Assets of the company - this is the cost expression of resources that ensure the production process. The property complex of the company includes non-current assets (administrative and industrial buildings, equipment, machines, vehicles), as well as current assets, in the structure of which there are such types of property as:
• money on hand and in bank accounts;
• stocks - inventories, raw materials, manufactured products, goods for sale and other inventories;
• debt of debtors for delivered but not yet paid services / goods;
• short-term financial investments and other assets.
All current assets are accumulated in the second section of the balance sheet and are treated as current assets, i.e., those participating in the turnover.
The article will focus on such a concept as the average annual cost of working capital. We’ll find out how this indicator is calculated and what it means.
Revolving production assets in the balance sheet
As already noted, in the balance sheet hierarchy current assets are collected in the second section of the BO-1 report. Each type of property has its own line:
▪ 1210 - MPZ;
▪ 1220 - VAT on acquired property;
▪ 1230 - obligations of debtors;
▪ 1240 - fin. attachments;
▪ 1250 - cash, cash equivalents;
▪ 1260 - other.
The total total cost of working capital is fixed in line 1200 of the balance sheet. It accumulates the absolute value of fund balances in the company for each position at the beginning of a given analyzed period and its end. In accounting, the value of assets on the balance sheet is called the carrying amount.
Carrying amount of property
Economists analyze book value based on research objectives. For example, when it is necessary to find out the size of the balance of property as a whole by section or for each position separately, determine the dynamics (increase or decrease in the value of assets) and, based on a comparison of absolute indicators, draw conclusions about the status of working capital for a certain date. In addition to internal users of the information available in the financial statements, companies are required to inform various external users - founders, creditors, insurers, investors, providing them with various information, including the availability of assets.
Where is the carrying amount used?
Information on the book value of assets when analyzing the economic activity of the company, the main tool in assessing the production and financial condition of the company, is very necessary. Using this indicator, intrafirm coefficients are calculated:
▪ return on assets, which determines the amount of profit received for each ruble invested in the purchase of raw materials and production;
▪ asset turnover, indicating the efficiency of their use.
Comparing the initial and final values that determine the cost, the economist can draw conclusions about the increase or decrease in the number of current assets in monetary terms for a given period, determine the relative values that characterize the growth rate of indicators of each row of the second section of the balance sheet. However, the figures only provide information on the availability of property on a certain date, not always reflecting the real picture, since the work intensity in the life of the enterprise is not the same, and this leads to uneven purchase and working capital expenditures, for example, in companies that depend on the seasonality of cycles.
It is more advisable to analyze the condition of assets for short periods of time or to calculate such an indicator as the average annual cost of working capital. The value of this indicator is calculated for the production of many economic calculations.
Why is the average annual value of working capital calculated
A detailed analysis of changes in the structure and composition of property, including working capital, is impossible without calculating the average value of the property for the year. How is the average annual cost of working capital calculated? Analysts turn to the line of balance 1200, and if it is necessary to calculate any one type of property, for example, stocks, to the line corresponding to this position. The calculation formula is as follows:
- O cf = (O n + O k ) / 2,
where - the amount of working capital at the beginning of the analyzed period, - at the end of the period, 2 - the number of reporting dates.
Calculation Example
Consider, for example, how the average annual value of working capital is calculated (balance sheet formula). The source data are presented in the table of balance sheet values of working capital.
Table of indicators of current assets of the company for 2016| Indicators | Line code | December 31, 2015 | December 31, 2016 |
| Productive reserves | 1210 | 5200 | 5450 |
| VAT on acquired property | 1220 | 242 | 210 |
| Accounts receivable | 1230 | 510 | 620 |
| Cash | 1250 | 2460 | 3020 |
| Total for the 2nd section of the balance sheet | 1200 | 8412 | 9300 |
We calculate the value according to the above formula based on the balance data:
About avg = (8411 + 9300) / 2 = 8856 thousand rubles. - average annual current assets (line in the balance sheet 1200) amounted to 8856 thousand rubles.
Using the same calculation algorithm, the average annual cost of material circulating assets (thousand rubles) is calculated for the positions:
▪ reserves (p. 1210) - About avg = (5200 + 5450) / 2 = 5325 thousand rubles;
▪ VAT on purchased materials - About avg = (242 + 210) / 2 = 226 thousand rubles;
▪ accounts receivable - About avg = (510 + 620) / 2 = 565 thousand rubles .;
▪ cash - About avg = (2460 + 3020) / 2 = 2740 thousand rubles.
The average annual cost of working capital, the calculation formula of which is presented in the review, is used by economists to calculate ratios that demonstrate the financial condition of the company, the level of stability, and also to determine the reasons (positive and negative) that led to the changes. Based on the findings of analysts, the company management makes decisions on further management of available resources.
The formula for calculating the average chronological
A variation of the arithmetic mean, which refers to the average annual value, is the average chronological, calculated by the totality of values at different times or for different periods of time.
In mathematics, it is used to find the average level in time series. In accounting, the average chronological more fully characterizes the value of an individual asset at regular intervals. The calculation formula is as follows:
O cf / xp = (½ x O 1 + O 2 + O 3 + .... + O n -1 x ½) / n-1, where
- balance for a certain date, n - number of reporting dates.
Calculation of the average chronological
Returning to the example presented above, we supplement the initial data on the value of stocks at the beginning of each month:
- as of January 1, 2016 - 5200 thousand rubles;
- as of February 1, 2016 - 4960 thousand rubles;
- as of March 1, 2016 - 5460 thousand rubles;
- as of April 1, 2016 - 5530 thousand rubles .;
- as of May 1, 2016 - 5360 thousand rubles;
- as of June 1, 2016 - 4980 thousand rubles;
- as of July 1, 2016 - 4890 thousand rubles;
- as of August 1, 2016 - 4780 thousand rubles;
- as of September 1, 2016 - 4980 thousand rubles;
- as of October 1, 2016 - 5180 thousand rubles;
- as of November 1, 2016 - 5450 thousand rubles;
- as of December 1, 2016 - 5550 thousand rubles;
- as of January 1, 2017 - 5450 thousand rubles.
We calculate the average chronological for the MPZ quarterly for 2016:
• 1 sq. About cf / xp = (1/2 x 5200 + 4960 + 5460 + ½ x 5530) / 4-1 = 5261.66 thousand rubles .;
• 2 sq. About cp / xp = (1/2 x 5530+ 5360 + 4980 + ½ x 4890) / 4-1 = 5183.33 thousand rubles .;
• 3 sq. About cf / xp = (1/2 x 4890 + 4780 + 4980 + ½ x 5180) / 4-1 = 4931.66 thousand rubles .;
• 4 sq. About cp / xp = (1/2 x 5180 + 5450 + 5550 + ½ x 5450) / 4-1 = 5438.33 thousand rubles .;
Thus, the average size of reserves for the 1st quarter is 5,261.66 thousand rubles, for the 2nd - 5183.33 thousand rubles, for the 3rd - 4931.66 thousand rubles, for the 4th - 5438 , 33 thousand rubles Analyzing the resulting number series, the economist can conclude that there are stocks in each quarter, establish the dynamics of changes depending on the activities of the company or industry. Calculating the average chronological value, the values of the indicators are obtained, undoubtedly more accurate. These values used in economic calculations give the most realistic indicators. This is important primarily for internal users - company management. External users are quite satisfied with the absolute indicators of the carrying value of assets.
Calculation of turnover ratio
A general indicator of the use of working capital in the company is the turnover ratio, defined as the ratio of turnover (revenue) to the average cost of working capital for the year:
To rev / r = B: O cf , where B is revenue, O cf is the average annual value of working capital. The formula shows the number of completed transactions of the average balance of funds invested in current assets in the production process.
Using the above example and supplementing it with information from the Profit and Loss Statement on the amount of revenue (326,000 thousand rubles), we calculate the turnover ratio:
To about = 326 000/8856 = 36.8 times, that is, for the year the funds invested in production in the amount of the average balance are turned over 36.8 times.
In addition, the turnover is calculated in days, that is, they find out for how many days the company will receive revenue equal to the indicator, as the average annual cost of working capital. The calculation is carried out according to the formula:
- K rev / day = 365 / K rev / r .
To r / d = 365 / 36.8 = 9.92 days, the company will need to receive revenue in the amount of the average cost of working capital for the year.
The normal value of the coefficients
There are no general normative values for turnover values.
The coefficients are usually analyzed in dynamics or in comparison with similar industry companies. We only note that a very low coefficient indicates excessively accumulated working capital assets, which should intensify work to increase the liquidity of assets.