Working capital is a combination of circulation funds, as well as production current assets, defined in monetary terms. These components take part in the reproduction process in different ways: the first in the sphere of circulation, the second in the field of production of goods.
The composition and structure of working capital
The conditions for the sale and production of products impose requirements for the constant presence in warehouses of stocks of material assets that are consumed in production, as well as finished products. For the smooth operation of the workshops, they must have certain stocks of goods in progress. In addition, each company needs certain money in the current account.
Working capital is the assets of the company, which in the process of its activity transfer their entire value to the final product, while participating once in the production process, losing or changing their natural form.
Working capital - this is the most mobile part of the assets, which in each circuit goes through three stages: cash, production and commodity.
The composition and structure of working capital is represented by the following elements: circulation funds and revolving production assets.
The vast majority of production circulating assets are production stocks (components, raw materials, materials and semi-finished products, containers, fuel, spare parts, household equipment).
Together with inventories, the composition and structure of working capital in terms of production assets includes assets in production, including work in progress, as well as expenses and deferred expenses.
The category "work in progress" includes objects of labor that have already entered the production process, but have not gone through the entire processing cycle required by the technology.
The only element of non-material revolving funds is the future costs necessary to create a reserve, to install new equipment, etc.
Composition and structure of working capital: circulation funds
This category includes the funds of enterprises invested in the process of sale of goods and necessary to service the sale. This group includes finished products that are in stock pending sale, goods shipped but not paid by the consumer (goods on credit, late payment). The circulation funds also include free money at the cash desk, as well as funds that are in incomplete settlements (advance payments to suppliers (prepayment), salary payments, etc.) and on the current account.
Working capital structure
Elements of circulation funds and working capital have the same principle of movement, and are in a constant continuous circuit. The ratio of the individual components in the total value forms the structure of current assets. This indicator between different elements (finished products, packaging, spare parts, fuel, raw materials) is expressed as a percentage of the total.
According to the source of replenishment and formation, the composition of current assets is divided into own and borrowed funds.
The first are allocated by the founders in order to ensure the smooth operation of the company. The main sources of their income are financial on-farm resources, as well as enterprise profits.
Equated equity includes assets that do not belong to the enterprise, but which are in circulation under the terms of settlements. These are salary arrears, reserve funds to cover future payments, payroll, and payables.