You will need
  • Accounting balance sheet (form No. 1).
Own circulating funds (SOS) characterize the amount of investment of the organization in current assets and provide our own sources of capital and reserves, the value of which is determined on the same section of the form №1 balance. For determination of working capital, find the difference between equity and non-current assets, using the formula:SOS = (p. 1300 – 1100 pages)(form # 1).
To equity also include long-term loans and borrowings, included in section IV of the balance. This is because most often they are attracted to investments in capital construction and acquisition of fixed assets, and these processes require time to complete and return. If there is on balance of the enterprise long-term liabilities, apply the following formula for calculation of working capital:COC = (line 1300 + line 1400 – p. 1100) (form # 1).
Another approach to the definition of working capital involves the calculation of the difference between current assets and current liabilities. Subtract the amount of current liabilities from the amount of current assets:SOS = (p. 1200 – 1500 pages) (form # 1).
A positive value obtained as a result of calculations on any of the proposed formulas, means good financial position, solvency and independence of extra sources of formation of circulating assets. A negative index indicates financial instability of the company and that all revolving funds and possibly a portion of non-current assets formed at the expense of borrowed capital and not their own.
Monitor the status of working capital in the dynamics at the end of each reporting period. With a trend to reduction of their share in current assets as this will allow time to make the right management decisions and avoid bankruptcy.