Revolving Funds

Business

An essential condition for uninterruptedfunctioning of any business entity is the availability of certain sources and means. Without the basic production assets, which include buildings and structures, machinery and equipment, transport and other means of labor, the basic production process of the firm is impossible. In the absence of these non-current assets, which are the basis of the activities of any enterprise, it would be impossible to implement the planned output.

In addition, for normal operationthe organization also needs working capital. First of all, they are money resources. Their availability makes it possible to purchase circulating funds in the required amount. In turn, the presence of all these resources will ensure uninterrupted production.

Basic and circulating funds need economicaland rational use. This is the priority task facing the management of the enterprise. For more effective management of the means that the organization has, it is necessary to know their composition and structure.

The revolving funds of an enterprise are resourceseconomic entities that, over the course of their use, consistently pass from the monetary to the productive, and then into the commodity form. In this regard, there is a need for them to be divided into two categories. The first of these is production assets. The second is circulation funds. The first category of current assets includes the means of production and labor. In contrast, circulation funds represent finished goods in conjunction with monetary resources.

Circulating assets, in contrast to non-current,are consumed during one technological process. Their total cost increases the price of the finished product. The material elements, of which the circulating assets are added, change their natural form and physico-chemical properties in the process of production. The consumer value of these resources is lost with the course of the production cycle. Circulating assets can be divided into three groups:

- stocks of production;

- work in progress and own semi-finished products;

- costs that are relevant to future periods.

The circulation funds consist of finished goods onwarehouse or on the way, as well as money held on settlement accounts or on accounts of accounts in the form of receivables. These resources are used to service the production sector.

The revolving funds of the organization forThe production process goes through several stages. Their movement begins with advances of money amounts directed to purchase the necessary funds. At the first stage, the process of material and technical supply of tools and objects of labor is organized. At the second stage, the means of production are consumed, and finished products are created. The third stage is characterized by the process of selling finished goods. Sources of the acquisition of current assets can serve as own or borrowed funds.

Effective current assets arean important criterion in the stable functioning of the business entity. This can be achieved with a rational use of the funds available to the enterprise. If current assets are used economically, then the resources released at the same time contribute to the financial strengthening of the business entity. To implement this process, it is necessary to increase the material interest of the enterprise collective in increasing the efficiency of the whole production.

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