Instruction

1

Count the amount of working capital ratio of own funds that relates to the financial stability of the company. It characterizes the amount of working capital in the company, which are necessary for its financial sustainability. Calculate this ratio using the following formula: subtract from the amount of equity capital the ratio of current assets non-current assets.

2

Please note that when the indicator of sufficiency of own

**means**will be low, your chances of getting credit will be low. However, there are various ways to make changes in the structure of accounting report thus, to achieve a growth of this ratio.3

Reduce the value of the ratio of current assets to increase working capital own funds. It will also help you increase the amount of own capital and to reduce the amount of non-current assets.

4

Use other methods to increase own funds. This can be attributed to the income of all available or a specific part of accounts payable. In this case, the amount of equity will increase. However, this method is permissible only in respect of outstanding loans, for which the period of limitation is expired.

5

Contract for purchase and sale of the shares with deferred payment. Such an agreement will help you reduce the amount of non-current assets and to increase the amount of working capital. If in practice it turns out that the company does not intend to alienate its own shares in favour of other persons, then the specified documentation needs to include additional terms for deferment of payment and to specify that in the case of non-payment of the amount equal to the purchase cost of these shares in a certain (specific) period of time, they will be refundable by the company to the seller.

# Advice 2: How to calculate the availability of own working capital

**Security**own circulating

**funds**is one of the main indicators of financial stability. If the company does not have equity, it means that the formation of current assets, and in some cases part of the non-current, at the expense of borrowed funds.

Instruction

1

To determine the security of the enterprise own circulating

**means**is a special ratio. It is calculated as the ratio of own working capital to the volume of current assets. In turn, the amount of working capital is calculated as the difference between own capital (line 490 of "Balance") and the amount of non-current assets (line 190).2

The ratio of own circulating

**means**indicates what part of equity capital left over from the formation of non-current assets is used to cover working capital. The normative value of this ratio is 0.1, i.e. 10 percent of working capital should be formed at the expense of own capital of the enterprise.3

There are times when the difference between equity and non-current assets of the company is negative. This means that own capital of the company is insufficient to form not only a part of circulating assets and non-current, ie a part of the core, and all current assets are formed at the expense of borrowed sources.

4

Sometimes non-current assets are covered 100 percent equity, and working capital are provided through loans. In this case, the ratio of own circulating

**means**will be zero.5

If the level of this ratio below the standard value, it indicates a lack of own capital of the enterprise or too large value of non-current assets, for example, due to the large volume of incomplete construction, or a significant value of current assets, e.g. due to the growth of unclaimed stocks or a large volume of accounts receivable.

# Advice 3: How to calculate working capital

Own circulating

**funds**of enterprises – those**funds**, which were invested in current assets of the company. This is the subject of labor, raw materials, finished products in warehouses of the company, as well as monetary**funds**. To calculate working capital you can use in several ways.Instruction

1

Calculated according to balance – the most simple, fast and convenient. Official estimates use a formula, spelled out in an official document - Methodological provisions for the assessment of the financial condition of the organization. This formula for calculation of working capital of the enterprise must from the sum of section III of the balance deduct the amount of section I. in order to calculate their own turnover

**means**the company is more practical, add to the amount of own funds long-term loans and borrowings. The fact that long-term borrowed**funds**are used traditionally for the acquisition of fixed assets, so you may consider them in their own revolving**funds**H.2

Calculation using mathematical formulas much more complicated. These formulas there are several, and each of them allows you to calculate your own working

**funds**(SOS). In order to determine SOS, subtract the amount of their sources of non-current assets. You can also calculate your own current**funds**on a formula taking into account long-term loans. Sum of own and long-term borrowed**funds**, and then subtract from the resulting value non-current assets. Finally, if using the third option, take the value of current assets and subtract from it the value of short-term debt.3

Despite the fact that the exact meaning of all the mathematical expressions for the calculation of SOS differs in meaning and content, these differences are quite thin and are of greater importance in science of financial analysis, not for practical use. Therefore, all versions of calculations will give a correct estimate of the amount of working capital. Importantly, identifying the dynamics that have occurred over the last 2-3 years of activity of the enterprise, estimate the value of own circulating assets in the same way.

4

To assess the adequacy of working capital in the company, calculate the ratios of financial stability, which may also be considered as according to the balance sheet, and appropriate formulas.

# Advice 4: How to find working capital

Own working capital is part of current assets formed at the expense of own capital. Working capital needed to Finance current activities of the organization. In their absence, or shortage the company has to apply for the borrowed funds.

Instruction

1

To find the value of own circulating assets of the enterprise, you should know the amount of sources of own funds non-current assets. Working capital will be calculated as the difference between these values:

SOS = SK – VA where: SOS working capital; SK – own capital of the enterprise;VA – non-current assets.

SOS = SK – VA where: SOS working capital; SK – own capital of the enterprise;VA – non-current assets.

2

Sometimes to equity equate the amount of long-term liabilities (long term borrowings). In this case, working capital will be calculated as follows:

SOS = SK + TO ISLANDS, where long – term obligations of the enterprise.

SOS = SK + TO ISLANDS, where long – term obligations of the enterprise.

3

You can find the amount of own funds another way – as the difference between the sum of current assets and current liabilities of the company: COC = OA – KO, where: OA – floating assets; CO – current liabilities of the organization.

4

Remember that the amount of working capital is one of the most important indicators of financial stability. Their absence suggests that all current assets of the organization, and sometimes part of non-current assets formed at the expense of borrowed sources.

5

The amount of working capital you can use in the calculation of the ratio of own working capital. It is defined as the ratio of the magnitude of working capital to the value of current assets. This ratio shows what proportion of current assets formed at the expense of own funds of the enterprise.

6

In this case, note that the company is financially unstable, and the structure of balance unsatisfactory, if the ratio is less than 0.1. This value is considered standard for the considered factor, but, as practice shows, this criterion satisfies a small percentage of enterprises.