Rational and competent use of resources and means of the company guarantees its success in the market. Analysis plays an important role working capital, which contain problematic areas of development. In addition, a reliable assessment allows you to analyze the general policy of the enterprise, identify the main mistakes and begin to identify reserves for improving efficiency.
The turnover of working capital characterizes the business activity of the enterprise
About the indicator
Indicators of profit, profitability, liquidity are subject to mandatory calculation. An important role is given to such an indicator as. Its expediency and the need for regular calculation are discussed at every enterprise, this is also evidenced by the fact that the Ministry of Finance of Russia recommends its use.
Note: the indicator is otherwise called the rate of turnover of goods and characterizes the size of the volume of proceeds received from sales by the value of the average cost of funds. It demonstrates how profitable and efficient the use of working capital is, which makes it possible to assess the picture of economic efficiency as a whole.
In practice, the value of the period of one revolution is used. Since both are important, their values play an important role in the operation of any enterprise.
What does it depend on:
- Industry of the firm. For industry, some values are provided, for construction - others, for the computer sector - third, and for trade - fourth. It is not the general indicator of orientation that is taken into account, but its private values (for example, the seasonality of goods).
- Economic policy applied by management. Qualification and level of preparedness of specialists. Efficiency of making commercial and managerial decisions.
For each type of enterprise, the optimal value of the parameter is determined.
Calculations
Calculation formulas
For the calculation, there is no need to use difficult cumbersome formulas. In principle, there is one calculation method that can be deciphered as follows: the value of the indicator is equal to sales revenue divided by the average size balances for the reporting period. In another way, these balances are called commodity stocks.
The formula for the turnover ratio of working capital is as follows:
The numerator shows the volume of products sold for a certain period, and the denominator shows the average value of the balance of funds for the same time. The parameter shows how many turnovers the funds had for a certain period - a quarter, six months, a year.
The duration of the turnover is found by using the following formula
The indicator characterizes how long the company can return its funds as revenue. The parameter T represents the number of days (for a year - 360, for a month - 30).
Calculation example
As we found out, the turnover ratio of working capital characterizes the effectiveness of their use. Consider the calculation procedure and the degree of its significance in any enterprise.
Read also: Aggregates of money supply: what is it
Suppose that for the reporting period equal to a year, products were sold in a quantitative volume equal to 20 million rubles. Average per year balance commodity stocks amounted to 4 million rubles.
In this case, the calculation will be as follows
Thus, the indicators of turnover of working capital are as follows: they manage to make 5 turns every 72 days. For some types of businesses this parameter is optimal, however, for sales in small businesses, the turnover ratio should take a greater value.
Finding data for calculations
The question arises of where to find the indicators that are needed to calculate the data using the formula. First of all, the main sources of indicators are data financial statements firms. Would need the most important document activities - the balance sheet, its application as a profit and loss statement. The data is collected 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 TK at the end of the previous one), as well as at the end of the period.
The formula for the average cost of working capital
Their sum is divided in half. The question arises of finding data for calculation, and the balance sheet, line code - 290, acts as a reliable source of data.
Factors affecting the indicator
For each enterprise, based on the main branch of its activity, there is its own 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 nature 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 the turnover of working capital will allow achieving optimal results in this area.
Values are affected by:
- raw materials used;
- rates and volumes;
- skill level;
- Kind of activity.
- analysis of the indicator.
Note: the value of the turnover ratio alone speaks volumes. If the parameter exceeds one, the enterprise is fully considered profitable. If the value is more than 1.36, this indicates increased profitability, therefore, his policy works as efficiently and rationally as possible.
Despite this, importance is given to measuring this indicator not separately, but in dynamics, so that it is possible to compare the values. For clarity, accountants and other employees use visual tables to conduct analytical operations with data and make decisions to stabilize the situation. Positive dynamics speaks of good development companies.
The director of the company, who has before his eyes only indicators of profit and overall profitability, cannot always understand how to correct them in the right direction. In order to have all the levers of control in hand, it is absolutely necessary to also 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 working capital makes a turn in reporting period;
- How much working capital is accounted for per unit of products sold;
Let's consider the calculation of these data using the example of a conventional enterprise, as well as the calculation of a number of important coefficients for understanding the significance of turnover indicators in the overall picture of the company's success.
Turnover ratio
The basic formula that determines the turnover rate of working capital is as follows:
Cob is the turnover ratio. It shows how many turnovers of working capital were made for a specific period of time. Other designations in this formula: Vp - sales volume for the reporting period;
Oav, - the average balance of working capital for the reporting period.
Most often, the indicator is calculated for a year, but absolutely any period necessary for analysis can be chosen. This ratio 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 of funds in circulation was 357,600 rubles. We get the turnover ratio:
4800000 / 357 600 = 13.4 turns.
Turnover duration
It also matters how many days one revolution lasts. This is one of the most important indicators, which shows how many days the company will see the funds invested in the turnover in the form of cash proceeds and will be able to use them. Based on this, it is possible to plan both making payments and expanding turnover. Duration is calculated like this:
T is the number of days in the analyzed period.
Let's calculate this indicator for the above digital example. Since the enterprise is trading, it has a minimum number of days off - 5 days a year, for the calculation we use the figure of 360 working days.
Calculate how many days 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 funds for expanding trade almost monthly.
To calculate the turnover of working capital essential It also has a rate of return. To calculate it, you need to calculate the ratio of profit to the average annual balance of working capital.
The profit of the enterprise for the analyzed year amounted to 1,640,000 rubles, the average annual balance was 34,080,000 rubles. Accordingly, the return on working capital in this example is only 5%.
Load factor of funds in circulation.
And one more indicator necessary for assessing the speed of turnover of working capital is the utilization factor of funds in circulation. The coefficient shows how much working capital is advanced for 1 rub. revenue. This is the working capital intensity, which shows how much working capital must be spent in order for the company to receive 1 ruble of revenue. It is calculated like this:
Where Kz - the load factor of funds in circulation, kop.;
100 - transfer 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 kop.
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 the efficiency of work with the help of all possible economic levers.
Forecast NOW! can be calculated
- Turnover in monetary and physical units both for a specific product, and for a group of goods, and for a cut - for example, for suppliers
- The dynamics of changes in turnover in any necessary sections
An example of calculating the turnover rate for groups of goods:
Evaluation of the dynamics of changes in turnover by goods/groups of goods 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 the turnover and the level of service are declining, then this is an unhealthy situation - you need to study this group of goods more carefully.
If turnover is increasing, but the level of service is decreasing, then the increase in turnover is most likely provided by fewer purchases and an increase in shortages. The opposite situation is also possible - the turnover decreases, but with this calculation, the level of service - customer demand is provided 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 ongoing changes are beneficial for the company, if they fall, then measures must be taken.
Forecast NOW! it is easy to assess the dynamics of turnover, service level, profit and profitability - it is enough to conduct 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 profits have been falling since August, we can conclude that the dynamics of changes is negative
Turnover analysis is one of the leading areas of analytical study of the financial activities of an organization. Based on the results of the analysis, assessments of business activity and the effectiveness of asset and / or capital assets management are made.
Today, the analysis of the turnover of working capital raises a lot of controversy between practical economists and theoretical economists. This is the most vulnerable point in the entire method of financial analysis of the organization's activities.
What characterizes the analysis of turnover
The main purpose for which it is carried out is to assess whether the company is able to make a profit by completing the "money-commodity-money" turnover. After the necessary calculations, the conditions for material supply, settlement with suppliers and buyers, sales of manufactured products, etc., become clear.
So what is turnover?
This is an economic value that gives a characteristic of a certain time period for which the full circulation of money and goods passes, or the number of these calls for a given time period.
So, the turnover ratio, the formula of which is given below, is equal to three (the analyzed period is a year). This means that the enterprise in a year of operation rescues a second more money than the value of its assets (that is, they turn over three times in a year).
The calculations are simple:
K about = sales proceeds / average assets.
It is often required to know the number of days in which one revolution takes place. For this, the number of days (365) is divided by the turnover rate for the analyzed year.
Frequently used turnover ratios
They are needed to analyze the business activity of the organization. The indicators of the turnover of funds show the intensity of the use of liabilities or certain assets (the so-called rate of turnover).
So, when analyzing the turnover, the following turnover ratios are used:
Equity capital of the enterprise,
Working capital assets,
Full assets,
Stocks,
Debts to creditors,
Accounts receivable.
The higher the calculated turnover ratio of complete assets, the more intensively they work and the higher the indicator of business activity of the enterprise. Not always positively affect turnover industry specifics. So, in trade organizations through which large amounts of money pass, the turnover will be high, while in capital-intensive enterprises it will be much lower.
When comparing the turnover ratios of two similar enterprises belonging to the same industry, one can see a difference, sometimes significant, in the efficiency of asset management.
If the analysis shows a large ratio of accounts receivable turnover, then there is a reason to talk about a significant efficiency of collection of payments.
This coefficient characterizes the speed of movement of working capital from the moment of receipt of payment for material values and ending with the return of funds for goods (services) sold to bank accounts. The amount of circulating assets is the difference between the total amount of circulating assets and the balance of funds in the bank on the accounts of the enterprise.
In the case of an increase in the rate of turnover with the same volume of goods (services) sold, the organization will use smaller amounts of working capital. From this we can conclude that material and monetary resources will be used more efficiently. Thus, the working capital turnover ratio indicates the entire set of processes of economic activity, such as: a decrease in capital intensity, an increase in productivity growth rates, etc.
Factors affecting the acceleration of the turnover of working capital
These include:
Reducing the total time spent on the technological cycle,
Improvement of technologies and production process,
Improving the supply and marketing of goods,
Transparent payment and settlement relations.
Money cycle
Or, as it is also called, working capital is the time period of cash turnover. Its beginning is the moment of acquisition of labor, materials, raw materials, etc. Its end is the receipt of money for the goods sold or services provided. The value of this period shows how effective the working capital management is.
A short cash cycle (a positive characteristic of the organization's activities) makes it possible to quickly return the funds invested in current assets. Many enterprises with a strong position in the market, after analyzing the turnover, receive a negative working capital ratio. This is explained, for example, by the fact that such organizations have the ability to impose their conditions on both suppliers (receiving various payment delays) and buyers (significantly reducing the payment period for the goods (services) supplied).
Inventory turnover
This is the process of replacing and / or complete (partial) renewal of stocks. It passes through the transfer of material assets (that is, the capital invested in them) from the group of stocks into the production and / or sale process. The analysis of inventory turnover makes it clear how many times the inventory balance was used during the calculation period.
Inexperienced managers create excessive reserves to reinsurance, not thinking about the fact that this surplus leads to a "freeze" of funds, spending in excess of the norm and a decrease in profits.
Economists advise avoiding such low-turnover stocks. And instead, by accelerating the turnover of goods (services), free up resources.
The inventory turnover ratio is one of the important criteria for assessing the activities of an enterprise.
If the calculations show a ratio that is too high (in comparison with the average or the previous period), then this may mean a significant insufficient inventory. If, on the contrary, the stocks of goods are not in demand or are very large.
It is possible to characterize the mobility of funds that are invested in the creation of stocks, only by calculating the stock turnover ratio. And the higher the business activity of the organization, the faster they return cash in the form of proceeds from the sale of goods (services) to the accounts of the enterprise.
There are no generally accepted norms for the turnover ratio. Analyze them within the same industry, and perfect option- in the dynamics of a single enterprise. Even the slightest decrease in this ratio indicates excessive stockpiling, ineffective warehouse management, or the accumulation of unusable or obsolete materials. On the other hand, this high indicator does not always characterize well the business activity of the enterprise. Sometimes this speaks of depletion of reserves, which can cause disruptions in the technological process.
Affects the inventory turnover and the organization's marketing department, since a high return on sales entails a low turnover ratio.
Accounts receivable turnover
This ratio characterizes the rate of repayment of accounts receivable, that is, it shows how quickly the organization receives payment for the goods (services) sold.
It is calculated for a separate period, most often for a year. And it shows how many times the organization received payments for products in the amount of the average outstanding balance. He also describes the policy of selling on credit and the efficiency of working with customers, that is, how effectively receivables are collected.
The receivables turnover ratio has no standards and norms, since it depends on the industry and technological features production. But in any case, the higher it is, the faster the receivables are covered. At the same time, the efficiency of the enterprise is not always accompanied by a high turnover. For example, sales of products on credit give a high balance of accounts receivable, while the rate of its turnover is low. 
Accounts payable turnover
This ratio shows the relationship between the amount of money that needs to be paid to creditors (suppliers) by the agreed date and the amount spent on purchases or on the purchase of goods (services). The calculation of the turnover of accounts payable makes it clear how many times its average value was repaid during the analyzed period.
Financial stability and solvency decrease with a high proportion of accounts payable. While it also gives the opportunity for the entire period of its existence to use "free" money.
The calculation is simple
The benefit is calculated as follows: the difference between the amount of interest on the loan, equated to the amount of debt (that is, a hypothetically taken loan) for the time it is on the balance sheet of the organization, and the amount of accounts payable itself.
A positive factor in the activity of the enterprise is the excess of the accounts receivable ratio over the accounts payable turnover ratio. Lenders give preference to a higher turnover ratio, but it is beneficial for the company to keep this ratio at a lower level. After all, unpaid accounts payable is a free source for financing the current activities of an organization.
Resource efficiency, or asset turnover
It makes it possible to calculate the number of capital turnovers for a particular period. This turnover ratio, the formula exists in two versions, gives a characteristic of the use of all assets of the organization, regardless of the source of their receipt. It is also important that, only by determining the resource efficiency coefficient, one can see how many rubles of benefit are accounted for for each ruble invested in assets.
The asset turnover ratio is equal to the quotient of the division of proceeds by the value of assets on average for the year. If it is necessary to calculate the turnover in days, then the number of days in a year must be divided by the asset turnover ratio.
The leading indicators for this category of turnover are the period and rate of turnover. The latter is the number of capital turnovers of the organization for a certain period of time. This interval is understood as the average period for which the funds invested in the production of goods or services are returned.
Asset turnover analysis is not based on any norms. But the fact that in capital-intensive industries the turnover rate is significantly lower than, for example, in the service sector, is definitely understandable.
Low turnover may indicate insufficient efficiency in working with assets. Keep in mind that ROIs also affect this category of turnover. Thus, high profitability entails a decrease in asset turnover. And vice versa.
Equity capital turnover
It is calculated to determine the rate of the organization's equity capital for a given period.
The capital turnover of the organization's own funds is designed to characterize various aspects of the financial activity of the enterprise. For example, from an economic point of view, this coefficient characterizes the activity of the money turnover of the invested capital, from the financial point of view - the rate of one turnover of the invested funds, and from the commercial point of view - surplus or insufficient sales.
If this indicator shows a significant excess of the level of sales of goods (services) over the invested funds, then, as a result, the growth of credit resources will begin, which, in turn, makes it possible to reach the limit beyond which the activity of creditors increases. In this case, to equity the liability ratio increases and the credit risk increases. And this entails the inability to pay these obligations.
The low turnover of equity capital indicates their insufficient investment in the production process.
current assets- one of the resources without which the commercial activity of the enterprise is impossible. Calculation and analysis of indicators turnover current assets characterizing the efficiency of managing this resource will be considered in this article.
Current assets, their composition and indicators for analysis
Systematic analysis commercial activities enterprises as an element of effective management is based on the calculation of a number of indicators and the normalization of their values. Comparison of actual and standard indicators makes it possible to identify various patterns in business processes, eliminate risks, and make timely and correct management decisions.
The main source of information for calculating analytical coefficients is financial statements.
A significant part of the calculations is based on information about the movement and balances current assets.
TO current assets include the following types of company assets:
- stocks, including raw materials, materials, goods for resale and goods shipped, finished products, future spending;
- VAT on purchased assets;
- accounts receivable;
- financial investments;
- cash.
In accordance with PBU 4/99 "Accounting statements of the organization" data on current assets enterprises are contained in section II of the balance sheet. Often in the literature you can find the terms "working capital" or "funds in circulation."
The magnitude current assets used in the calculation of the following indicators:
- profitability;
- liquidity;
- financial stability.
Let's take a closer look at analysis turnover of current assets, which is one of the aspects characterizing the business activity of the enterprise.
Why do you need a current asset turnover analysis?
The dynamics of indicators characterizing the turnover of working capital is necessarily disclosed in the information accompanying financial statements (clauses 31, 39 PBU 4/99), as part of a group of coefficients that allow interested users of financial statements to assess the financial stability, liquidity and business activity of the enterprise. current assets and their fair assessment are carefully checked in the process of auditing financial statements.
Competent management of funds in circulation allows you to effectively attract credit sources to finance current activities. To assess the creditworthiness of an enterprise, banks use well-known indicators for assessing financial and economic activities. Based on the ranking of these indicators, an enterprise is assigned a certain rating, on which credit conditions depend, including the credit rate, the amount of collateral and the loan term. current assets may also serve as collateral for loan obligations.
The presence of a system of analytical coefficients greatly facilitates the dialogue with the tax authorities, if it is necessary to explain the causes of seasonal losses. current assets may cause an excess of VAT deductions over the amount of VAT accrued.
Consider the procedure for calculating turnover ratios.
Turnover ratio of current assets
The turnover ratio shows how many times in the period under review current assets converted into cash and vice versa. The coefficient is calculated by the formula:
Kob \u003d B / SSOA,
where: Cob - turnover ratio of current assets ;
B - revenue for the year or another analyzed period;
SSOA - average cost current assets for the analysis period.
Attention should be paid to the calculation of the average cost current assets. For the purposes of obtaining the most correct value of the turnover ratio, it makes sense to divide the analyzed period into equal intervals and calculate the average cost using the following formula:
SCOA \u003d (COA0 / 2 + COA1 + COAn / 2) / (n - 1),
where: SSOA - average cost current assets for the period of analysis;
SOA0 - the balance of funds in circulation at the beginning of the analyzed period;
СОА1, СОАn - the balance of funds in circulation at the end of each equal interval of the analyzed period;
n is the number of equal time intervals in the analyzed period.
This method of calculating the average value of funds in circulation will take into account seasonal fluctuations in balances, as well as the influence of external and internal factors.
However, the value of the calculated turnover ratio gives only general information about the state of business activity of the enterprise and is of no value for management without analyzing its dynamics, comparing it with standard indicators.
Turnover of current assets: formula in days
The most informative indicator from the point of view of managing the commercial activities of an enterprise is the turnover of current assets in days or other units of time (weeks, months). This indicator can be calculated using the formula:
About \u003d K_dn / Cob,
where: About - turnover in days;
K_dn - the number of days in the analysis period;
Cob - turnover ratio of current assets.
The normative values of turnover in days and the turnover ratio are set by the enterprise independently based on the analysis of a combination of factors, such as the terms of contracts, industry specifics, region of activity, etc.
current assets have a different structure depending on the type of activity. For example, if an enterprise provides services and does not have stocks, the focus in the analysis of current assets turnover will be on receivables. Effective management of this type of funds in circulation will enable the enterprise to release the funds frozen in receivables and thereby improve the financial position of the enterprise.
How to set the standard for the turnover of receivables? It is necessary to compare the turnover of receivables with the turnover of accounts payable. The economic effect of managing receivables will be the higher, the greater the excess in days of accounts payable turnover over receivables turnover.
An analysis of the dynamics of receivables turnover indicators will make it possible to identify negative trends in the event that uncollectible debts appear in the receivables.
Results
current assets Enterprises are a rapidly changing resource that reacts most sharply to changes in the external and internal business environment. Turnover indicators current assets are an important indicator of the effectiveness of the commercial activities of the enterprise.
Under the working capital of the enterprise refers to the assets used in the current activities of the organization. According to Russian standards accounting (RAS) they include: stocks of raw materials and materials, finished goods and work in progress, cash and cash equivalents (such as air and railway tickets, travel tickets, etc.), goods purchased for resale , receivables, as well as financial investments for a period of less than one year.
Without competent and rational use this group of assets is impossible for the economic activity of any organization.
That is why it is so important to carefully monitor the ways and procedure for using the working capital of the company. In economic analysis, one of the most significant indicators that allows you to evaluate the effectiveness of the use of the company's working capital is the turnover ratio of the company's current assets.
Calculation procedure
The turnover ratio of working capital allows you to determine how much rationally and intensively current assets of the company are used.
In other words, it shows how much the company's revenue falls on one ruble of working capital. 
Thus, the turnover ratio is calculated as:
K_rev = TR/(P_(rev.av.))
where:
TR is the revenue or the volume of products sold for the analyzed period of time, excluding VAT;
(P_(ob.sr.)) - the average cost of the company's working capital for the specified period.
Since the main goal of company asset management is to profit maximization organization received per unit of invested capital, then it is with the help of this coefficient that the owner can analyze the return received from current assets. The higher the value of this indicator, the more efficiently the working capital is used in the company!
Data for calculation
Traditionally, for the calculation of economic indicators, the data of the enterprise's financial statements are used. To calculate the turnover ratio of current assets, the information provided in the Balance Sheet (form No. 1) and the Statement of Financial Results (formerly Profit and Loss Statement) (form No. 2) is required. It is obvious that reporting is used for the period of time that is being analyzed.
The average cost of the organization's working capital for twelve months is found as the difference between the value of working capital at the beginning and at the end of the year, divided in half.
(P_(rev.av.)) = (P_(rev.av.2) - P_(rev.av.1))/2
where:
P_(ob.sr.1) - the value of the company's working capital at the beginning of the period;
P_(ob.sr.2) - the value of working capital at the end of the period.
All these data are presented in balance sheet organizations in the line "Total for section II".
As for revenue (TR), information about it can be found in the second form of financial statements, in the Statement of Financial Results (line "Revenue").
General information about the working capital of the enterprise can be obtained from the following video:
Factors affecting the value of the coefficient
Several factors influence the turnover ratio of a company's working capital. First, its meaning is related to the amount of working capital companies, i.e. the higher it is, the lower the final score. Secondly, the coefficient is also affected by the indicator the value of products sold.
Thus, if a company consistently demonstrates high rate revenue, then an increase in working capital in one period may not affect the final value of the turnover ratio.
Turnover ratio analysis
When analyzing the turnover ratio, it should be understood that its values are not always directly related to the efficiency or inefficiency of the economic activity of the enterprise. In most cases, its value can be explained by several important factors at once:
- the scope of the company;
- production cycle;
- life cycle stage.
So, for example, for material-intensive areas production characterized by much lower values of the coefficient than for trading companies, and an organization in the growth stage will always use more working capital than an organization in the decline stage. That is why it is possible to analyze the value of the turnover indicator only in dynamics. It is best to consider the values of the coefficient for 5 - 10 years. In this case, it is possible to clearly define both the length of one production cycle of the company and the efficiency of the use of working capital.
In addition, in order to understand how rationally resources are used at a particular enterprise, it is worth comparing the obtained data with industry average indicators. But even in this case, an underestimated or overestimated value of the coefficient will not testify about positive or negative results. Thus, it is impossible to draw any conclusions based only on data on the value of the turnover ratio. To correctly determine the current situation, it is necessary complete economic analysis enterprises.
For information on working capital efficiency indicators, see the following video:
How to increase the turnover ratio
If, after analyzing the economic activity of the organization, it was revealed that there are no objective reasons for the underestimated value of the turnover ratio of working capital, then it's time to look for solutions given problem, and there may be several such ways.
First, you can reduce the company's working capital, i.e. sell off the rest of finished products, reduce the purchase of raw materials and materials, deal with accounts receivable, and so on. Reducing the cost of working capital will allow the company to significantly increase the turnover ratio.
Secondly, attention should be paid to company's revenue. If it is not possible to reduce current assets, then it is necessary to look for new ways to sell products. However, it should be understood that attracting new customers and increasing sales volumes in most cases leads to an increase in production volumes. Thus, along with the company's revenue, working capital costs may also increase, which will lead to a decrease in the value of the coefficient.
Possible reasons for the decline
If, when analyzing the turnover of the company's working capital, it was revealed that the value of this coefficient is constantly decreasing and this has nothing to do with the production cycle of the enterprise, then it's time to pay attention to the ways in which working capital is used.
First of all, it is necessary to complex analysis all components of the company's working capital and identify which line of the balance sheet has the largest share. More often than not, companies suffer from exorbitant inventory and receivables.
If the company's inventory grows from period to period, and the volume of products sold does not change, then the main problem is errors in logistics. In other words, the organization purchases more raw materials and materials than it needs for its current activities. To solve this problem, it is necessary to debug the supply chain, revise contracts with suppliers and once again calculate the optimal inventory levels for a continuous production process.
Another problem may be settlements with buyers and customers, it is from them for the most part that the receivables of the enterprise are formed. Many large companies prefer to pay their suppliers only at the end of the reporting period, while the finished product was shipped at the very beginning. There are no universal solutions to this problem, and the organization itself chooses how to influence its customers.
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