for the company and determine the possibility of further operation.

The turnover of circulating assets is defined as the duration of successive passage of all stages of production by working capital.

Among the indicators of turnover are the following: the coefficient of the load of funds, the duration of turnover.

The speed of turnover characterizes the volume of proceeds from the sale of products at an average cost of resources. The duration of the turnover is a quotient from the division of the number of days of the period under review into the turnover of circulating assets. This ratio shows the degree of congestion of resources. The lower the utilization factor, the more efficiently the available means are used at the enterprise.

During the analysis, the actual turnover is compared with the turnover in the previous period and with the planned value. By these values, a slowdown or acceleration of the turnover of circulating assets is established. If the organization shows a slowdown in turnover, this is evidence of a decrease in the efficiency of resource use. Acceleration of turnover implies the release of funds. That is, an organization can, using an unchanged number of working capital, produce more products.

Ways to accelerate the turnover of current assets consist in the introduction of new technology, the use of more advanced technologies, automation of production. These measures allow to reduce the cycle time and increase production volumes. In addition, the turnover of working capital can be improved through more rational organization of production, compliance with resource savings, accelerated payments, and so on.

To analyze the reasons for the change in the speed of the flow of the process, it is advisable to consider the indicators of private turnover of certain types of assets. These indicators will give an idea of the time during which the funds go through certain stages of production, which will allow even more accurate assessment of the level of efficiency.