Own working capital is a part of the working capital of the enterprise, formed at the expense of its own capital. Working capital is required to finance the current activities of the organization. In their absence or shortage, the company is forced to apply for borrowed funds.
Instructions
Step 1
In order to find the value of the company's own working capital, you must know the sum of the sources of own funds and non-current assets. Own working capital will be calculated as the difference between these values:
SOS = SK - VA, where: SOS - own circulating assets; SK - equity capital of the enterprise; VA - non-current assets.
Step 2
Sometimes the amount of long-term liabilities (long-term borrowed funds) is equated to equity capital. In this case, own working capital will be calculated as follows:
SOS = SK + DO - VA, where DO - long-term obligations of the enterprise.
Step 3
You can find the value of your own funds in another way - as the difference between the sum of current assets and short-term liabilities of the enterprise: SOS = OA - KO, where: OA - current assets; KO - short-term liabilities of the organization.
Step 4
Remember that the value of your own working capital is one of the most important indicators of the financial stability of an enterprise. Their absence suggests that all the organization's circulating assets, and sometimes part of the non-circulating assets, are formed at the expense of borrowed sources.
Step 5
You can use the found value of your own working capital when calculating the ratio of security with your own working capital. It is defined as the ratio of the value of own circulating assets to the value of circulating assets. This ratio shows what proportion of current assets is formed at the expense of the company's own funds.
Step 6
At the same time, keep in mind that an enterprise is considered financially unstable, and the balance sheet structure is unsatisfactory if the security ratio is below 0, 1. This value is considered the standard for the coefficient under consideration, but, as practice shows, this criterion is met by a small percentage of enterprises.
