Working Capital Financing

Financing of working capital by means of lending is a fairly common phenomenon that helps manufacturers not to stop the process of production of goods or services. But it is also necessary to pay attention to the calculation of the financial benefit on the loan so that production does not become unprofitable.

If an enterprise conducts an incorrect policy of management and planning of working capital, then problems of a different nature follow from this. The main problem will be the lack of working capital and the need for additional funding.

Definition 1

Working capital financing is the attraction of additional capital to the company to cover the shortage current assets.

In any case, if the company realizes that it will not be able to cover the deficit of working capital with its own stable liabilities, then the management is forced to resort to borrowed funds from the outside in order not to stop the production process.

Debt financing is a loan, it can be taken from a bank at interest or microfinance or, if there are other sources of loan, then use their services. This is not the most profitable source of working capital, since interest on loans ultimately increases the cost of production.

What is a company's working capital?

In the economy of an enterprise, it is customary to single out such an item in the balance sheet of financial statements as “ working capital”, they are included in the balance sheet asset in the “capital and reserves” section.

Remark 1

Without working capital, the company will not be able to exist in the market, or rather, conduct current activities, ensure the process of production of goods or services.

It is customary to attribute to the working capital of the company everything that in the final form transfers its value to the final result. production process i.e. manufactured products.

Working capital of the company can be different, that is, they have different classification depending on purpose and form.

Sources of working capital

It is not always possible for an enterprise to form working capital from its own capital, it happens that the company does not have the financial capacity at the moment, or the entire working capital was invested in another line of business.

In view of this, the sources of formation of working capital of an enterprise can be:

• Company's own funds;
• Borrowed funds.

So, let's consider in more detail our own working capital and the issues of their formation at the enterprise. Before starting the production of goods on the market, it is necessary to form a policy for maintaining working capital accounting. All working capital of the company must be formed depending on the internal documentation of the company, that is, they are prescribed in the company's charter. They will not indicate how much funds should be or how they should be distributed, but information on from what sources of the enterprise they are formed and in what percentage.

Sources of replenishment of the company's own working capital can be:

• Gross profit of the company, which it receives during the year;
• Depreciation of fixed assets of the enterprise, depending on the method of depreciation, working capital can be replenished every month or quarter or year;
• Additional sources of income. For example, renting necessary companies area, etc.

In addition to its own working capital, a company can use borrowed funds, which are also divided into several categories.

Group of stable liabilities. They can also be called their own, but not completely, since in the end the company will have to give these funds away. For example, the amount not issued by the company wages, which she has not yet given to employees for a month, unpaid taxes and fees, unpaid sick leave, social contributions, etc. That is, until the payment of these funds to employees, the company actually has financial resources and can invest them in working capital if there is a deficit. But in any case, in the future, this money must be paid to employees and the state according to the law;

A group of borrowed funds. If the company realizes that it will not be able to cover the deficit of working capital with its own stable liabilities, then the management is forced to resort to borrowed funds from the outside in order not to stop the production process. Borrowed funds can be taken from a bank at interest or microfinance, or, if there are other sources of loans, then use their services. This is not the most profitable source of working capital, since interest on loans ultimately increases the cost of production.

Working capital problems

In matters of a production nature of working capital, various kinds of problems periodically arise. The main problems of working capital include:

• Illiterate policy of working capital planning. This problem leads to a shortage or lack of working capital in production. This is a serious problem for the enterprise, since an incorrect financial calculation of the need for funds ultimately affects the cost of the company's products, which, due to its growth, loses its competitive position in the sales market;
• The problem of incorrect calculation is the need for working capital for the enterprise. It often happens that the calculation of the need for working capital does not always correspond to the real situation on the market, prices are constantly rising due to growth and changes in inflation, which is why suppliers change the terms of delivery and sale of goods, which leads to an increase in the cost of the production process and final products as resulting in a negative impact on the overall performance of the company.

Thus, the problems associated with working capital have a serious impact on the work of the company, as they can change final results activities of the company, and more precisely end products firms that are marketed.

What measure of replenishment of insufficiency own funds enterprises is given in the text? Using social science knowledge, indicate any other measure and compare its effectiveness with the measure from the text.

The role of money is primarily manifested in the results of the participation of money in setting the price of a commodity. In conditions market economy this value is formed based on the value of the goods, with a possible deviation of the price from the value. The price of a product is affected by the supply-demand ratio and competition, which makes it possible to reduce the price of the product. However, lower costs may be allowed by producers with lower costs. In contrast, producers with higher cost levels are forced to either achieve cost reductions or reduce or cease production of such goods. The pricing mechanism is aimed, therefore, at increasing the efficiency of production, at reducing the level of costs.
Money is of great importance in the process of money circulation, when it performs the function of a medium of circulation or a means of payment. When paying for acquired values ​​or services rendered, the buyer controls the price level and the quality of goods and services, which forces manufacturers to reduce prices and improve the quality of their products. As a result, this is aimed at increasing the efficiency of production.
Money plays an important role in economic activity enterprises, in the functioning of state bodies, in strengthening the interest of people in the development and improvement of production efficiency, and the economical use of resources.
With the help of money, it is possible to determine not only the total cost (materials, depreciation, electricity, wages, etc.) for the production of each type of product and their total volume, but also the results of production through price certain types production, its entire volume, the amount of profit received.
At the same time, the dependence of the possibility of spending funds on the amount of cash receipts encourages the formation of stocks of materials only to a minimum. required sizes and to implement measures to accelerate the receipt of revenue for products sold. If own funds are insufficient to form increased stocks, the manufacturer could attract a loan for this, but this is associated with additional costs (%), which is undesirable, since such costs are a direct deduction from cash income.
The monetary remuneration of workers and employees, the monetary incomes of entrepreneurs encourage them to intensify their participation in the production processes, increase its volume, in the sale of products, since under such conditions the monetary incomes of citizens and entrepreneurs increase, which, accordingly, can contribute to an increase in their well-being.
To characterize the role of money in foreign economic relations, the following is also important. Each country periodically draws up a trade balance that compares money-denominated exports and imports of goods. As a result of comparing the volume of exports and imports for a certain period, the results of such operations are summed up in the form of active (excess of exports over imports) or passive (excess of imports over exports) trade balances.

(O.I. Lavrushin and others)

The rhythm and coherence of the work of enterprises largely depends on its availability of working capital. Excess working capital leads to the inactivity of capital, the deadening of resources, their inefficient use. Lack of working capital slows down the course of the production process, slows down the speed of the economic turnover of the enterprise's funds.

Excess and lack of working capital lead to a decrease economic benefit, inefficient use of resources.

The company's need for working capital depends on the following factors:

• - volume of production and sales;
• - type of business;
• - scale of activity;
• - the duration of the production cycle;
• - the capital structure of the enterprise;
• - seasonality of work;
• - accounting policy and settlement systems; lending conditions and practices;
• - the level of material and technical supply;
• - types and structure of consumed raw materials;
• - growth rates of production and sales volumes;
• - qualifications of managers and accountants and other factors.

An accurate calculation of the enterprise's need for working capital should be carried out on the basis of the time spent by working capital in the sphere of production and in the sphere of circulation.

The residence time of working capital in production covers:

• - the time during which working capital is in the process of direct functioning (processing);
• - the time of interruptions in the production process, which does not require labor costs;
• - the time during which the current assets of production are in the state of stocks.

The residence time of working capital in the sphere of circulation covers:

• - the time they are in the form of residues of unsold products;
• - Money at the box office of the enterprise;
• - time spent on bank accounts and in settlements with business entities.

Total turnover time of working capital consists of the time they spend in the sphere of production and in the sphere of circulation and is an important characteristic of the efficiency of the use of working capital.

Determining the needs of enterprises in their own working capital is carried out in the process rationing, those. determination of the standard of working capital.

The goal of regulation is determination of the optimal size of the working capital of the enterprise, involved for a certain period in the sphere of production and the sphere of circulation.

The need for own funds for each enterprise is determined when compiling financial plan. Rationing of working capital is carried out in monetary terms.

To normalized working capital include, as a rule, all negotiable production assets, as well as part of the circulation funds, which is in the form of balances finished products in the company's warehouse.

To non-standardized working capital include the remaining elements of circulation funds, i.e. sent to consumers, but not paid for products and all types of cash and settlements.

The absence of norms does not mean that the size of these elements of working capital can change arbitrarily and indefinitely and that there is no control over them. In the process of rationing, private and aggregate standards are established. The normalization process consists of several successive stages.

At the first stage, stock standards are developed for each element of normalized working capital.

Norm - this is relative value, corresponding to the volume of the stock of each element of working capital. The norm is set in days of stock and means the duration of the period for providing this type of material assets. The stock rate can be set as a percentage, in monetary terms to a certain base. Based on the norms of the stock and consumption of inventory items, the amount of working capital necessary to create normalized stocks for each type of working capital is determined.

Then, by adding the private standards, the total standard is calculated. Working capital ratio represents the monetary expression of the planned stock of inventory items, the minimum required for the normal economic activity of the enterprise.

The following working capital rationing methods:

• - direct account;
• - analytical;
• - coefficient.

Direct Count Method consists in the fact that first the amount of advanced working capital in each element is determined, then by summing them the total amount of standards is determined, which is a rather time-consuming operation, but allows you to make the most accurate calculations of private and total standards.

Analytical method is applied when in the planning period there are no significant changes in the working conditions of the enterprise compared to the previous one. The calculation of the standard is carried out on an enlarged basis, taking into account the ratio between the growth rate of production volume and the size of normalized working capital in the previous period.

At coefficient method the new standard is determined on the basis of the old one by making changes to it, taking into account the production, supply, sale of products, goods (works, services).

For example, the standard of working capital advanced in raw materials, basic materials, and purchased semi-finished products is determined by the formula

where H is the standard of working capital in stocks of raw materials, basic materials and purchased semi-finished products; P - average daily consumption of raw materials, materials, purchased semi-finished products; D - stock rate in days.

own asset negotiable solvency

Own working capital is included in the assessment financial condition enterprises. The availability of own working capital is one of the important indicators financial stability organizations. The absence of SOS indicates that all the working capital of the organization and, possibly, part of non-current assets (with a negative value of own working capital) are formed at the expense of borrowed sources. Improving the financial position of the enterprise is impossible without effective management working capital, based on the identification of the most significant factors and the implementation of measures to increase the security of the enterprise with its own working capital.

The financial position of the enterprise can be assessed from the point of view of the short and long term. In the first case, the criteria for assessing the financial position are the liquidity and solvency of the enterprise, i.e. the ability to timely and in full make settlements on short-term obligations.

The liquidity of an asset is understood as its ability to be transformed into cash, and the degree of liquidity is determined by the duration time period, during which this transformation can be carried out. The shorter the period, the higher the liquidity of this type of assets.

Speaking about the liquidity of an enterprise, they mean that it has working capital in an amount theoretically sufficient to repay short-term obligations, even if they do not meet the maturity dates stipulated by contracts.

Solvency means that the enterprise has cash and cash equivalents sufficient to pay for accounts payable requiring immediate repayment. Thus, the main signs of solvency are: a) the presence of sufficient funds in the current account; b) the absence of overdue accounts payable.

The amount of own working capital. It characterizes that part of the company's own capital, which is the source of coverage of its current assets (ie, assets with a turnover of less than one year). This is a calculated indicator that depends both on the structure of assets and on the structure of sources of funds. The indicator has a special importance for businesses dealing commercial activities and other intermediaries. Other equal conditions the growth of this indicator in dynamics is considered as a positive trend. The main and constant source of increasing own funds is profit. It is necessary to distinguish between "working capital" and "own working capital". The first indicator characterizes the assets of the enterprise (section II of the balance sheet asset), the second - the sources of funds, namely the part of the enterprise's own capital, considered as a source of coverage of current assets. The value of own working capital is numerically equal to the excess of current assets over current liabilities. A situation is possible when the value of current liabilities exceeds the value of current assets. The financial position of the enterprise in this case is considered as unstable; immediate action is required to correct it.

Consider the main indicators and coefficients of SOS characterizing the solvency and liquidity of enterprises:

1) Own working capital- (reflects the sufficiency of permanent resources to finance permanent assets) SOS = SK-VA, page 490 - page 190 (form No. 1)

Own current assets are calculated as the value of the company's own funds minus non-current assets, and are an indicator of how much the company's working capital is formed from its own funds. The study of the dynamics of own working capital, both in absolute terms and in relation to the total value of assets, is a very important tool financial analysis, since it allows the analyst to draw initial conclusions about the financial independence, solvency (liquidity) and efficiency of the enterprise.

If a SOS > 0, then the enterprise has more permanent sources (resources) than it is necessary for self-financing.

If a SOS< 0, then the source of coverage of fixed assets and non-current assets is short-term accounts payable. If the deadline for fulfilling obligations to creditors comes, and the indicator SOS does not change, then either the attraction of borrowed funds or the sale of fixed assets and non-current assets (and they, in turn, are among the slowest and most difficult to sell) will be required.

That's why financial position enterprise is unsustainable and urgent action is required to correct it.

2) financial indicator F1- (used to characterize the liquidity of the enterprise) F1 = SOS- p. 210 - p. 220 (form No. 1)

If a F1< 0 , this means a lack of own working capital ( SOS) for the formation of stocks of the enterprise, which is a negative indicator for the activities of the enterprise (periodic lack of funds for urgent needs, violation of solvency, etc.)

If a F1 > 0, this means the sufficiency of own current assets ( SOS) for the formation of reserves, which is a positive moment for the activity of the enterprise (the enterprise has enough funds necessary for business development).

If a F1 = 0, then the enterprise develops a situation in which all own current assets ( SOS) materialized in inventory for production. The extent to which such a policy is correct can be judged by the final indicators of financial and economic activity for the reporting period.

3) The most generalizing absolute indicator of financial stability is the surplus or lack of sources of funds for the formation of reserves and costs, i.e. the difference between the value of sources of funds and the value of stocks and costs. This refers to the provision of sources of own and borrowed funds, with the exception of accounts payable and other liabilities.

Depending on the ratio of the values ​​of indicators of inventories, own working capital and other sources of formation of reserves, the following types of financial stability can be distinguished with a certain degree of conventionality:

Three indicators of the availability of sources of formation of reserves and costs correspond to three indicators of the availability of reserves and costs with sources of formation.

Table 1. Algorithm for calculating absolute indicators characterizing different kinds sources

It is possible to distinguish 4 types of financial situations:

1. Absolute financial independence. This type of situation is extremely rare and represents an extreme type of financial stability.

2. Normal independence of the financial condition, which guarantees solvency.

3. An unstable financial condition, associated with a violation of solvency, but in which it is still possible to restore balance by replenishing sources of own funds, by reducing accounts receivable, accelerating inventory turnover.

4. Crisis financial condition, in which the company is completely dependent on borrowed sources of financing. Equity capital, long-term and short-term loans and borrowings are not enough to finance working capital, that is, replenishment of stocks comes at the expense of funds generated as a result of slowing down the repayment of accounts payable.

4) The relative indicator characterizing the security of the enterprise SOS is the coefficient of the enterprise's security with its own working capital (Koss).

koss = SOS / OA

It is defined as the ratio of own working capital to the value of the company's current assets (p. 490 - p. 190): p. 290. Own capital in circulation is calculated as the difference between own capital organization and its non-current assets (p. 490 - p. 190). Normative value Koss = 0.1

This method of assessment is considered quite tough, since it is customary in the world to qualify any financial ratios as unsatisfactory if they turn out to be worse than the industry average values ​​of the corresponding coefficients. In Russia, when the entire industry may be in financial crisis, it is reasonable to compare the financial ratios of an enterprise with the same ratios of financially healthy open companies industries whose shares in real terms do not fall in price on the stock market - or at least fall no faster than the decline in the price index of the entire stock market.

From the above, it follows that:

it is necessary to clearly distinguish the state of insolvency, which can be established Federal Service RF for insolvency (bankruptcies) and financial recovery, and the state of bankruptcy, which can only be recognized by a court that is in all circumstances of the case;

Critical factors for assessing the solvency (bankruptcy) of organizations are not so much values ​​such as the current liquidity ratio, commensurate with the current assets and borrowed current liabilities of the organization, but:

the ratio of the total debt to the entire balance sheet or market (liquidation) value of the enterprise's assets;

the ratio of accounts payable for current and future payments (including taxes) and receivables for completed orders;

the same for overdue accounts payable and receivable. The recommended approach should prevent false conclusions about insolvency and even more so bankruptcy of enterprises in the context of the ongoing crisis of mutual non-payments in the economy, which especially affects organizations and enterprises specializing in the execution of long-term contracts of the contract type.

4) The coefficient of maneuverability of own working capital.

The maneuverability coefficient characterizes what share of equity sources is in a mobile form and is equal to the ratio of the difference between the sum of all sources of equity and the cost of non-current assets to the sum of all sources of equity and long-term loans and borrowings.

The coefficient shows what part of the volume of own working capital (in the special literature they are sometimes also called functioning, or working, capital) falls on the most mobile component of current assets - cash. It is determined by the ratio of the amount of cash to the amount of own working capital (the difference between current assets and liabilities).

When using this coefficient in economic analysis be aware of its limitations. In the conditions of the Russian economy, which is still far from stable (by stability one should understand, first of all, the presence of stable legal and economic conditions: regulatory framework, tax mechanism, price proportions, etc.) this coefficient should be treated with great caution. Only as normal, due to the specifics of the type of activity under consideration, structural relationships and proportions in property and sources of financing develop in stable conditions, this indicator will begin to acquire analytical value. First of all, it will act as an indicator of changes in the conditions for the receipt of funds and their expenditure.

The formula for calculating the coefficient of maneuverability of own working capital:

CmanSOS = SOS/SC

(P. 490 - P. 190 + P. 5 10) /P. 490 f1

It is believed that the optimal value of this indicator may approach 0.5.

5) The share of own working capital in covering stocks

This indicator characterizes that part of the cost of inventories, which is covered by own working capital, and also traditionally is of great importance in the analysis of the financial condition. The value of this coefficient must exceed the value 0,5.

Share of SOS_in_GZ = SOS/ZZ

where SOS - own working capital (p. 490 - p. 190), ZZ - stocks and costs (p. 210 + p. 220, second section of the balance sheet)