It is necessary to calculate the coefficient to estimate the conversion rate working capital into money. It is closely related to the efficiency of sales management at the enterprise: an increase in the indicator in dynamics characterizes an increase in sales and profits. To calculate the indicator, you will need data on revenue and the average annual cost of fixed assets.
How efficiently are working capital used? Is there a shortage of assets? Are there problems with the money in circulation?
What are working capital?
These are revolving funds that are involved in the process of production and marketing of products. They provide the process of exchanging money for raw materials, raw materials for products, products for money.
Working capital is the cost of all items of labor involved in production process. They change their form (from natural to monetary) and are included in the cost of production.
The cost of this indicator includes:
- Costs of materials, raw materials.
- Costs of creating, storing and selling products.
- Money received from sales.
Every enterprise has working capital; they are needed for organization uninterrupted operation companies. Their lack can lead to production downtime due to the inability to purchase raw materials, pay wages personnel, payment of taxes, utility bills. The shortage has a negative impact on current processes and further development enterprise, a cash gap may form (lack of money to finance upcoming expenses).
If there is an insufficient amount of its own working capital, the enterprise attracts borrowed money (credits, loans, loans, deferments in payments to the budget).
More information on the topic can be obtained from the video:
Assessing the efficiency of using working capital
To assess the effectiveness of working capital management, there is a working capital turnover ratio (CRT). It determines the number of revolutions during which raw materials manage to turn into money. Calculated for any period - month, quarter, year.
K OOS indicates how many times funds are turned over over a certain period, at what speed.
Formula for calculation:
- B - revenue;
- ΔOC is the average amount of working capital.
ΔOA is calculated using the formula:
- OS NP - current assets at the beginning of the period;
- OS KP - current assets at the end of the period.
To calculate the environmental impact ratio, you can use balance sheet data. The formula in this case will be like this:
- Page 2010 - the value of line 2010 from form 2.
- Page 1200 NG - the value of line 1200 at the beginning of the year (form 1).
- Page 1200 KG - the value of line 1200 at the end of the year (form 1).
Calculation of K OOS using an example
For the convenience of calculating the working capital turnover ratio, you can use an Excel table (download example).
Conclusions from the table. In 2014, revenue indicators and the volume of fixed assets fell, but despite this, the environmental impact ratio increased by 1.06. This means that the number of turnovers has increased over the year. Further, since 2014, there has been growth in all indicators. Consequently, the enterprise operates more and more efficiently every year.
Normal value of the indicator
The working capital turnover ratio always takes a positive value, but it can be anything - it all depends on the industry and the specific enterprise. The Environmental Protection Code does not have any standard by which one can evaluate whether 1 or 100 is too much or too little. Each company will have different results. And to understand the current economic situation, they need to be compared with values from previous years and the industry average. Direct competitors will be of particular interest. If there is growth (as in the example above), this is a positive sign. A decrease is a reason to think about organizing the production/sales process. Therefore, we must strive to increase the coefficient.
Important! Changes in environmental protection can be influenced not only by internal ones, but also external factors(changes in tax legislation, state sanctions policy, decline in the entire industry, reduction in state support, etc.).
You can increase the value of the indicator in several ways:
- Reduce the amount of debt of the enterprise.
- Reduce the turnaround time for raw materials/goods.
- Stimulate demand.
- Reduce production costs.
- Strengthen the company's image among clients.
- Update the material and technical base, introduce new technologies.
- Improve the quality of services provided and goods sold.
- Reduce inventory.
- Initiate personnel changes.
It is also important to analyze the indicator with other economic indicators (liquidity ratio, asset turnover, etc.). Data must be taken for similar periods of time.
Monitoring environmental protection helps to notice in a timely manner a situation that threatens the company’s work and to correct it in a timely manner. management decisions, because the faster the funds turn around, the sooner the company’s expenses will be repaid. The slowdown in turnover leads to an increase in the need for working capital.
WORKING CAPITAL
The production process requires not only buildings and equipment, product licenses and other types of fixed assets and intangible assets. The production process also requires raw materials, spare parts and semi-finished products, as well as other resources that are included in working capital. Working capital, along with non-current assets, is the most important production factor
Working capital- this is money invested in raw materials, fuel, work in progress, finished but not yet sold products, as well as money necessary to service the circulation process
A characteristic feature of working capital is the high speed of their turnover. The functional role of working capital in the production process is fundamentally different from fixed capital. Working capital ensures the continuity of the production process.
The material content of working capital is objects of labor, as well as means of labor with a service life of no more than 12 months.
Material elements of working capital (labor items) are consumed in each production cycle. They completely lose their natural form, therefore they are fully included in the cost of manufactured products (work performed, services rendered).
Composition, structure and classification of working capital
Under composition of working capital it is necessary to understand the elements included in their composition (Fig. 1):
Industrial inventories (raw materials and basic materials, purchased semi-finished products, auxiliary materials, fuel, spare parts...);
Unfinished production;
Future expenses;
Finished products in warehouses;
Products shipped;
Accounts receivable;
Cash in the company's cash register and bank accounts.
Raw materials is a product of the extractive industries.
Materials represent products that have already undergone certain processing. Materials are divided into basic and auxiliary.
Basic– these are materials that are directly included in the composition of the manufactured product (metal, fabric).
Auxiliary – these are the materials necessary to ensure the normal production process. They themselves are not included in the finished product (lubricants, reagents).
Semi-finished products– products completed by processing at one processing stage and transferred for processing to another processing stage. Semi-finished products can be own and purchased. If semi-finished products are not produced at
own enterprise, but are purchased from another enterprise, they are classified as purchased and are included in production inventories.
Figure 1 – Elemental composition of working capital
Unfinished production - These are products (works) that have not passed all the stages (phases, processing stages) provided for by the technological process, as well as incomplete products that have not passed testing and technical acceptance.
Future expenses- these are expenses of a given period that are subject to repayment at the expense of the cost of subsequent periods.
Finished products represents fully finished finished products or semi-finished products received at the enterprise warehouse.
Accounts receivable– money that individuals or legal entities owe for the supply of goods, services or raw materials.
Cash– these are funds located in the cash register of the enterprise, in bank accounts and in settlements.
Based on the elemental composition of working capital, you can calculate them structure, which represents the share of the cost of individual elements of working capital in their total cost.
According to the sources of education, working capital is divided into own and borrowed (borrowed). Own working capital is formed at the expense of the enterprise's own capital (authorized capital, reserve capital, accumulated profit, etc.). Borrowed working capital includes bank loans, as well as accounts payable. They are provided to the enterprise for temporary use. One part is paid (credits and borrowings), the other is free (accounts payable).
In different countries, different ratios (standards) are used between equity and debt capital. In Russia, the ratio is 50/50, in the USA – 60/40, and in Japan – 30/70.
According to the degree of controllability, working capital is divided into standardized and non-standardized. Standardized assets include those working capital that ensures continuity of production and contributes to the efficient use of resources. These are inventories, deferred expenses, work in progress, finished goods in warehouse. Cash, shipped products, and accounts receivable are classified as non-standardized working capital. The absence of norms does not mean that the amounts of these funds can be changed arbitrarily. The current procedure for settlements between enterprises provides for a system of sanctions against the growth of non-payments.
Standardized working capital is planned by the enterprise, while non-standardized working capital is not an object of planning.
Circulation of working capital. Turnover indicators
Working capital is in constant motion. The circulation of capital covers three stages: procurement, production and marketing.
Any business starts with a certain amount of cash, which is invested in a certain amount of resources for production.
At the production stage, resources are embodied in goods, works or services. The result of this stage is the transition of working capital from the production form to the commodity form.
After the sale of the produced product, working capital from the commodity form again passes into money. The sizes of the initial amount of money and proceeds from the sale of products (works, services) do not coincide in size. The resulting financial result of the business (profit or loss) explains the reasons for the discrepancy (Fig. 2).
The time required for a complete turnover of working capital is called turnover time (period) working capital.
The time (duration) of turnover of working capital is one of the indicators turnover. Another indicator of turnover is the turnover ratio.
Turnover ratio- this is the number of revolutions that working capital makes over a certain period; it is calculated using the formula:
Where R– volume of products sold for the period under review;
OS– the average amount of working capital for the same period.
The time (duration) of turnover is usually called turnover in days. This indicator is determined by the formula:
Where D– the number of days in a given period (360, 90, 30);
TO about– turnover ratio:
After substituting the corresponding quantities into the formula, you can obtain a detailed expression for the turnover indicator:
At each stage of the circulation of working capital, it is possible to determine the private turnover of each element of working capital:
Partial turnover indicators can be calculated based on specific turnover. A special turnover for material inventories is their consumption for production, for work in progress - the receipt of goods at the warehouse, for finished products - shipment, for shipped products - their sale.
Average for the period, the amounts of working capital used in calculating turnover indicators are determined using the average chronological formula. The average annual amount (average annual working capital balances) is found as the arithmetic average of four quarterly amounts:
The quarterly average amount is calculated as the average of three monthly averages:
The expression used to calculate the average monthly amount is:
The amount of working capital at the disposal of the enterprise must be large enough so that the circulation process is not interrupted. At the same time, the presence of excess working capital negatively affects the results of its activities.
Figure 2 – stages of circulation of working capital
Methods for determining the need for working capital
Effective use of working capital largely depends on the correct determination of the need for working capital. An underestimation of the amount of working capital entails instability of the financial situation, interruptions in the production process and a decrease in production volumes and profits. Overestimation of the size of working capital reduces the ability of the enterprise to make capital expenditures to expand production (Fig. 3).
The need for working capital depends on many factors: production and sales volumes; the nature of the enterprise's activities; duration of the production cycle; types and structure of consumed raw materials; growth rates of production volumes, etc.
Figure 3 – Optimal amount of working capital
An accurate calculation of the enterprise's need for working capital should be based on the time spent by working capital in the sphere of production and the sphere of circulation.
The residence time of working capital in the production sector covers the period during which working capital remains in the state of inventory and in the form of work in progress.
The period of stay of working capital in the sphere of circulation covers the period of their presence in the form of balances of unsold products, in the form of shipped but not yet paid products, accounts receivable, in the form of cash in the cash register of the enterprise, in bank accounts.
The higher the turnover rate (the total time spent in the sphere of production and circulation), the lower the need for working capital.
The company is interested in reducing the size of its working capital. But this reduction must have reasonable limits, since working capital must ensure normal operation.
When determining the optimal need for working capital, the amount of money that will be advanced to create inventories, backlogs of work in progress and the accumulation of finished products in the warehouse is calculated. For this, three methods are used: analytical, coefficient and direct counting method.
Essence analytical, or the experimental-statistical method is that when analyzing existing inventory items, their actual inventories are adjusted and excess and unnecessary values are eliminated.
At coefficient method, amendments are made to the standard of the previous period for the planned change in production volumes and for the acceleration of turnover.
Analytical and coefficient methods can be used in those enterprises that have been operating for more than a year, have formed a production program and organized the production process, have statistical data for previous years and do not have a sufficient number of qualified specialists for more detailed work in the field of working capital planning.
Method direct account provides for the calculation of inventories for each element of working capital. This method is used when organizing a new enterprise and periodically clarifying the working capital needs of an existing enterprise.
General standards of own working capital are determined in the amount of their minimum requirement for the formation of reserves of raw materials, supplies, fuel, work in progress, deferred expenses, finished products.
The general working capital standard consists of the sum of private standards:
Where N P h – standard of production reserves;
N np– work-in-progress standard;
N gp– finished product standard;
N br – standard for future periods.
The production inventory standard depends on the average daily consumption of raw materials, fuel materials and the stock standard in days:
Where R With – average daily consumption of a given type of raw material or materials ( in rubles);
T days – stock norm in days
The average stock norm in days is calculated in general as a weighted average of the working capital stock norms for individual types.
The stock norm in days for a particular type is made up of the following components:
Where T tr – transport stock;
T tech – current warehouse stock;
T page – insurance (warranty stock);
T season – seasonal stock.
Transport stock is established by the length of time it takes the cargo to travel from the supplier to the consumer, taking into account the time of document flow.
If there are several suppliers, then the transport stock is determined as a weighted average value, taking into account the duration of the run and the size of the supply:
Delivery volume, t Cargo travel time, days.
1st supplier 20 15
2nd supplier 30 14
3rd supplier 10 12
T tr = (20 ×15 + 30 × 14 + 10 ×12) \ (20 + 30 + 10) = 14 days,
Figure 4 – Current warehouse stock
Current warehouse stock material assets are called a stock that meets production needs for the period between the two next arrivals of their suppliers (Fig. 4).
The composition of working capital includes the average current stock, taken in the amount of 50% of the duration of the interval between two adjacent deliveries:
Where AND– duration in days of the interval between deliveries.
The average interval between deliveries can be calculated using the formula:
Where P – number of deliveries for the period
Warranty (insurance) stock material assets is a reserve intended to meet the needs of production in case of a delay in the receipt of material assets.
The amount of safety stock is usually set within 50% of the current stock. This limit increases if the enterprise is located far from suppliers, the materials consumed are unique, and the manufactured products require many components or components from different suppliers.
Seasonal stock is calculated at enterprises with seasonal supplies of raw materials.
Amount of working capital for work in progress is determined taking into account the duration of the production cycle and the value of the cost increase coefficient:
Where IN– volume of average daily production at production cost;
T ts – duration of the production cycle;
TO ne – coefficient of increase in costs in work in progress
Production cycle refers to a number of production processes performed in the manufacture of products.
Production cycle time consists of the time spent directly on operations for processing raw materials, materials, workpieces, and the time required for breaks between operations from the start of the first operation to the delivery of finished products to the warehouse.
Cost increase factor characterizes the degree of product readiness and is determined by the ratio of the cost of work in progress to the cost of finished products.
The increase in costs can be uniform and uneven (slow and accelerated).
At uniform increase in costs the cost increase coefficient is found using the formula:
Where WITH n– the cost of raw materials and materials entering the production process;
WITH To– cost of finished products.
At uneven increase in costs Cost growth factors are first determined at several points in the production process:
Where TO i– coefficient of increase in costs at the i-th point;
WITH i– the cost of work in progress at the i-th point;
WITH To– cost of the finished product.
The overall cost increase factor for the process is calculated as the average value:
Where TO nz– general cost increase coefficient for the process;
i– number of points for calculating partial coefficients.
The amount of working capital invested in finished product inventories in the warehouse depends on the average daily output of products and the duration of storage of products in the warehouse:
Where IN– average daily output at production cost;
T xp– the average duration of storage of finished products in the warehouse.
The duration of storage of products in the warehouse, in turn, is calculated as the sum of the time for the formation of a batch of products for shipment and the preparation of documents for this batch:
Where T FP– time required to form a batch for shipment of finished products to the consumer, days;
T od– time required to prepare documents for sending cargo to the consumer, days.
Calculated in one way or another, the amount of working capital required for normal operation increases the efficiency of using this resource.
The company invests its working capital in current business and production operations.
Turnover ratios(indicators) are of great importance for assessment, analysis and forecasting financial condition companies or enterprises, since the rate of transformation current assets in cash has a significant impact on profitability, creditworthiness and solvency.
The turnover ratio characterizes:
- number of revolutions, which working capital makes during the analyzed period of time (for example, a quarter or a year);
- revenue, per one monetary unit, for example, one ruble of working capital.
Formula for calculating the working capital turnover ratio
The turnover ratio can be determined by dividing the revenue received over a period of time by the average amount of working capital for the same period.
The formula that determines the turnover ratio is the ratio of sales revenue for a quarter or year to the average amount of working capital:
Cob = RP/CO, where
- To ob.- turnover ratio;
- RP- sales revenue for the analyzed period (for example, quarter or year);
- CO- the average amount of working capital for the same period (calculated as the arithmetic mean: the amount of working capital at the beginning and end of the same period, divided by two).
What are the sources of information for the calculation?
The source of information for calculating the turnover ratio is:
- annual accounting balance;
- income statement(formerly profit and loss).
The balance of the line with code 1200 shows the total amount of current assets.
In the income statement, line code 2110 reflects sales proceeds, excluding value added tax and excise taxes.
Cob = line 2110 Form 2 / (line 1200 beginning year Form 1 + line 1200 ending year Form 1) / 2
Example.
The billing period is one year.
The proceeds from the sale are 900 million rubles.
The average annual amount of working capital is 300 million rubles.
Let's calculate the turnover ratio:
This means that per ruble of working capital, goods worth 3 rubles were sold. The annual amount of working capital (300 million rubles) made 3 turnovers.
What factors does the coefficient depend on?
The value of the turnover ratio is influenced by various economic, political and production factors. 
External factors:
- industry in which the company operates or organization;
- enterprise size(small, medium, large);
- scope and type of activity enterprises;
- economic situation in the country;
- inflationary processes;
- expensive loans;
- promotion taxes.
Internal factors directly depend on the operation of the enterprise itself, for example:
- management system efficiency assets;
- accounting policies;
- price policy;
- volume of sales and the rate of its change;
- assessment methods stocks;
- system improvement calculations;
- qualification personnel.
The turnover ratio mainly depends on the industry in which the organization or enterprise operates. Trade enterprises have the highest coefficients. Business in the field of science or culture does not have such a high indicator.
How to determine the profitability of working capital of fixed assets?
The profitability of the enterprise's turnover shows how effectively the organization's working capital is used - the amount of profit per 1 ruble of current assets.
Formula for calculating the profitability of working capital
K p = PE/SO, Where 
- Emergency — net profit for the analyzed period (for example, quarter or year);
- CO— average amount of working capital.
Balance sheet profitability formula:
K p =line 2400 / line 1200.
If the profitability ratio increases, then the company makes enough profit to produce efficient use current assets.
Analysis of the turnover ratio of current assets
Turnover ratio analysis- the main component of financial analysis.
Carried out using:
- comparison of actual indicators(proceeds from sales, amounts of current assets) with planned ones;
- comparison of actual indicators with relevant historical data.
As a result of the comparison, either the acceleration of turnover (the coefficient will increase) or the slowdown (the coefficient will decrease) is determined.
Increase in coefficient:
- leads to release material resources;
- volume increase products;
- helps to increase business activity and profits;
- allows you to highlight financial resources for development and modernization, without attracting additional loans for this;
- indicates improved methods of using and organizing supplies at the enterprise.
An increase in the turnover ratio indicates that current assets are used efficiently and effectively. In general, the financial condition and solvency of the enterprise improves.
Increasing the turnover ratio is achieved by:
- increase in sales growth compared to growth working capital;
- technology modernization production;
- improving the marketing system, sales and supply;
- increasing competitiveness;
- quality improvement products;
- reduction in production cycle;
- payment compliance disciplines.
A decrease in the turnover ratio leads to a deterioration in the financial condition of the organization or enterprise, there is a need to raise additional funds.
Reasons for reducing the working capital turnover ratio
The economic crisis and its components have a negative impact on the turnover ratio, for example:
- decline in volumes production;
- decline in consumer demand;
- violation of contractual and payment agreements obligations.
Also, a decrease in the turnover ratio can be caused by the following reasons:
- accumulation and excess of working capital(most often stocks);
- low qualifications personnel;
- growth of accounts payable enterprises;
- ineffective marketing policy;
- errors in the logistics system.
Timely detection and elimination of the causes of a decrease in the turnover ratio will help to avoid a financial crisis and bankruptcy of the enterprise.
Is there a normal turnover ratio?
There is no norm or so-called standard turnover ratio.
Therefore, the main task for economists– observe in a timely manner what will happen to the dynamics of changes in the indicator over certain periods of time. For comparison, you can use data from other organizations and enterprises that operate in a similar industry.
If the turnover ratio increases over time This means that the financial well-being and solvency of the enterprise is growing.
If the turnover ratio decreases every year, it is recommended to immediately review economic policy business.
The most important indicators of the use of working capital in an enterprise are the working capital turnover ratio and the duration of one turnover.
Working capital turnover ratio(Kob) shows how many revolutions the working capital made during the analyzed period (quarter, half-year, year). It is determined by the formula
where Vp is the volume of product sales for the reporting period;
O avg, is the average balance of working capital for the reporting period.
Duration of one revolution in days(D) shows how long it takes for the company to return its working capital in the form of revenue from sales of products. It is determined by the formula
where T is the number of days in the reporting period.
An important indicator of the effective use of working capital is also utilization rate of funds in circulation. It characterizes the amount of working capital advanced for 1 ruble. revenue from product sales. In other words, it represents the working capital intensity, i.e. costs of working capital (in kopecks) to receive 1 rub. sold products (works, services). The utilization rate of funds in circulation is determined by the following formula:
where Kz is the load factor of funds in circulation, kopecks;
100 - conversion of rubles to kopecks.
The load factor of funds in circulation (Kz) is the inverse value of the fund turnover ratio (Kob). The lower the utilization rate of funds, the more efficiently the working capital is used at the enterprise, and its financial position improves.
Example
During the reporting year, the volume of product sales amounted to 20 billion rubles, and the average annual balance of working capital was 5 billion rubles. For the planning period, it is planned to increase the sales volume by 20%, and the turnover ratio by one turnover.
Determine the indicators for the use of working capital in the reporting and planning period and their release.
Solution
1. We determine the indicators of the use of working capital for the reporting period:
2. We determine the indicators for the use of working capital in the planning period:
3. Determine the release of working capital:
where Qo is the need for working capital in the planning period, if there were no acceleration of their turnover;
Qpl - the need for working capital in the planning period, taking into account the acceleration of their turnover.
The turnover of working capital at an enterprise depends on the following factors: the duration of the production cycle; quality of products and their competitiveness; efficiency of working capital management at the enterprise in order to minimize them; solving the problem of reducing material consumption of products; method of supplying and marketing products; structures of working capital, etc. These are the ways to accelerate the turnover of working capital at an enterprise.
See also:
Each enterprise located in the segment market economy, works for the purpose of making a profit. To ensure that its amount is as large as possible, management makes a number of decisions to optimize all indicators. Collect necessary information The financial and analytical service of the enterprise helps.
One of the most important areas of her work is the study of such an indicator as working capital turnover. The amount of profit directly depends on its speed. After spending qualitative analysis the company’s activities in terms of working capital flow indicators, it is possible to track negative trends in the company’s development and eliminate them in the future.
Total value of working capital
Working capital represents resources directed to circulation funds and production assets to promote continuity economic activity various organizations.
This property of the enterprise forms assets that, during one cycle, transfer the full cost to the product. At the same time, working capital loses its material form. The time during which one production cycle occurs reflects the turnover ratio of the enterprise's working capital.
The circulation of capital goes through three stages. At the procurement stage, financial sources are invested in the resources necessary for the manufacture of products. Next comes the production stage. Raw materials, supplies, etc. are converted into finished goods. The last stage is sales. The company receives cash resources that reflect the results of its activities.
Structure of current assets
Working capital turnover deserves increased attention from financial managers and management. This indicator reflects how quickly the production cycle occurs. It involves circulation funds and production funds.
To find ways to speed up the turnover of working capital by reducing the duration of this period, it is necessary to understand which resources are involved in the cycle.
Circulation funds are responsible for servicing capital movements. These include financial sources invested in inventories, unpaid shipped products, money in accounts and on hand, as well as settlement finances. The coefficient that determines the turnover of working capital of enterprises largely depends on the size of the resources listed above.
Amount of working capital
The main criterion for organizing the production process is its continuity, consistency and speed. By calculating the working capital turnover ratio using the formula below, financial analysts should determine optimal quantity resources. 
This is their minimum size capable of ensuring full production of finished products. For this purpose, working capital is rationed. This procedure is carried out at the time of current planning. In this case, all the features of the functioning of the object under study are taken into account.
Rationing
Optimal working capital turnover indicators are achieved when rational use resources. For the smooth functioning of the enterprise, consumption rates and quantities of raw materials, fuel, semi-finished products, etc. are determined.
If resources are insufficient, downtime will occur. This will lead to underfulfillment of planned programs. And too much accumulation contributes to the irrational use of financial sources. Frozen in revolving funds funds could be used to purchase new technology, Scientific research etc.
Therefore, rationing performs a very important function, reducing the turnover period of working capital. Planning is carried out taking into account production conditions as responsibly as possible.
Efficiency mark
Working capital is formed from different sources. They can be the company’s net profit, bank loans, commercial deferred payments, shareholders’ capital, budget injections, accounts payable. 
Both paid and free sources are used. Therefore, finances put into circulation should bring a profit greater than the fee for attracting them. To carry out a full analysis, the following working capital turnover indicators are calculated:
- turnover ratio;
- duration of one cycle;
- load factor.
For the optimization process in this area, it is important to ensure a better balance between profitability and solvency, own and borrowed financial sources. Therefore, the analysis is performed globally.
Without optimization of the capital structure, which is reflected in Form 1 “Balance Sheet” financial statements, it is not possible to obtain a satisfactory result.
Calculation formulas
To assess working capital, a certain system of indicators is used. Initially, the analyst determines the total number of cycles that occur in the period under study. From this point of view, the turnover of working capital, the formula of which is given below, is determined as follows:
- Kob = Sales revenue: Average amount of working capital.
For such an analysis, you will need data from forms 1 and 2. The presented calculation based on the formula will have the following form:
- Kob = s. 2110 form 2: (p. 1100 (beginning of the period) + p. 1100 (end of the period)): 2.
To present this indicator in days, the turnover of working capital, the formula of which is presented below, looks like this:
- T = D: Kob, where D is the number of days in the period under study (can be 360, 90 or 30 days).
For companies producing seasonal goods, such calculations must be performed quarterly or monthly. This will make rationing easier. To calculate which component has a stronger effect on slowing down the flow of one cycle, the private turnover should be determined.
Each group included in current assets is calculated separately using the presented formulas.
Calculation example
To better understand how to calculate working capital turnover, you need to consider the analysis using an example. If it is known that in the period under study (year) the company received 20% less sales revenue, this indicates that its capital is not working properly.
At the same time, the analyst determined that the average number of current assets increased in the current period from 200 to 240 thousand rubles. The impact of such changes reflects the turnover ratio for the past and present periods. The calculation for the current period will be as follows:
- Cob1 = (1 - 0.2) BP0: Cob1 = 0.8 BP0: 240.
For the previous period the indicator will be as follows:
- Cob0 = BP0: Cob0 = BP0: 200.
The coefficient of change in turnover is determined as follows:
- d = Cob1: Cob0 = 0.8BP0: 240: BP0: 200 = 0.67.
It can be concluded that the production cycle decreased by 33%. With a more detailed study of the structure of current assets, it is possible to find ways to solve this problem. Additional resources were frozen in circulation.
Release or involvement in circulation
Slowing down or accelerating the turnover of working capital leads to the attraction or release of financial resources. To calculate the amount of these funds, the following formula is used:
- OS = BP (end of period): D x (T (end of period) - T (beginning of period)).
The economic effect of such changes makes it clear to the analyst whether resources were used rationally during the period under study. If the cycle speeds up, with the same amount of working capital, the company makes more profit due to the production of more finished goods.
Acceleration paths
To increase the speed of one cycle, there are certain ways. The turnover of working capital is facilitated by the introduction of new technology and modern scientific developments into the technological process. 
Production should be as mechanized and automated as possible. This leads to a reduction in the time spent on one technological operation. New equipment produces faster large quantity finished products. The rationality of logistics should also be examined.
The sales process may also need optimization. If a company has a large amount of accounts receivable, it is necessary to review the calculation procedure. For example, switching to a cashless system will speed up the process somewhat. A study of specific indicators will help determine at which stages of the cycle delays occur. Management must monitor turnover. If negative trends are detected, they are eliminated as quickly as possible.
By optimizing the turnover of working capital, the company uses its resources more efficiently. This leads to getting larger amount income.
