Current assets, their essence and analysis

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That also includes the concept of "current assets"?It refers to the entire mass of cash advances in the establishment of treatment and manufacturing revolving funds that provide them a continuous circuit.To understand the essence of these assets should be thoroughly understand their purpose and the movement in the company.In a series circuit current assets are 3 stages: cash, inventory, commodity.

The first step is to turn the money, at which the transition of money in stocks, intended for the production.Roughly speaking, an entity acquires objects of labor (and raw materials) and the means of labor (service life of up to 1 year).

productive stage involves advancing the value created by the production, but not in full, and in the volume of spent inventories.At this point, it formed a work in progress and there is advancing in labor costs (wages) and part of fixed assets.

in commodity stage continues advancing the final product of work (finished products).Previously, working capital advances are reimbursed from the proceeds only at the moment when the commodity form of value added is converted into cash, or more simply, at the time of sales.The minimum estimated amount required for the smooth operation of enterprises, set standards for working assets.

Since any productive activity depends on the efficiency and size of current assets, detailed analysis of the current assets of the company plays a primary role in the administrative control of business efficiency.

all current (mobile and current) assets of the company are shown in the asset balance, namely in its second section.Analysis usually begins with the grouping of all assets in accordance with the degree of liquidity.In the process of grouping Assets distributed on such parameters:

- most easily implemented, which have the lowest degree of risk in terms of their liquidity.These assets include cash, stocks, promissory notes;

- marketable assets, which have a low degree of risk.These include: accounts receivable counterparties with a stable financial status, all inventories (except stale), finished products of high demand;

- assets that have a high degree of liquidity.These include unfinished and finished products, having for industrial purposes;

- a little liquid (illiquid) Assets, high-risk implementation.These include: stale material resources, accounts receivable counterparties having a poor financial condition, finished products with low demand.

During the analysis assesses the dynamics of relations illiquid assets and all current assets.The increasing ratio indicates a decrease in liquidity.For in-depth analysis of the composition of the study work in progress, inventory, finished goods by species and varieties.

Analysis of working capital turnover should be carried out regularly.General Turnover considered:

- turnover ratio, which is calculated as the ratio of revenues to average assets over a given period;

- the duration of the turnover is calculated as the ratio of the sum of the average balance of assets to a day in revenue for the period.

A good indicator is the increase in speed compared to the previous periods, as evidenced by the growth of the rational use of these assets.