The company invests its working capital in current business and production operations.
Turnover ratios(indicators) have great value for assessment, analysis and forecasting financial condition companies or enterprise, since the rate at which current assets are converted into 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 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;
- Report on financial results (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. The most high values coefficients have trading enterprises. 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.
Ratio increase:
- leads to release material resources;
- volume increase products;
- helps increase business activity and profits;
- allows you to allocate funds for development and modernization, without attracting additional loans for this;
- indicates improved methods of using and organizing inventory 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 attract additional Money.
Reasons for reducing the working capital turnover ratio
The turnover ratio has a negative impact economic crisis and its components, 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, which means it is growing financial well-being and solvency of the enterprise.
If the turnover ratio decreases every year, it is recommended to immediately review the economic policy of doing business.
Rational and competent use of the company's resources and funds guarantees its success in the market. An important role is played by the analysis of working capital, in which problematic areas of development lie. In addition, a reliable assessment allows you to analyze the overall policy of the enterprise, identify the main errors and begin to discover reserves for increasing efficiency.
Working capital turnover characterizes business activity enterprises
About the indicator
Indicators of profit, profitability, and liquidity are subject to mandatory calculation. An important role is given to such an indicator as . Its feasibility and the need for regular calculations are discussed at every enterprise; this is evidenced by the fact that it is recommended for its use by the Russian Ministry of Finance.
Note: the indicator is otherwise called the speed of turnover of goods and characterizes the amount of revenue received from sales by the value average cost funds. Demonstrates how profitable and efficiently working capital is used, which allows you to evaluate the picture economic efficiency generally.
In practice, the value of the period of one revolution is used. Since both are important, their meanings play important role in the activities of any enterprise.
What does it depend on:
- Industry of the company. For industry, certain values are provided, for construction - others, for the computer sector - third, and for trade - fourth. It is not the general indicator of direction that is taken into account, but its particular values (for example, the seasonality of goods).
- Economic policies applied by management. Qualification and level of preparedness of specialists. Efficiency of making commercial and management decisions.
For each type of enterprise, the optimal value of the parameter is determined.
Calculations
Formulas for calculations
There is no need to use difficult cumbersome formulas for calculations. In principle, there is one method of calculation, which can be deciphered as follows: the value of the indicator is equal to sales revenue divided by the average balance for the reporting period. In another way, these balances are called inventory.
The formula for the working capital turnover ratio is as follows:
The numerator displays the volume of products sold over a certain period, and the denominator displays the average value of the balance of funds for the same time. The parameter demonstrates how many turnovers occurred in funds over a certain period - a quarter, six months, a year.
The turnover time is found by using the following formula
The indicator characterizes how long the company can return its funds as revenue. The T parameter represents the number of days (for a year - 360, for a month - 30).
Calculation example
As we found out, the working capital turnover ratio characterizes the efficiency of their use. Let's consider the calculation procedure and the degree of its significance in any enterprise.
Read also: What's happened single tax on imputed income
Let us assume that during the reporting period of one year, products were sold in a quantitative volume equal to 20 million rubles. On average, the balance of inventory for the year amounted to 4 million rubles.
In this case, the calculation will be as follows
Thus, the turnover indicators of working capital are as follows: they manage to complete 5 turnovers every 72 days. For some types of enterprises, this parameter is optimal, however, for sales in small enterprises, the turnover ratio should take a greater value.
Finding data for calculations
The question arises about where to find the indicators that are needed to calculate data using the formula. First of all, the main sources of indicators are the data from the company’s financial statements. You will need the most important document of activity - the balance sheet, its application as a profit and loss statement. Data is taken for the period under study.
The volume of quantitatively sold products is the amount displayed on line 10 in the Report - it is this document that contains data on net revenue.
To calculate the average cost of working capital, the sum of the cost is divided in half, that is, the indicator of inventory at the beginning of the year is taken (it is equal to the amount of technical assignment at the end of the previous one), as well as at the end of the period.
Formula for average cost of working capital
Their amount is divided in half. The question arises about finding data for calculations, and the balance sheet, line code - 290, acts as a reliable source of data.
Factors influencing the indicator
For each enterprise, based on the main industry of its activity, there is a different indicator. There is no specific value that was considered universal and optimal for everyone. The real champions in terms of the parameter value are wholesale and retail due to the specifics of the activity. But companies engaged in the field of culture and science have slightly different indicators, which is quite natural. A timely analysis of working capital turnover will allow you to achieve optimal results in this area.
The values are affected by:
- raw materials used;
- rates and volumes;
- qualification level;
- Kind of activity.
- carrying out indicator analysis.
Note: The turnover ratio alone speaks volumes. If the parameter exceeds one, the enterprise is considered fully profitable. If the value is more than 1.36, this indicates increased profitability, therefore, his policy works as efficiently and efficiently as possible.
Despite this, importance is attached to measuring this indicator not individually, but in dynamics, so that it is possible to compare values. For clarity, accountants and other employees use visual tables that allow them to carry out analytical operations with data and make decisions to stabilize the situation. Positive dynamics indicate good development companies.
Each enterprise located in the market economy segment operates with the goal 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. By conducting a qualitative analysis of 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, materials, 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 guidance. 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, coherence and speed. By calculating the working capital turnover ratio using the formula below, financial analysts must determine the optimal amount of resources. 
This is their minimum size that can ensure full production 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 through rational use of 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 equipment, 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 optimizing the capital structure, which is reflected in Form 1 “Balance Sheet” of the 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 is reflected by 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. Working capital turnover is facilitated by the introduction of technological process new technology, modern scientific developments. 
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 more finished products faster. 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 mandatory control 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.
The efficiency of using working capital is characterized by a system of economic indicators, and, above all, the turnover of working capital and the duration of one turnover. The turnover of working capital refers to the duration of the complete circulation of funds from the moment of acquisition of working capital (purchase of raw materials, supplies, etc.) to the release and sale of finished products. The circulation of working capital is completed by crediting the proceeds to the company's account.
The turnover of working capital at an enterprise depends on the following factors:
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;
working capital structures, etc.
The efficiency of working capital turnover is characterized by the following indicators:
1. Working capital turnover ratio. Shows the number of revolutions that working capital makes during the analyzed period. The higher the turnover ratio, the better the working capital is used.
Cob=N/Esro(1)
Where Cob- working capital turnover ratio;
N- revenues from sales;
EURO- average annual cost of working capital.
Euro = (Start of year + End of year)/2 (2)
Where EURO- average annual cost of working capital;
Start of the year- cost of working capital at the beginning of the year;
End of the year- cost of working capital at the end of the year.
2. Load factor of funds in circulation. It is the inverse of the direct working capital turnover ratio. It characterizes the amount of working capital spent per 1 ruble. sold products. The lower the utilization rate of funds, the more efficiently the working capital is used at the enterprise, and its financial position improves.
Kz = Euro/N x100 (3)
Where Kz- load factor of funds in circulation
N- revenues from sales;
EURO- average annual cost of working capital;
100 - conversion of rubles to kopecks.
3. Coefficient of duration of one turnover of working capital. It shows how long it takes for the company to return its working capital in the form of revenue from sales of products. A decrease in the duration of one revolution indicates an improvement in the use of working capital.
TE = T/Kob (4)
Where THOSE- duration of the 1st turnover of working capital;
T
Cob- turnover ratio;
Comparison of turnover ratios over the years allows us to identify trends in the efficiency of using working capital. If the working capital turnover ratio has increased or remained stable, then the enterprise operates rhythmically and uses financial resources rationally. A decrease in the turnover ratio indicates a decline in the rate of development of the enterprise and its poor financial condition. The turnover of working capital may slow down or accelerate. As a result of accelerating turnover, that is, reducing the time it takes working capital to pass through individual stages and the entire circuit, the need for these funds is reduced. They are being released from circulation. The slowdown in turnover is accompanied by the involvement of additional funds in the turnover. Relative savings (relative overexpenditure) of working capital is determined by the following formula:
E = Euro-Esrp x(Nreport/N prev) (5)
Where E– relative savings (overexpenditure) of working capital;
E sro- average annual cost of working capital for the reporting period;
E srp- average annual cost of working capital of the previous
Nreport- revenue from sales of the reporting year;
Nbefore- revenue from sales of the previous year.
Relative savings (relative overexpenditure) of working capital:
E = 814 - 970.5x375023/285366 = - 461.41 (thousand rubles) - savings;
The general assessment of working capital turnover is presented in Table 5
Table 5
General assessment of working capital turnover
|
Indicators |
Previous 2013 |
Reporting |
Absolute deviation |
|
|
Revenue from implementation N, thousand rub | ||||
|
Average annual cost of working capital EURO, thousand roubles. | ||||
|
Working capital turnover ratio Cob, revolutions | ||||
|
Duration of turnover of working capital THOSE, days | ||||
|
Load factor of funds in circulation Kz, cop. |
Conclusion: The general assessment of working capital shows that for the analyzed period:
The duration of the turnover of working capital has improved by 0.44 days compared to the previous period, that is, funds invested in current assets go through a full cycle and again take cash form 0.44 days earlier than in the previous period;
A decrease in the utilization rate of funds in circulation by 0.13 indicates that working capital has become more efficiently used at the enterprise compared to last year, i.e. financial situation improves;
An increase in the turnover ratio by 166.66 indicates better use of working capital;
The acceleration of turnover of working capital led to their release from circulation in the amount of 461.41 thousand rubles.
Accounts receivable is the amount of debts owed to an enterprise or organization from legal entities and individuals. The most general recommendations for managing accounts receivable are:
Monitor the status of settlements with customers for deferred (overdue) debts;
If possible, target a larger number of buyers in order to reduce the risk of non-payment by one or more large buyers;
Monitor the status of accounts receivable and accounts payable - a significant excess of accounts receivable poses a threat to the financial stability of the enterprise and makes it necessary to attract additional sources of financing.
The information base for the analysis of receivables is official financial reporting: accounting report - form No. 1 (section " Current assets"), Form No. 5 "Appendix to the Balance Sheet" (section "Receivables and Payables" and references thereto).
For accounts receivable, as well as for working capital, in general, the concept of “turnover” is used. Turnover is characterized by a group of coefficients. To assess accounts receivable turnover, the following indicators are used:
1. Accounts receivable turnover ratio.
Shows how effectively the company organized the collection of payment for its products. A decrease in this indicator may signal an increase in the number of insolvent customers and other sales problems.
Cobd =N/Esrd (6)
Where N- revenues from sales;
Cobd
Esrd- average annual value of accounts receivable.
2. Period of repayment of receivables.
This is the length of time required for the enterprise to collect debts for sold products. It is defined as the reciprocal of the accounts receivable turnover ratio and multiplied by the period.
TEDz = T/Kob (7)
Where TEDz- duration of the 1st turnover of working capital;
T- duration of the 1st period (360 days);
Cobd- Accounts receivable turnover ratio.
3. Share of receivables in the total volume of current assets. Shows what share receivables occupy in the total amount of current assets. An increase in this indicator indicates an outflow of funds from circulation.
Ddz = Edzkon/TAkon x 100% (8)
Where Jedzkon- accounts receivable at the end of the year;
TAcon- current assets at the end of the year.
Ddz- share of accounts receivable
All calculated data are grouped and listed in table 6.
Table 6
Accounts receivable turnover analysis
|
Indicators |
Previous |
Reporting |
Absolute deviation |
|
|
Revenues from sales TO thousand roubles. | ||||
|
Average annual value of accounts receivable Esrd, thousand roubles. | ||||
|
Current assets at the end of the year TA con. ,thousand roubles. | ||||
|
Accounts receivable at the end of the year Edz con., thousand rubles | ||||
|
Accounts receivable turnover ratio Cobd,revolutions | ||||
|
Receivables repayment period TEDz,days | ||||
|
Share of receivables in total current assets Ddz |
Conclusion: analysis of accounts receivable turnover shows that the state of settlements with customers has improved compared to last year:
The average repayment period for receivables decreased by 1.87 days;
An increase in the accounts receivable turnover ratio by 73.49 turns shows a relative decrease in commercial lending;
The share of accounts receivable in the total volume of working capital decreased by 8.78%, which indicates an increase in the liquidity of current assets, and therefore, a slight improvement in the financial condition of the enterprise.
Inventory management (IPM).
The accumulation of mineral resources has positive and negative sides.
Positive sides:
The fall in the purchasing power of money forces the enterprise to invest temporarily free funds in stocks of materials, which can then be easily sold if necessary;
The accumulation of inventories is often a necessary measure to reduce the risk of non-delivery or under-delivery of raw materials and materials necessary for the production process of the enterprise.
Negative sides:
The accumulation of inventories inevitably leads to an additional outflow of funds due to an increase in costs associated with storing inventories (rental of warehouse premises and their maintenance, costs of moving inventories, insurance, etc.), as well as an increase in costs associated with losses due to obsolescence, damage , theft and uncontrolled use of inventories, due to an increase in the amount of tax paid, and due to the diversion of funds from circulation.
To assess inventory turnover, the following indicators are used:
1. Inventory turnover ratio. Shows the turnover rate of inventories.
Kmpz =S/Esrmpz (9)
Where Esrmpz- average annual cost of inventories; S- cost;
Kmpz- inventory turnover ratio.
The cost price is taken from Form No. 2 - Profit and Loss Statement. The higher this indicator, the less funds are associated with this least liquid item, the more liquid the structure of current assets and the more stable the financial position of the enterprise. It is especially important to increase turnover and reduce inventories if the company has a large debt. In this case, creditor pressure may be felt before anything can be done with the inventory, especially in unfavorable conditions.
2. Shelf life of MPZ.
An increase in this indicator indicates the accumulation of inventories, and a decrease indicates a reduction in inventories. The turnover indicators of finished products and inventories, as well as shelf life, are calculated in the same way. inventories and finished products.
Tmpz = T / Kmpz (10)
Where Tmpz- shelf life of MPZ;
T- duration of the 1st period (360 days);
Kmpz- inventory turnover ratio.
An increase in this indicator indicates the accumulation of inventories, and a decrease indicates a reduction in inventories. The turnover rates of finished products and inventories, as well as the shelf life of inventories and finished products, are calculated similarly. Data from the analysis of inventory turnover are presented in table. 7.
Table 7
Analysis of inventory turnover
|
Indicators |
Previous |
Reporting |
Absolute deviation |
|
|
Cost of products sold S, thousand roubles | ||||
|
Average annual cost of inventories Esrmpz,thousand roubles. | ||||
|
Average annual cost of inventories, ESRPZ | ||||
|
Average annual cost of finished products ESRgp, thousand roubles. | ||||
|
Inventory turnover Kobmpz rpm | ||||
|
Inventory turnover Bullpen,revolutions | ||||
|
Turnover of finished products To obgp,revolutions | ||||
|
Shelf life of MPZ, Tmpz, days | ||||
|
Shelf life of inventories, Tpz,days | ||||
|
Shelf life of finished products, Tgp, days |
Conclusion: analysis of inventory turnover shows that during the analyzed period:
The turnover rate of inventories increased by 0.5 revolutions, and the shelf life of inventories decreased by 0.8 days compared to last year. Consequently, the enterprise does not accumulate inventories;
The turnover rate of industrial inventories decreased by 20.8 revolutions, and the shelf life of industrial inventories increased by 1.43 days compared to last year. Consequently, the enterprise is accumulating inventories;
The turnover rate of finished products increased by 2.19 turns, and the shelf life of finished products decreased by 2.15 days. Thus, finished products do not accumulate at the enterprise.
The director of a company, who only has indicators of profit and overall profitability before his eyes, cannot always understand how to adjust them in the right direction. In order to have all the control levers in your hands, it is absolutely necessary to calculate the turnover of working capital.
The picture of the use of working capital consists of four main indicators:
- Duration of turnover (determined in days);
- How many times do working capital turn over in the reporting period;
- How much working capital is there per unit of products sold;
Let's consider the calculation of these data using the example of an ordinary enterprise, as well as the calculation of a series important coefficients to understand the importance of turnover indicators in the overall picture of the company’s success.
Turnover ratio
The main formula determining the rate of turnover of working capital is as follows:
Cob is the turnover ratio. It shows how many turnovers of working capital were made during a specific period of time. Other designations in this formula: Vp - volume of product sales for the reporting period;
Osr is the average balance of working capital for the reporting period.
Most often, the indicator is calculated for the year, but absolutely any period needed for analysis can be selected. This coefficient is the rate of turnover of working capital. For example, the annual turnover of a mini store mobile phones amounted to 4,800,000 rubles. The average balance in circulation was RUB 357,600. We get the turnover ratio:
4800000 / 357600 = 13.4 revolutions.
Duration of turnover
It also matters how many days one revolution lasts. This is one of the most important indicators, which shows how many days later the company will see the funds invested in turnover in the form of cash proceeds and will be able to use them. Based on this, you can plan both making payments and expanding your turnover. The duration is calculated as follows:
T is the number of days in the analyzed period.
Let's calculate this indicator for the above digital example. Since the company is a trading company, it has a minimum number of days off - 5 days a year; for the calculation we use the figure of 360 working days.
Let's calculate how many days later the company could see the money invested in turnover in the form of revenue:
357,600 x 360 / 4,800,000 = 27 days.
As you can see, the turnover of funds is short; the management of the enterprise can plan payments and use of funds to expand trade almost monthly.
To calculate working capital turnover important It also has a profitability indicator. To calculate it, you need to calculate the ratio of profit to the average annual balance of working capital.
The enterprise's profit for the analyzed year amounted to 1,640,000 rubles, the average annual balance was 34,080,000 rubles. Accordingly, the profitability of working capital in in this example is only 5%.
Load factor of funds in circulation.
And one more indicator necessary to assess the speed of turnover of working capital is the load factor of funds in circulation. The coefficient shows how much working capital is advanced per 1 ruble. revenue. This is the working capital intensity, which shows how much working capital must be spent for the company to receive 1 ruble of revenue. It is calculated like this:
Where Kz is the load factor of funds in circulation, kopecks;
100 - conversion of rubles to kopecks.
This is the opposite of the turnover ratio. The smaller it is, the better the use of working capital. In our case, this coefficient is equal to:
(357,600 / 4,800,000) x 100 = 7.45 kopecks.
This indicator is an important confirmation that working capital is used very rationally. The calculation of all these indicators is mandatory for an enterprise that seeks to influence operational efficiency using all possible economic levers.
In Forecast NOW! can be calculated
- Turnover in monetary and natural units both for a specific product and for a group of products, and by section - for example, by suppliers
- Dynamics of changes in turnover in any necessary sections
An example of calculating the turnover rate by product groups:
Assessing the dynamics of changes in turnover by product/group of products is also very important. At the same time, it is important to correlate the turnover schedule with the service level schedule (how much we satisfied consumer demand in the previous period).
For example, if turnover and the level of service are declining, then this is an unhealthy situation - you need to study this group of products more carefully.
If turnover increases, but the level of service decreases, then the increase in turnover is most likely due to smaller purchases and an increase in shortages. The opposite situation is also possible - turnover decreases, but in this calculation the level of service - customer demand is ensured by large purchases of goods.
In these two situations, it is necessary to evaluate the dynamics of profit and profitability - if these indicators grow, then the changes taking place are beneficial for the company; if they fall, it is necessary to take action.
In Forecast NOW! It’s easy to assess the dynamics of turnover, service level, profit and profitability - just carry out the necessary analysis.
Example:
Since August, there has been an increase in turnover with a decrease in the level of service - it is necessary to evaluate the dynamics of profitability and profit:
Profitability and profit have been falling since August, we can conclude that the dynamics of changes are negative