Basic and working capital
Basic and working capital has an enduring importance for the calculation of the balance of the enterprise. It is these numerical characteristics that are indicative of the company's profitability and well-being.
Basic and working capital are the termspart of the capital of the enterprise, which is the financial, material and intellectual values that are the property of the firm and serve in the process of activity for profit. Entrepreneurial idea of the founder of the company determines the required amount of capital.
It is known that no firm can beis formed and begins its operation without the initial capital, which is put into circulation at the very beginning of the implementation of the business project. From the correct calculation and planning of all financial operations at the initial stage depends the successful launch of the entrepreneurial idea and the retention of new competitive positions in the market. Therefore, a beginning businessman in the planning period of the process of realizing his or her undertaking should carefully estimate the permissible minimum and maximum possibilities of the financial resources available and necessary to achieve the goal. Determination of the mandatory value of the initial capital is made depending on the industry in which the idea of business is supposed to be realized.
When calculating the required initial capitalthe distribution of the latter is of major importance. During planning, it is also very important to determine the structure of capital, which is an obligatory element in the calculation of initial capital.
What does division into fixed and working capital mean?
Main capital
It includes buildings, land, transportation, equipment, tools, machinery, innovative property, patents, licenses.
That is, it is movable and immovable propertya company that has a specific cost, determined by depreciation methods of accounting for a given time period. Fixed assets for several years take part in the production process and transfer their value to the finished products or goods in stages, for several years.
Working capital
The concept of working capital includes everything that is planned to be used for employees of the enterprise, as well as for production or sale.
The basic working capital has such constituent parts:
- cash (payroll, cash, cash for the purchase of raw materials, materials or goods);
- Material means (short-term tools, manufacturing materials, raw materials, products or purchased goods for sale).
Ratio of working capital and fixed capital
Defining the structure and proportion of partsworking capital and fixed capital, it is necessary to take into account the proportional correspondence of all parts in its total volume. These miscalculations are of great importance when choosing to purchase a building for office and production halls or shopping areas and equipment. If you do not take into account the spent finances to the amount of money left for working capital, that is, raw materials, goods for sale, money for their purchase, funds for employees' salaries, the firm can simply "suffocate" at the very beginning, that is, stop operations. Therefore, the larger the scale of the work of the enterprise is planned, the greater the need for an increased volume of working capital.
Depending on the industry, fixed and working capital has also a different ratio. It is determined depending on the complexity, material consumption, as well as the labor intensity of the products.
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