Where to look at working capital in the balance sheet. Current assets in the balance sheet
in rubles (thousand rubles, million rubles)
Explanation of the essence of the indicator
Own working capital is an indicator of the financial stability and liquidity of the company, which is the amount of cash remaining after the exclusion of the company's liabilities from its current assets. In other words, this is the amount of own current assets that is available for the company's daily operations.
If the main part of the company's working capital is cash and cash equivalents, a smaller amount of working capital is acceptable. On the other hand, if the assets mainly consist of relatively slowly converting current assets, then the company will need more working capital.
Standard value:
When analyzing an indicator, it is necessary to compare its value over a long period of time. The company can increase production and sales or reduce it. Therefore, comparing the indicator with competitors is not appropriate. Due to different business models, enterprise size, and other factors, the amount of equity required will vary.
If the value of the indicator is negative, then the company does not have enough funds to ensure uninterrupted activities due to constant financial resources. This creates a risk of loss of liquidity and stability. To determine the cause of such a financial condition, it is necessary to study the structure of assets and financial resources in more detail.
Directions for solving the problem of finding an indicator outside the normative limits
If the value of the indicator is negative or too low, it is necessary to attract additional funds on an ongoing basis. This can be both additional investments from third-party investors, and funds from current owners.
Calculation formula:
Own working capital \u003d Equity capital - Non-current assets
Calculation example:
JSC "Web-Innovation-plus"
Unit of measurement: thousand rubles
Balance | On 31 12 2016 | On 31 12 2015 |
Assets | ||
I. NON-CURRENT ASSETS | ||
TOTAL FOR SECTION I | 842 | 893 |
II. CURRENT ASSETS | ||
TOTAL FOR SECTION II | 1203 | 1201 |
Balance | 2045 | 2094 |
Liabilities | ||
III. OWN CAPITAL AND RESERVES | ||
TOTAL FOR SECTION III | 803 | 954 |
IV. LONG TERM DUTIES | ||
TOTAL FOR SECTION IV | 800 | 800 |
V. SHORT-TERM LIABILITIES | ||
TOTAL FOR SECTION V | 442 | 340 |
Balance | 2045 | 2094 |
Own working capital (2016) = 803– 842= -39 thousand rubles.
Own working capital (2015) = 954– 893 = 61 thousand rubles.
The data shows that the amount of available equity working capital is negative, so it can be argued that Web-Innovation-plus OJSC is not a completely financially stable company. To finance current activities and ensure the continuity of the operational process, it is necessary to attract third-party financial resources.
The concept and significance of working capital in the balance sheet
Any enterprise draws up a balance sheet, which reflects data on its economic assets (assets) and their sources (liabilities). This is a system of tabulated indicators that describe the property and financial position of the enterprise at the reporting date.
Remark 1
The essence of the balance is the equality of its two main parts: assets and liabilities. This equality is guaranteed by the fact that the same objects are evaluated from the side of attachments and sources. For this, the double entry method is used, in which each transaction on the asset and liability of one account is reflected in the balance of another account.
Equality is ensured by the fact that the same objects are described from the side of their sources and from the side of attachments. This equality is ensured by the double entry method - a reflection of each operation on the asset of one account and the liability of another account.
Definition 1
Assets are economic resources that an organization needs to conduct and develop its activities. These are property and liabilities, i.е. what the company owns. And liabilities are the totality of all sources of formation of the enterprise's funds.
In the balance sheet, working capital is the amount advanced to the totality of the company's material assets that are necessary to service the business process. Unlike fixed assets, working capital is fully used during one production cycle, transferring its value to finished products and recovering in physical and value terms. At the same time, they are in a state of constant movement.
Working capital in the balance sheet plays a key production role. Their significance lies in the systematic formation and use of production assets in a minimal amount. They allow the enterprise to execute the program in a specific period. In addition, working capital is involved in the formation of the planned and predicted economic results of the company.
Classification of working capital in the balance sheet
Definition 2
Current assets are displayed in the active part of the balance sheet. These are material values that are used in production and circulation.
They go through three stages in which assets change their economic expression:
- money stage;
- production stage;
- commodity stage.
At the first stage, the available cash and non-cash funds are converted into production reserves. The production stage is characterized as a process of changing the qualitative properties of working capital and transferring their value to finished products. In this case, working capital is used once. The commodity stage involves the use of finished products in the field of marketing.
After the end of one cycle, current assets enter into a new one. Therefore, they are constantly in motion, which ensures an uninterrupted process of production and circulation.
Current assets reflected in the balance sheet include:
- production funds;
- work in progress (products have not passed all stages of the technological process);
- deferred expenses with maturity;
- shipped products (products shipped but not paid for by the buyer);
- receivables (debts of individuals or other market entities to the enterprise);
- financial investments for a short period of time;
- “Input” VAT on purchases;
- cash on hand and in bank accounts.
In addition, current assets are classified according to the source of formation and the mode of use for own and borrowed funds.
Own funds are formed at the expense of the authorized capital and the profits of the enterprise through rationing. If necessary (temporary difficulties), working capital is provided at the expense of borrowed funds (credits from commercial banks).
There are also two types of working capital according to the degree of controllability. These are standardized and non-standardized current assets. The first means ensure a continuous production process and contribute to the rational use of available resources. The second assets are in the sphere of circulation, except for manufactured products and do not affect the production process.
The formula for own working capital on the balance sheet
Remark 2
The main source of information for analyzing the activities of any enterprise is the balance sheet. According to his data, you can draw up a formula for own working capital (SOS).
The calculation of SOS is carried out by subtracting existing debts from assets:
$SOS=OA-KZ,$
where SOS - own working capital; OA - current assets; KZ - accounts payable.
When using the new balance sheet, the formula for own working capital is as follows:
$SOS=line 1200-line 1500$
There is a second option for calculating own current assets:
$SOS=SK+DZ-VA$
where SC is the amount of equity capital; DZ - accounts receivable; VA - non-current assets.
According to the balance lines, this formula can be represented:
$SOS=line 1300+line 1530-line 1100$
Own constant-variable assets can be positive, negative or equal to zero.
Remark 3
When equity is greater than the amount of current debt, then the amount of current assets is positive. This indicates a successful financial condition of the company and allows you to pay off short-term debts to borrowers by selling their assets.
The negative value of the indicator of own working capital indicates that the share of short-term loans has accumulated in the fixed capital. This share can also be used to cover losses. This means that the organization lacks funds and is not in a favorable financial situation.
Zero indicators indicate the recent opening of the company. Current assets are still not enough, borrowed funds are attracted to start the implementation of the production process or work. Also, enterprises whose fixed assets are fully financed by creditors have a zero fund.
The firm's assets are the value of the resources that support the production process. The property complex of the company includes non-current assets (administrative and industrial buildings, equipment, machine tools, vehicles), as well as current assets, in the structure of which there are such types of property as:
Money in cash and bank accounts;
Stocks - goods and materials, raw materials, manufactured products, goods for sale and other inventories;
Indebtedness of debtors for delivered, but not yet paid services/goods;
Short-term financial investments and other assets.
All current assets are accumulated in the second section of the balance sheet and are considered as current, i.e., participating in the turnover.
This article will focus on such a concept as the average annual cost of working capital. Let's find out how this indicator is calculated and what it means.
Revolving production assets in the balance sheet
As already noted, in the balance hierarchy, current assets are collected in the second section of the BO-1 report. Each type of property corresponds to a separate line:
▪ 1210 - MPZ;
▪ 1220 - VAT on acquired property;
▪ 1230 - obligations of debtors;
▪ 1240 - fin. attachments;
▪ 1250 - cash, cash equivalents;
▪ 1260 - other.
The total final cost of working capital is recorded 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.
Book value of the property
Economists analyze book value based on 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 item separately, determine the dynamics (growth or decrease in the value of assets) and, based on a comparison of absolute indicators, draw conclusions about the state of working capital on a certain date. In addition to internal users of information available in 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 book value is used
Information on the book value of assets is very necessary in the analysis of the economic activity of the company - the main tool in assessing the production and financial condition of the company. Using this indicator, intra-company coefficients are calculated:
▪ return on assets, which determines the amount of profit received for each ruble invested in the purchase of raw materials and production;
▪ asset turnover, indicating the efficiency of their use.
Comparing the initial and final values that determine the value, an economist can draw conclusions about the growth or decrease in the amount of current assets in monetary terms for a given period, determine the relative values characterizing the growth rates of indicators for each line of the second section of the balance sheet. However, the figures only provide information about the availability of property on a certain date, not always reflecting the real picture, since in the life of an enterprise the intensity of work is not the same, and this leads to uneven purchase and expenditure of working capital, for example, in companies that depend on the seasonality of 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 cost of working capital. The value of this indicator is calculated for the production of many economic calculations.
Why is the average annual cost of working capital calculated?
A detailed analysis of changes in the structure and composition of property, including working capital, is impossible without calculating the average value of property for the year. How is the average annual cost of working capital calculated? Analysts refer to the balance sheet line 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:
About cf \u003d (O n + O k) / 2,
where O n - the amount of working capital at the beginning of the analyzed period, O to - at the end of the period, 2 - the number of reporting dates.
Calculation example
Let's take an example of how the average annual cost of working capital is calculated (balance sheet formula). Initial data are presented in the table of balance values of working capital.
Calculate the value using the above formula based on the balance sheet data:
About cf \u003d (8411 + 9300) / 2 \u003d 8856 thousand rubles. - average current assets for the year (line 1200 in the balance sheet) amounted to 8856 thousand rubles.
Using the same calculation algorithm, the average annual cost of tangible working capital (thousand rubles) is calculated for the positions:
▪ stocks (line 1210) - О av = (5200 + 5450) / 2 = 5325 thousand rubles;
▪ VAT on purchased materials - О ср = (242 + 210) / 2 = 226 thousand rubles;
▪ accounts receivable - О av = (510 + 620) / 2 = 565 thousand rubles;
▪ cash - О av = (2460 + 3020) / 2 = 2740 thousand rubles.
The average annual cost of working capital, the calculation formula of which is presented in the review, is used by economists to calculate coefficients that demonstrate the financial condition of the company, the level of stability, as well as determine the reasons (positive and negative) that led to changes. Based on the conclusions of analysts, the company's management makes decisions on the further management of available resources.
The formula for calculating the average chronological
A variety of the arithmetic mean, to which the cost refers, is the chronological average, calculated from the totality of values at different moments or for different periods of time.
In mathematics, it is used to find the average level in time series. In accounting, the chronological average characterizes the value of an individual asset in equal periods of time in more detail. The calculation formula is:
About cf / xp \u003d (½ x O 1 + O 2 + O 3 + .... + O n -1 x ½) / n-1, where
O - the balance on a certain date, n - the number of reporting dates.
Calculation of average chronological
Returning to the example above, let's supplement the initial data on the cost of inventory at the beginning of each month:
Let's calculate the average chronological for MPZ quarterly for 2016:
1 sq. About cf / xp \u003d (1/2 x 5200 + 4960 + 5460 + ½ x 5530) / 4-1 \u003d 5261.66 thousand rubles;
2 sq. About cf / xp \u003d (1/2 x 5530 + 5360 + 4980 + ½ x 4890) / 4-1 \u003d 5183.33 thousand rubles;
3 sq. About cf / xp \u003d (1/2 x 4890 + 4780 + 4980 + ½ x 5180) / 4-1 \u003d 4931.66 thousand rubles;
4 sq. About cf / xp \u003d (1/2 x 5180 + 5450 + 5550 + ½ x 5450) / 4-1 \u003d 5438.33 thousand rubles;
Thus, the average amount of reserves for the 1st quarter is 5261.66 thousand rubles, for the 2nd - 5183.33 thousand rubles, for the 3rd - 4931.66 thousand rubles, for the 4th - 5438 .33 thousand rubles Analyzing the obtained numerical series, an economist can conclude that there are reserves in each quarter, establish the dynamics of changes depending on the company's activities or industry affiliation. By calculating the average chronological value, the values of the indicators are obtained, undoubtedly, more accurate. These values, used in economic calculations, provide the most realistic figures. This is important primarily for internal users - company management. External users are quite satisfied with the absolute indicators of the book value of assets.
Calculation of the turnover ratio
The general indicator of the use of working capital in a company is the turnover ratio, defined as the ratio of turnover (revenue) to the average cost of working capital for the year:
To about / r \u003d B: About cf, where B is revenue, About cf is the average annual cost of working capital. The formula shows the number of completed turnovers of the average balance of funds invested in current assets in the production process.
Using the above example and supplementing it with information from the Profit and Loss Statement on the amount of revenue (326,000 thousand rubles), we calculate the turnover ratio:
K about \u003d 326,000 / 8856 \u003d 36.8 times, i.e., for the year, the funds invested in production in the amount of the average balance are turned around 36.8 times.
In addition, the turnover is calculated in days, that is, they find out for how many days the company will receive revenue equal to the indicator as the average annual cost of working capital. The calculation is carried out according to the formula:
K rev / day \u003d 365 / K rev / r.
To about / day = 365 / 36.8 = 9.92 days the company will need to receive revenue in the amount of the average cost of working capital for the year.
The normal value of the coefficients
There are no general normative values for turnover values.
Ratios are usually analyzed in dynamics or in comparison with similar industry companies. We only note that a very low coefficient indicates excessively accumulated circulating production assets, which should intensify work to increase the liquidity of assets.
DEFINITION
Own working capital represent working capital, including the amount of excess of current assets of the enterprise over its short-term liabilities. This indicator is used in assessing the ability of companies in the calculation of short-term liabilities in the event of the sale of all their current assets.
The company's current assets represent the monetary value of:
- working capital (raw materials and materials, fuel, components);
- circulation funds (finished products, goods shipped but not paid for).
Using your own current assets, you can determine the degree of solvency and financial stability of any enterprise.
The formula for own working capital on the balance sheet
The formula for own working capital on the balance sheet requires data from the balance sheet, which is the main source of information for analyzing the activities of any organization.
The general formula for own working capital on the balance sheet is as follows:
CoS \u003d OA - KO
Here CoC - own working capital,
OA - the amount of current assets,
KO - the amount of short-term liabilities.
If you use the new balance, then the formula for own working capital on the balance sheet looks like this:
CoC = line 1200 - line 1500
The same value can be determined in the second way:
CoS \u003d SC + DO - VA
Here SC is the amount of equity,
VA - non-current assets,
TO - the amount of own obligations.
For the balance sheet, this formula looks like this:
Normative indicator of own working capital
The indicator of own working capital of any company can be positive and negative:
- According to the standard, the indicator should be a positive value, which means that current assets are greater than short-term liabilities.
- The negative value of the index of own working capital characterizes the company from the negative side. True, there are exceptions when successful enterprises operate with a negative value of the working capital ratio (for example, McDonald's, where this ratio is covered by a very fast cycle of turning stocks into revenue).
When analyzing the indicator of own working capital, it must be compared with the value of the company's reserves. With the normal functioning of the enterprise, the indicator should not only be positive, but also be greater than the value of the reserves. This can be explained by the fact that stocks are the least liquid part of working capital, so they need to be financed from own funds or funds attracted for long periods.
Examples of problem solving
EXAMPLE 1
Exercise | The company worked with the following indicators for 2015 and 2016 Equity (line 1300) 2015 - 258,000 rubles, 2016 - 286,000 rubles. Non-current assets (line 1100) 2015 - 148,000 rubles, 2016 - 172,000 rubles. Current assets (line 1530) 2015 - 250,000 rubles, 2016 - 270,000 rubles. Determine the indicator of own working capital on the balance sheet and compare the figures for two years. |
Solution | The formula for own working capital on the balance sheet to solve this problem: CoC = line 1300 + line 1530 - line 1100 SoS (2015) = 258,000 + 250,000 - 148,000 = 360,000 rubles SoS (2016) = 286,000 + 270,000 - 172,000 = 384,000 rubles Conclusion. We see that the indicator of the company's own working capital tends to increase, which indicates an increase in its efficiency. |
Answer | SoS (2015) = 360,000 rubles, SoS (2016) = 384,000 rubles. |
- This is an absolute indicator that is used to determine the liquidity of the enterprise. In fact, this indicator determines how much the company's current assets are greater than its short-term debts. In foreign literature, own working capital is also called working capital of the enterprise(working capital, net working capital).
What is own working capital (SOS). economic sense
Let us analyze the general economic meaning of the indicator. Own current assets of the enterprise show solvency/liquidity of the enterprise. The indicator is used to assess the company's ability to pay off debts with the help of its current assets.
Own working capital. Synonyms
Synonyms of the indicator own working capital:
- own working capital,
- working capital of the enterprise,
- working capital,
- net working capital (NWC),
Own working capital. Balance calculation formula
The formula for calculating own working capital:
Own working capital \u003d Current assets - Current liabilities
What are current assets?
Current assets of the enterprise- this is the sum of working capital (raw materials, materials, components, fuel) and circulation funds (finished products, shipped, but not paid for goods), expressed in money.
Formula for calculating SOS according to the Order of the Federal Office for Insolvency (Bankruptcy) dated August 12, 1994 No. 31-r On the Methodological Provisions for Assessing the Financial Condition of an Organization and Establishing an Unsatisfactory Balance Structure is as follows:
Own working capital = line 490 - line 190
According to the new balance (after 2011), the formula will look like this:
SOS = p.1200 – p.1500
In addition to the first formula, there is another way to calculate this indicator. The second formula for calculating own working capital on the balance sheet.
Own working capital \u003d (Equity + Long-term liabilities) - Non-current assets \u003d str. 1300 + p.1530 - p.1100
In my opinion, the first formula is easier to calculate and more convenient than the first. I recommend using it in calculations.
In the English literature, this indicator according to (IFRS) will be calculated as follows:
SOS(working capital) = Current Assets – Current Liabilities
CA - current assets,
CL - short-term accounts payable.
The balance of the enterprise is taken from the official website of the company. To understand the dynamics of changes in the solvency of the enterprise, we will take 1 year for analysis. The reporting period is a quarter. One quarter in 2013 and three in 2014.
Calculation of the indicator of own working capital for OJSC "Uralkali"
Own working capital 2013-4 = 87928663-47938587 = 39990076
Own working capital 2014-1 = 132591299-35610079 = 96981220
Own working capital 2014-2 = 115581096-34360221 = 81220875
Own working capital 2014-3 = 132981010-19458581 = 113522429
All SOS values are >0 and they also increase with time. This indicates that the solvency of OJSC Uralkali is growing.
Own working capital. standard
Own current assets can be greater than zero, equal or less than zero. As a general rule, own working capital = 0 for new businesses. If SOS > 0, then this indicates that the financial condition (solvency) of the enterprise is normal, if<0, то предприятие финансово неблагополучно, т.к. у него не хватает денежных средств для покрытия долгов.
Summary
The article analyzed the indicator "own working capital", which is one of the important indicators for assessing the solvency / liquidity of an enterprise. Do not confuse it with the ratio of own working capital, because. they are completely different things. If own working capital is greater than zero, then this indicates the financial stability of the enterprise.