Working capital means those funds that have been invested in the current assets of the organization. This is a value expression of the elements of labor that take a direct part in the activities of production and completely redirect their own value to the cost of goods produced.
Instructions
Step 1
Working capital is determined as the difference between the size of current assets and the value of the current (short-term) liabilities of the enterprise. After all, working capital is the sum of the company's working capital.
Step 2
In turn, circulating assets are a set of funds that were advanced for the creation and use of circulation funds and production circulating assets, ensuring the continuity of the production and sale of manufactured goods. At the same time, the presence of the amount of working capital in the minimum required amounts that ensure the normal commercial, production activities of the company is a prerequisite for the successful performance of their own functions.
Step 3
The short-term (current) liabilities of the organization include the amount of short-term loans, accounts payable, the amount of advances received, dividends payable, the amount of lease payments.
Step 4
Determine the amount of working capital. It is formed from materials and stocks of raw materials, work in progress, high-wear and low-value items, as well as from accounts receivable and finished goods. Their entire total value determines the amount of money needed to cover them. For example, if the value of current assets is less than the size of current liabilities, then the working capital will have a negative value.
Step 5
Remember that the amount of the company's working capital depends on the value of the amount of expenses spent on the purchase of raw materials, as well as materials and direct overhead costs in the operation of the production of easily marketable products. Also, the amount of working capital depends on the duration of the production cycle and the sale of manufactured products, the cost of overhead indirect costs in the production and sale of manufactured products, the size of the loan received and its term for repayment.
