Capital turnover: concept and calculation. Working capital. Capital working working capital of the organization

Working capital - these are the funds that the company has in the process of doing its business, spent during the production cycle, that is, that part of the capital that allows the uninterrupted production and sale of the product.

In the case when the functioning of the production and trading cycle is not violated, the working capital is a part of the net assets in circulation, or current assets.

In material circulation, fixed and circulating capital is what is meant by general concept capital. The first includes those factors of production that have a long service life, while the second is consumed in one cycle.

What is working capital

Working capital consists of:

• Working capital
• Circulation funds

Production assets are made up of production inventories (this can be raw materials, materials, fuel, etc.), unfinished production, as well as the costs of subsequent production.

Circulation funds are funds that are necessary for the circulation process to have the resources necessary for its functioning, as well as to service the circulation of the firm's funds.

The components of the working capital are arranged according to the principle, that is, the possibility, if necessary, to turn the funds of the enterprise into cash. This indicator determines the stability of the company's financial condition.

Functioning of working capital

Continuously renewable production reflects the non-stop functioning of working capital.

In the first stage (procurement) of circulating capital rotation, money becomes production stocks.

At the second stage (production), a new product is created. Consequently, the value again passes, but this time from the productive to the commodity.

At the third stage (marketing), the manufactured products are sold, and the working capital is again converted into money and, thus, returns to the first stage of the circuit.

If, after the return of capital to the starting point, its growth is observed, we can talk about or the efficiency of capital turnover. In quantitative terms, it is measured by the income received. The more efficient the working capital management, the greater the increase in profitability will occur.

Since the value of working capital is first transferred to the product, and then returned again in the form of money in one turn, it also includes objects of labor, tools subject to wear, and wages.

Sources of working capital formation

Working capital can be formed from own, borrowed and additionally attracted capital.

Equity is the difference in the value of assets and liabilities. It consists of the firm's funds and savings, as well as long-term liabilities. Normally, the working capital should be equal to about a third of the fixed capital.

Own working capital - that component of equity capital, with the help of which current assets are financed.

The borrowed capital is those funds that do not belong to the firm, but are attracted by it to carry out activities. It also consists of debts, which means those funds that the company uses temporarily.

As a rule, it is considered optimal when 50% is equity, and 50% is borrowed working capital.

Since working capital must make production continuous, in order to determine its size, organizations must know exactly not only production needs, but also what funds are needed to ensure circulation.

For this, it is precisely calculated in what amount of working capital the firm needs and the time spent by capital in the spheres of production and circulation is determined.

Capital turnover in days, the number of revolutions and the inverse turnover ratio - must be calculated in order to estimate the working capital turnover.

When a company, in order to ensure its current assets, uses all possible and available sources to cover costs, this is net working capital. Its value shows the part of the working capital, financing for which is taken from long-term sources, that is, it does not need to be used to pay off current debts.

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For the period of each operating cycle. In other words, these are the firm's funds invested in current assets (working capital). Working capital, like fixed capital, expresses certain production relations that develop with the development of entrepreneurship.

Working capital is directly involved in the creation of new value, functioning in the process of circulation of all capital. In this case, the ratio of fixed and working capital affects the amount of profit received. Working capital circulates faster than fixed capital. Therefore, with an increase in the share of working capital in the total amount of advanced capital, the turnover time of the entire capital decreases, and, consequently, the possibility of the growth of new value increases, i.e. arrived.

There is a concept net working capital... Its value is determined as the difference between current assets and current liabilities, current liabilities. Under normal conditions of functioning of economic entities, the value of current assets is higher than current liabilities, i.e. the amount of working capital exceeds accounts payable.

Definition 2

Net working capital in traditional terminology, it is nothing more than its own working capital.

Working capital is characterized not only by the volume and structure, but also by the liquidity of current assets. The degree of liquidity is determined by the ability of current assets to turn into cash in the course of circulation. This takes into account that, for example, production stocks are less liquid than finished products, and funds are absolutely liquid.

Features of working capital management are determined by the structural affiliation of economic entities. If trade organizations have a high specific gravity goods, at industrial enterprises- raw materials and supplies, then financial corporations are dominated by cash and cash equivalents.

According to financial management theory, working capital consists of permanent and variable capital... That part of the current assets, which is constantly at the disposal of the enterprise and in the amount of the required minimum provides economic activity, constitutes the basis of constant working capital.

When an additional need for funds arises, due, for example, to the seasonal nature of production and sales or other objective reasons, a variable working capital is formed.

Remark 1

Thus, the efficiency of working capital management is determined by a number of factors: the volume and composition of current assets, their liquidity, the ratio of own and borrowed sources of coverage of current assets, the amount of net working capital, the ratio of constant and variable capital and other interrelated factors.

Definition 3

Working capital of business entities participating in the circulation of the market economy means, it is an organically unified complex. Working capital is money advanced into circulating production assets and circulation funds, which ensure both the production process and the circulation process.

The circulating capital (circulating assets) of the enterprise, participating in the process of production and sale of products, makes a continuous circulation. In this case, the funds are transferred from the sphere of circulation to the sphere of production and vice versa, taking the form of circulation funds and circulating production assets.

Working capital phases

Thus, passing through three successive phases, circulating assets change their natural-material form.

1. In the first phase(M - T) circulating assets, which initially have the form of cash, are converted into inventories, i.e. move from the sphere of circulation to the sphere of production.
2. In the second phase(T ... P ... T,) circulating assets participate directly in the production process and take the form of work in progress, semi-finished products and finished products.
3. Third phase the circulation of circulating assets (C - D) occurs again in the sphere of circulation. As a result of the sale of finished products, circulating assets take the form of cash again.

The difference between the received cash proceeds and the initially spent cash (D - D) determines the amount of the firm's cash savings. Thus, making a complete circuit (M - T ... P ... T - D,), the circulating capital functions at all stages in parallel in time, which ensures the continuity of the process of production and circulation. The circulating capital is an organic unity of its three phases.

Unlike fixed capital, which repeatedly participates in the production process, working capital functions in only one production cycle and completely transfers its value to the entire manufactured product.

According to the sources of formation, working capital is divided into equity and borrowed (attracted). Own working capital of enterprises with development entrepreneurial activity and corporatization plays a decisive role, as it ensures financial stability and operational independence of an economic entity. Own circulating assets of the privatized enterprises are at their complete disposal. Enterprises have the right to sell them, transfer them to other business entities, citizens, lease them, etc.

Borrowed capital, attracted in the form of bank credit of other forms, covers the additional need of the enterprise for funds. At the same time, the main criterion for the terms of lending by the bank is the reliability of the financial condition of the enterprise and the assessment of its financial stability.

Remark 2

The placement of working capital between enterprises of different industries predetermines the sectoral structure of working capital. So, in the sphere of production, the structure of working capital is determined by the degree of concentration, the nature and duration of the production process, its material consumption, the level of technical equipment and other factors. At the enterprises of the sphere of circulation, the share of inventories is higher.

Working capital management

Working capital management closely related to its composition and location. In various economic entities, the composition and structure of working capital is not the same, since it depends on the form of ownership, the specifics of the organization of the production process, relationships with suppliers and buyers, the structure of production costs, financial condition and other factors. Typical composition and placement of working capital are shown in the figure:

Picture 1.

The condition, composition and structure of inventories, work in progress and finished goods are an important indicator of the commercial activity of an enterprise. Determining the structure and identifying the trend of changes in the elements of working capital make it possible to predict the parameters of entrepreneurship development.

The structure of working capital (working assets) by sectors of the Russian economy, including industry, is presented in the table:

Figure 2.

The structure of working capital in industry is basically identical to the corresponding average indicators for the sectors of the economy. It is characteristic that about one third of the current assets in industry falls on stocks. More than half of the funds are in the calculations, namely in accounts receivable. The share of short-term financial investments and cash accounts for almost $ 14 \% $. This is due to the fact that cash has absolute liquidity and quick turnover, in contrast to this type of current assets, such as receivables... The predominance of funds in settlements in the current conditions is due to the difficulties of the transition period, economic restructuring, inflation and, consequently, violations of financial and payment discipline.

Working capital is the capital invested by an enterprise (firm) in current activities for the period of each operating cycle. In other words, these are funds invested in current assets (current assets). Working capital, like fixed capital, expresses a certain product of the relationship in the process of entrepreneurial activity.
Working capital participates directly in the creation of new value, functioning in the process of the circulation of all capital.
At the same time, the ratio of fixed and working capital affects the amount of profit received. Working capital circulates faster than fixed capital. Therefore, with an increase in the share of working capital in the total amount of advanced capital, the turnover time of the entire capital decreases, and therefore the possibility of growth of new value increases, i.e. arrived.
There is a concept of net working capital (or own working capital). It is defined as the difference between current assets and current liabilities. Under normal operating conditions, this value is positive.
Working capital is characterized not only by the volume and structure (by specific weight), but also by the liquidity of current assets.
Liquidity is the speed of transformation of individual elements of current assets into cash in the course of circulation.
Features of working capital management
The peculiarities of working capital management are determined by the branch affiliation of economic entities. For example, trade organizations have a high share of goods, industrial enterprises have raw materials and work in progress, and financial corporations are dominated by cash and cash equivalents. The efficiency of working capital management is determined by its volume and composition.
Working capital is money advanced into circulating production assets and circulation funds, which ensure both the production process and the circulation process.
The circulating capital (circulating assets) of the enterprise, participating in the process of production and sale of products, makes a continuous circulation, while the funds pass from the sphere of circulation to the sphere of production and vice versa, consistently taking the form of circulation funds and circulating production assets. Thus, passing through three successive phases, circulating assets change their natural - material form.
In the first phase (D – T), circulating assets, which have the original form of cash (D), are transformed into inventories (T), i.e. move from the sphere of circulation to the sphere of production. In the second phase (T ... P ... T1) working capital is directly involved in the production process and takes the form of work in progress, semi-finished products and finished products. The third phase of the circulation of circulating assets (T1 - D1) occurs again in the sphere of circulation. As a result of the sale of finished products, circulating assets take the form of cash again. The difference between the received cash proceeds and the initially spent cash (D1 - D) determines the amount of cash savings of the firm (enterprise).
Thus, completing a full circuit (M - T ... P ... T1 - D1), the circulating capital functions at all stages in parallel in time, which ensures the continuity of the process of production and circulation. Working capital participates in only one production cycle and completely transfers its value to the entire manufactured product.
Working capital management is related to its composition and placement. The composition and structure of working capital is not the same for various business entities and depends on the specifics of the organization of the production process, financial condition and other factors.
Typical composition and placement of working capital are presented in Table 7.1.
Table 7.1
Working capital of the enterprise

More on the topic 7.4. The working capital of the enterprise: economic content and fundamentals:

1. 1.3. Sectoral features of the formation of working capital
2. 5.2. Rationalization of the capital structure of agricultural formations based on an objective assessment of the elements of working capital
3. Financial aspects of the circulation of fixed and working capital
4. Working capital (working capital) of enterprises: the essence, composition and ways of increasing the efficiency of use

For the production of products, the means of labor alone (machines, fixtures, equipment) are not enough. In addition to them and the labor of workers of the enterprise, the source material, raw materials, blanks are also needed - that from which finished products are created in the production process - objects of labor. And in order to be able to buy these objects of labor from suppliers and pay for the labor of workers, the enterprise needs money. Items of labor and monetary resources together form working capital of an enterprise... Management, determination of the optimal size, write-off of working capital into production - all these are important and pressing issues for any enterprise. You will find the answers to them and indicators of working capital in this article.

Working capital: concept, composition and role in production

Working capital Is the enterprise's funds advanced into circulation funds and circulating production assets.

Working capital- This is a cost estimate of circulation funds and working capital assets.

The main purpose of working capital is ... make a turn! In the course of such a process, circulating assets change the material form to monetary, and vice versa.

The circulation of the company's working capital: money - goods, goods - money.

For example, a company has some funds that it spends on the purchase of raw materials and materials. This is the first transformation: money (not necessarily cash) was transformed into material objects - stocks (parts, blanks, material, etc.).

The inventory is then processed during the manufacturing process, moving into the work-in-progress (WIP) stage and ultimately becoming a finished product. These are the second and third transformations - stocks have not yet turned into cash for the enterprise, but have already changed their form and role.

And finally, the finished product is sold to the outside (sold to consumers or resellers) and the company receives money that can be spent again on the purchase of resources to resume the production process. And everything is repeated again in the second round. This is the fourth conversion of finished goods into cash.

Turnover of working capital- the most important indicator. The faster the funds of the enterprise turn around, the less the time gap between investments in production and the receipt of returns - revenue (and with it profit).

It is important that the working capital of an enterprise, in contrast to fixed assets, participates in the production cycle only once and at the same time completely transfers its value to finished products! This is what is the main difference between the working capital.

The structure of working capital includes various groups of objects of labor and cash. Enlargedly, they are all divided into two large groups: circulating production assets and circulation funds. More about them below.

Composition of working capital:

1. Revolving production assets - include:

   a) production (warehouse) stocks- objects of labor that are still awaiting entry into production. Include:
   - raw materials;
   - basic materials;
   - purchased semi-finished products;
   - accessories;
   - auxiliary materials;
   - fuel;
   - container;
   - spare parts;
   - fast-wearing and low-value objects.

   b) stocks in production- objects of labor that have entered production, but have not yet reached the stage of finished products. Inventories in production include the following types of working capital:
   - work in progress (WIP) - processed products that are not yet finished and have not arrived at the finished product warehouse;
   - deferred expenses (BP) - the costs that the company bears at the moment, but they will be written off to the prime cost in the future period (for example, the cost of mastering new products, creating prototypes);
   - semi-finished products for own consumption - semi-finished products (for example, spare parts) produced by the enterprise itself exclusively for internal needs.

2. Circulation funds - these are the funds of the enterprise associated with the sphere of circulation, that is, with the maintenance of goods turnover.

   Circulation funds consist of the following elements:

   a) finished products:
   - finished products in stock;
   - shipped products (goods in transit; products shipped but not yet paid for).

   b) cash and settlements:
   - cash on hand (cash);
   - funds in the current account (or on the deposit);
   - profitable assets (funds invested in securities: stocks, bonds, etc.);
   - receivables.

The percentage between individual groups or elements of working capital is structure of working capital.

For example, in the production sphere, the share of circulating production assets is 80%, and of circulation funds - 20%. And in the structure of industrial stocks in industry, the first place (25%) is occupied by basic materials and raw materials.

The structure of the working capital of an enterprise depends on the industry, the specifics of the organization of production (for example, the introduction of the same logistics concepts greatly changes the structure of the working capital), the conditions of supply and sale, and on many other factors.

Sources of formation of the working capital of the enterprise

Everything sources of working capital of the enterprise can be divided into three large groups:

1. - their size is determined by the company independently. This is the minimum amount of stocks and funds sufficient for the normal functioning of production and sales, timely settlements with counterparties.

   Own sources of formation of working capital:
   - authorized capital;
   - Extra capital;
   - Reserve capital;
   - accumulation funds;
   - reserve funds;
   - depreciation deductions;
   - retained earnings;
   - other.

   An important indicator here is its own working capital, or, in other words, the working capital of the enterprise.

   Own working capital (working capital) Is the amount by which the current assets of the enterprise exceed its short-term liabilities.

2. Borrowed working capital- cover temporary additional need for working capital.

   As a rule, short-term bank loans and borrowings are used as a borrowed source of working capital.

3. Raised working capital- they do not belong to the enterprise, they were received from the outside, but are temporarily used in circulation.

   Attracted sources of working capital: accounts payable of the enterprise to suppliers, wage arrears to employees, etc.

Determination of the enterprise's need for its own circulating assets is made by it in the process of rationing.

This calculates working capital standard according to one of the special methods (direct counting method, analytical method, coefficient method).

This is how the rational volume of circulating assets used in the sphere of production and the sphere of circulation is determined.

Methods for writing off working capital into production

You can write off the working capital of an enterprise in production in various ways, each of which has its own advantages and disadvantages. Basic methods:

1. FIFO method(from the English. "First In First Out" - "first came, first left") - stocks are written off to production at the price of those stocks that arrived at the warehouse first. At the same time, within the framework of the FIFO method, it does not matter how much the circulating assets written off into production actually cost.
2. LIFO method(from the English "Last In First Out" - "the last one came, the first one left") - stocks are written off to production at the price of those stocks that arrived at the warehouse last. With the LIFO method, the cost of the written off inventory is also not important, since they will be accounted for at the price of the last ones that arrived at the warehouse.
3. At the cost of each unit- that is, each unit of working capital is written off to production at its cost (so to speak "by the piece").

   An example of writing off inventories using this method: accounting for jewelry, precious metals, etc.

4. Average cost- the average cost is calculated for each type of inventory and already for it the inventory is written off to production.

   This is perhaps the most widespread practice at Russian enterprises.

The optimal amount of working capital

One of critical issues Is the definition optimal amount of working capital, for example, the amount of inventory. To find the optimal provision with working capital of the enterprise, they use special methods(ABC analysis, Wilson model, etc.). The solution to this problem is the theory of inventory management and logistics (for example, the concept of "Just-in-time" seeks to minimize warehouse stocks almost to zero).

The optimal amount of working capital- this is their level at which, on the one hand, an uninterrupted process of production and its implementation is ensured, and on the other hand, additional and unjustified costs do not arise.

At the same time, both large and small circulating assets of the organization (reserves) have their pros and cons.

Large amount of working capital (pros and cons):

• ensuring a smooth production process;
• availability of a safety stock in case of supply disruptions;
• the purchase of stock in large quantities allows you to get discounts from suppliers and save on transportation costs;
• the opportunity to win when prices rise by purchasing resources in advance at a lower price;
• large sums of money allow you to pay suppliers on time, pay taxes, etc.

• large stocks - a high risk of spoilage;
• the amount of property tax is increasing;
• the costs of maintaining inventory are growing (additional storage space, personnel);
• immobilization of working capital (in fact, they are “frozen, withdrawn from circulation, do not work).

Small amount of working capital (pros and cons):

• minimal risk of deterioration of stocks;
• the costs of maintaining stocks are reduced (less storage space, personnel and equipment are required);
• acceleration of the turnover of working capital.

• the risk of disruptions in production due to late deliveries (after all, then the warehouse simply will not have the required amount of stock);
• an increase in the risks of untimely settlements with suppliers, creditors, and the tax budget.

Turnover ratio and turnover of working capital

The efficiency of using working capital and their condition can be analyzed using indicators such as the turnover ratio (working capital ratio) and turnover.

Working capital turnover ratio(To vol.) - a value showing how many full revolutions were made by circulating assets during the analyzed period of time.

The ratio of the turnover of working capital is calculated (a tautology is obtained, but what can be done) as the ratio of the volume of products sold to the average value of the company's working capital for the year. That is, this is the value of products sold per 1 ruble of working capital:

where: K vol. - the ratio of the turnover of current assets;

RP - products sold per year (annual proceeds from sales), rubles;

OBS Wed - the average annual balance of working capital (according to the balance sheet), rubles.

Turnover(T rev.) - the duration of one complete revolution in days.

The turnover of current assets is calculated according to the following formula:

where: T about. - turnover of working capital, days;

T p. - the duration of the analyzed period, days;

To vol. - the ratio of the turnover of working capital.

Acceleration of turnover allows you to draw additional funds into circulation, increase the return on their use, shorten the period between investment and profit.

Slowdown turnover- a sign of "freezing" of resources, their "stagnation" in stocks, work in progress, finished goods. Accompanied by the diversion of funds from circulation.

Let's summarize. Working capital is the most important component of economic activity, without which it is simply impossible to manufacture products and sell goods to consumers. This is a kind of "blood" in the "organism" of the enterprise, feeding its "organs" (workshops, warehouses, services). And the efficiency of working capital, the efficiency of their use, has a huge impact on the economic results of the company.

Galyautdinov R.R.

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Working capital is one of the component parts property of the enterprise. The state and efficiency of their use is one of the main conditions for the successful operation of the enterprise. The development of market relations determines new conditions for their organization. High inflation, non-payments and other crisis phenomena are forcing enterprises to change their policy in relation to working capital, to look for new sources of replenishment, to study the problem of the efficiency of their use.

One of the conditions for the continuity of production is the constant renewal of its material basis - the means of production. In turn, this predetermines the continuity of the movement of the means of production themselves, occurring in the form of their circulation.

In its turn revolving funds consistently take monetary, productive and commodity forms, which corresponds to their division into production and circulation funds.

The material carrier of production assets is the means of production, which are subdivided into objects of labor and instruments of labor. Finished products, together with cash and funds in the calculations, form circulation funds.

The turnover of enterprise funds begins with the advance payment of value in cash for the purchase of raw materials, materials, fuel and other means of production - the first stage of the turnover. As a result, money takes the form of inventories, expressing the transition from the sphere of circulation to the sphere of production. In this case, the cost is not spent, but is advanced, since after the completion of the circuit it is returned. The completion of the first stage interrupts the circulation of commodities, but not the circulation.

The second stage of the circulation takes place in the production process, where the labor force carries out productive consumption of the means of production, creating a new product that carries the transferred and newly created value. The advanced value again changes its form - from the productive one, it passes into the commodity one.

The third stage of the circulation is the sale of finished products (works, services) and receipt of funds. At this stage, circulating assets are again transferred from the sphere of production to the sphere of circulation. The interrupted circulation of commodities is resumed, and the value from the commodity form passes into monetary. The difference between the amount of money spent on the manufacture and sale of products (works, services) and received from the sale of manufactured products (works, services) is the company's cash savings.

After completing one circuit, circulating assets enter a new one, thereby carrying out their continuous circulation. It is the constant movement of circulating assets that is the basis of an uninterrupted process of production and circulation. An analysis of the turnover of enterprise assets shows that the advanced value not only consistently assumes various forms, but also constantly stays in these forms in certain amounts. In other words, the advanced value for each this moment the circulation of various parts is simultaneously in monetary, productive, commodity forms.

The circulation of funds of enterprises can be carried out only in the presence of a certain advanced value in monetary form. Entering the circuit, it no longer leaves it, consistently changing its functional forms. The indicated value in monetary form represents the current assets of the enterprise.

Working capital acts primarily as a value category. They are literally not material assets, since they cannot be used to produce finished products. Being value in monetary form, circulating assets already in the process of circulation take the form of inventories, work in progress, finished goods. Unlike inventories, circulating assets are not spent, not spent, not consumed, but advanced, returning after the end of one cycle and entering the next.

The moment of advance payment is one of the essential and distinctive features of circulating assets, since it plays an important role in establishing their economic boundaries. The temporary criterion for advancing working capital should not be the quarterly or annual volume of funds, but one cycle, after which they are reimbursed and enter into the next.

The study of the essence of working capital involves consideration of working capital and circulation funds. Working capital, circulating funds and circulation funds exist in unity and interconnection, but there are significant differences between them, which boil down to the following. Working capital is constantly in all stages of the enterprise, while working capital goes through the production process, being replaced by new lots of raw materials, fuel, basic and auxiliary materials. Inventories, being part of the working capital, go into the production process, turn into finished products and leave the enterprise. Revolving assets are fully consumed in the production process, transferring their value to the finished product. Their sum for a year can be tens of times higher than the sum of circulating assets, which ensure the processing or consumption of a new batch of objects of labor and remaining in the economy at each circuit, making a closed circuit.

Revolving funds are directly involved in the creation of new value, and circulating assets - indirectly, through revolving funds.

In the process of circulation, circulating assets embody their value in circulating assets and therefore, through the latter, they function in the production process, participate in the formation of production costs.

If the circulating assets were directly and directly involved in the creation of a new product, then they would gradually decrease and by the time the circulation ended, they would have to disappear.

Revolving funds, representing use value, act in a single form - productive. Circulating assets, as noted, not only consistently take various forms, but also constantly in certain parts are in these forms.

The above circumstances create an objective necessity for differentiating the turnover of circulating assets and circulating assets.

Comparison of circulating assets with circulation funds, which are a functional form of circulating assets at the stage of circulation, leads to the following results. The turnover of funds of enterprises ends with the process of selling products (works, services). For the normal implementation of this process, they, along with fixed and circulating funds, must also have circulation funds.

The turnover of circulation funds is inextricably linked with the turnover of working production assets and is its continuation and completion. Making a circuit, these funds are intertwined, forming a general turnover, in the process of which the value of circulating assets transferred to the product of labor passes from the sphere of production to the sphere of circulation, and the value of the funds of circulation in the amount of the advanced value - from the sphere of circulation to the sphere of production. This is how a single turnover of advanced funds is carried out, passing through different functional forms and returning to the original monetary form. Working capital, making a circuit, from the sphere of production, where they function as circulating funds, go into the sphere of circulation, where they function as circulation funds.

The definition of circulating assets as advanced funds in the created stocks of circulating production assets and circulation funds does not reveal the full economic content of this category. It does not take into account that, along with the advance payment of a certain amount of money, there is a process of advancing the value of the surplus product created in the production process into these stocks. Therefore, for profitable enterprises, after the completion of the turnover of funds, the amount of advanced working capital increases by a certain amount of profit. At unprofitable enterprises, the amount of advanced working capital at the end of the turnover of funds decreases due to the incurred losses. Working capital is often identified with cash. Meanwhile, one cannot literally call them money. Funds employed in production and circulation should not be equated with money. The total value is advanced in the form of money and, after going through the process of production and circulation, again assumes this form. Cash are an intermediary in the movement of funds. The aggregate value expressed in money turns into real money only at times and in parts.

So, circulating assets represent the value advanced in monetary form for the planned formation and use of circulating production assets and circulation funds in the minimum necessary amounts, ensuring the implementation of the production program by the enterprise and the timeliness of settlements.

The current assets of the enterprise perform two functions: production and settlement. Carrying out a production function, working capital, advancing in working capital assets, maintain the continuity of the production process and transfer their value to the manufactured product. Upon completion of production, circulating assets pass into the sphere of circulation in the form of circulation funds, where they perform the second function, which consists in completing the circulation and converting circulating assets from a commodity form into a monetary one.

The rhythm, coherence and high performance of the enterprise largely depend on its availability of working capital. Lack of funds advanced for the purchase of inventories can lead to a reduction in production, non-fulfillment of the production program. Excessive diversion of funds into reserves in excess of the actual need leads to the deadening of resources, their ineffective use.

Since working capital includes both material and monetary resources, not only the process of material production, but also the financial stability of the enterprise depends on their organization and efficiency of use.