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Finance and Statistics - Kovalev AM

7. FINANCIAL PROBLEMS OF FORMATION AND USE OF WORKING CAPITAL ENTERPRISES

7.1 The economic essence of working capital of enterprises

Current assets are a component of the assets of the enterprise. Status and efficiency of their use - one of the main conditions for the success of the enterprise. The development of market relations defines new conditions for their organization. Inflation, defaults and other crisis forced the company to change its policy in relation to working capital, to seek new sources of revenue, to study the problem of the effectiveness of their use.

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

In his back revolving funds consistently make money, productive "marketable form that corresponds to their division into productive assets and circulating assets.

The material carrier of productive assets are the means of production, which are divided into the objects of labor and tools. Finished goods with cash and assets in the calculation of form handling funds.

Circuit enterprise funds begins with the value of advances in cash for the purchase of raw materials, fuel and other means of production - the first stage of the circuit. As a result, the funds take the form of production reserves, expressing the transition from the sphere of circulation into the sphere of production. The cost is expended, and is advanced as the circuit after it is returned. The completion of the first stage of commodity circulation is interrupted, but the circuit.

The second stage of the circuit is made in the production process, where labor is productive consumption provides the means of production, creating a new product that carries the transferred and newly created value. Advanced value again changes its form - from productive it becomes a commodity.

The third stage of the circuit is to implement manufactured finished goods (works, services) and receiving the money. At this stage, the working capital once again pass from the sphere of production in the sphere of circulation. Interrupted commodity circulation is resumed, and the cost of the commodity form into the money goes. The difference between the amount of money spent on the production and sale of goods (works, services) and proceeds from the sale of produced goods (works, services), it is the accumulation of money the enterprise

After finishing one cycle, working capital are entering a new, thus it made their continuous turnover. This constant movement of working capital is the foundation of an uninterrupted process of production and circulation.

Analysis of circulation enterprises funds shows that advances the cost of not only consistently takes many forms, but also constantly in certain dimensions is in these forms. In other words, the value of advances for every moment different parts of the circuit at the same time is in the money, productive, marketable forms.

Circuit enterprise funds can be committed only if a certain value of advances in cash. Entering the circuit, it is no longer leaving it consistently changing their functional forms. The price listed in the form of money is a working capital of the enterprise.

Current assets serve primarily as a value category. They literally are not material values, since one can not produce finished products. As the value of cash, working capital is already in the process of the circuit takes the form of inventories, work in progress and finished products. In contrast, not spent working capital inventory items, not spent, are consumed, and are advanced, returning after the end of the circuit and entering the next.

Moment of advancing is one of the most important and distinctive features of working capital, as it plays an important role in their economic borders. Interim criteria for advancing working capital should not be a quarterly or annual funds, and one cycle, after which they are reimbursed and come next.

The study of the essence of working capital involves consideration of working capital and circulation of funds. Working capital, revolving funds and funds of treatment exist in unity and relationship, but between them there are significant differences, which are as follows.

Current assets are constantly at all stages of the company, while the current assets are the production process and is replaced with new raw material batches, fuel, basic and auxiliary materials. Inventories, as part of the current assets are transferred into the production process, are transformed into finished goods, and leave the company. Revolving funds are completely consumed in the production process, bringing their value to the finished product. The sum for the year may be ten times higher than the amount of working capital, providing the commission of each of the circuit processing or consumption of a new batch of the objects of labor and remaining in the economy, making a closed circuit.

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

During circuit current assets embody its value in revolving funds and, therefore, by the last function in the production process involved in the formation of the cost of production.

If current assets directly and indirectly involved in the creation of a new product, they would gradually decrease and by the end of the circuit would have to disappear.

Revolving funds, representing a use-value, act in a uniform manner - productive. Circulating means, as noted, not only sequentially take various forms, but in certain parts permanently reside in these forms.

These circumstances make the objective necessity to distinguish the turnover of circulating assets and working capital.

A comparison of current assets to fund treatment, non-functional form of working capital to the stage of treatment, with the following results. Circuit enterprise funds completed the process of realization of production (works, services). For smooth implementation of this process, they, along with fixed and circulating capital and must have treatment funds.

Turnover treatment funds inextricably linked to the trafficking of circulating productive assets and is its continuation and completion. Making a circuit, these funds are intertwined to form the total turnover, during which the value of working capital, transferred to the product of labor, is transferred from the sphere of production in the sphere of circulation and in the amount of the cost of treatment of advanced value funds - from the sphere of circulation into the sphere of production. It carried a single turnover of advances, passing through different functional forms and returning to the original form of money. Current assets, making a circuit of the sphere of production, where they function as revolving funds, transferred to the sphere of circulation, where they function as handling funds,

The definition of working capital advances as the cash generated in the stocks circulating productive assets and handling the funds did not disclose the full contents of this economic category. It does not take into account the fact that, along with an advance of a certain amount of cash advances happening in the process of these stocks value of the surplus product created in the production process. So profitable businesses after completion of the circulation of funds advanced by the amount of working capital is increased by a certain amount of profits. At unprofitable enterprises amount of advances of working capital at the end of the circulation of funds is reduced due to the losses incurred.

Working capital is often identified with the cash. Meanwhile, you can not literally call them cash. Funds involved in the production and handling should not be equated with money. The aggregate value is advanced in the form of money and, after the process of production and circulation, again takes this form. Cash is the mediator in the flow of funds. The aggregate value, expressed in money, is converted into real money only at times and in parts.

Therefore, current assets are advances in cash costs for the planned education and the use of current production facilities and handling funds in the minimum size required to ensure implementation of enterprise production program, and timely implementation of the calculations.

Working capital companies perform two functions: production and settlement. Performing the function of production, working capital, avansiruyas in current operating assets, maintain the continuity of the production process and transfer their value to the manufactured product. Upon completion of the production of the working capital transferred to the sphere of circulation of funds in the form of treatment, which perform a second function, consisting in completing the circuit and the conversion of working capital from the commodity form into the money.

Rhythm, consistency and high productivity of the enterprise largely depends on its availability of working capital. Lack of funds, advances for the purchase of inventory, can lead to a reduction in production, non-fulfillment of the production program. Excessive diversion of funds to reserves in excess of actual demand, leading to necrosis of resources, inefficient use them.

Because current assets include both material and financial resources, their organization and efficiency of the process depends not only material production but also the financial stability of the enterprise,