business activity is estimated using a special type of indicators - indicators of turnover.They characterize it as extensively and effectively used a particular resource.These indicators can be calculated in two ways, and to characterize a number of revolutions of the period or duration of such trafficking.Even based on the name alone, we can judge that the analysis of the turnover of working capital the company carries extremely important to examine the financial condition of the organization.
Current assets can generally be regarded as objects of labor, which is directed certain activities of the company.They are consumed in the production process, so the faster they turn better.Of course, the above mainly refers to stocks, but the acceleration of the turnover and other elements of current assets will be extremely positive development.Let us consider in more detail some of the indicators turnover of working capital.
Naturally, the first step is to assess the total amount of the turnover of the property.To calculate the amount is sufficient to divide up over the average earnings over the same period the cost of working capital.Using the calculations of average size, obviously due to the fact that it is necessary to take into account possible changes in the value of property that occurred during the period.This indicator describes how much revenue could bring the cost of each unit of current assets.The period during which passes one turn, is determined by dividing the length of the study period by the number of revolutions.Typically, a period of a year or a quarter, so the numerator will be either 360 or 90 days.
Indicators turnover of working capital should also be designed in the context of individual groups of assets that can be found in the balance sheet.It is important to determine the turnover of the debt that the company can recover, - accounts.It is calculated by the exact same procedure, and in this case, too, it would be appropriate to calculate the duration of the turn.Also particularly important to assess the turnover of "accounts receivable" in terms of receivables.The duration of the turnover of this debt reflects the average period for which the company lends to its customers.
turnover ratio of stocks formed as part of the working capital turnover ratios.His determination is made in a different way, as the numerator of the formula is not revenue, and the sum of cost of goods manufactured.This choice is due to the peculiarities of stocks.As for the determination of the duration of one revolution, there is no difference.
last important indicator that we consider to be the turnover of funds.It is also determined based on revenue and characterizes its quantity per unit of organization of spare money.Duration of turnover in this case will show how long the funds on average are not present in the back and do not participate in the formation of revenues.
Indicators turnover of working capital should be subject to continuous study and analysis.With regard to the coefficients should ensure that the number of revolutions should be increased, so have taken appropriate management decisions.Thus, the period of turnover should be reduced.This may be due to any increase in revenues or decrease in the average value of a property.It should also be remembered that performance indicators are not limited to the working capital performance of their turnover.Be sure to need to produce identification and analysis of profitability ratios of the property.
