Current assets of the enterprise: theoretical and practical aspects

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Current assets of the enterprise: theoretical and practical aspects

Statement of the problem and its connection with important scientific and practical tasks

Globalization processes affecting development of Ukrainian economy currently require search for effective methods for enterprises functioning, especially enterprises of food industry because they contribute to social, economic aspects of development and food security of any country. Effectiveness of domestic enterprises of food industry is not possible without rational investment of working capital in its current assets, effectiveness of its use and impact on liquidity of assets and solvency and financial stability of an enterprise, because the largest share in the structure of current assets, as a rule, is occupied by accounts receivable and reserves. Thus, industrial enterprises operate in conditions of acute shortage of own current funds and working capital as a whole, which is invested in its current assets, and development of food as well as the entire industry of Ukraine is hampered by lack of flexible mechanism for managing it which leads to ineffective use of it. Therefore, for effective management of current assets of an enterprise, it is necessary to formulate the integrated approach for analyzing their condition, structure, effectiveness of use, assessment of impact on assets' liquidity and financial stability of an enterprise, as well as methods of managing elements of current assets, which confirms relevance of the study, outlining its main directions, internal logic and structure.

The analysis of the latest publications on the problem. Basic theoretical foundations for formation and use of current assets are set out in the works of foreign scientists: U. Baumol, Y. Brighheim, F. Kene, D. Martin, A. Marshall, M. Miller, J. St. Mill, D. Orr, A. Smith, D. Tomkins, J. Schumpeter and others.

Domestic and foreign economists I. Balabanov, S.Barngol'ts, L. Bethin, M. Bilyk, A. Birman, I. Blank, Bubnyak, B. Burkinskyi, M. Volodkin, Y. Vorobiev, V. Griniov, T. Demchenko, A. Zolotariov, V. Kovaliov, M. Korobov, V. Koiuda, E. Lokshina, N. Nevmerzhitskaya, O. Nepochatenko, P. Osipov, O. Pavlovskaya, A. Poddieriogin, N. Pryluliak, R. Radionov, L. Rothstein, N. Rusak, R. Slaviuk, L. Solyanik, R. Soroka, E. Stoyanova, O. Tereshchenko, A. Filimonenkov, A. Shilo etc. made significant contribution to the modern theory and practice of formation, efficient use and management of working capital and current assets, but the issues of accounting, analysis, control and management of current assets are controversial and require improvement.

Forming of the aims of the research. The main purpose of the study is to analyze approaches to definition of essence of the categories of "current assets”, "working capital", "current funds", and to study of the relationship between them and their

classification in modem conditions from theoretical and practical points of view. Implementation of the analysis of practical state and structure of current assets of the enterprise as a whole and by separate elements and placement of working capital invested in its current assets, on the example of food industry in Odessa region and search for ways and increase the efficiency of use of current assets on it.

Giving an account of the main results and their substantiation. In the economic literature there are different approaches to the definition of essence of the categories of “current assets”. So quite often you can find controversy in scientific publications of scientists- economists on the identification of concepts of “working capital”, "current funds" and "current assets".

The research showed (table 1) that most authors, such as Blank M.D., Kovalchuk I.V., Bilyk M.D., Pavlovska O.V. and Prytulyak N.M. [4, 5, 12] give almost identical definitions of the terms "working capital" and "current assets". The same similarity of the definition of nature of these categories is observed in Rusak N.A. and Kovaliov V.V. [11, 19]. In his turn, Poddieriogin A.M. [17] in general regards concepts of “working capital” and “current funds” as synonyms, but Burngol'ts S.B., Frolova L.V., Bakunov А.А., Sharuga L.V. [2, 23] give almost identical definitions of essence of "current funds" and "current assets".

Table 1 Determination of essence of categories "working capital", "current funds" and "current assets" *

* Compiled by author on the basis of analysis of sources [1, 2, 4-6, 8-15, 17-20, 21, 23]

In contrast to the data of the researchers Rotshtien L.O., Birman A.M., Lokshina E.Yu., Demchenko T.A., Griniova V.M. and Koiuda V.O. [2,9,10,18,20] consider "working capital", "current funds" and "current assets" as independent economic categories, which is understandable. In our opinion, the working capital is a part of capital of enterprise invested in its current, and not only in current assets, because flow assets, in addition to current assets, include goods - noncurrent assets held for sale and disposal groups in accordance with the National Statute (Standard) of accounting 1 "General requirements for financial statements" (NS (S) AC 1), which is reflected in sections II and III of asset form No. 1 "Balance sheet (Financial Statement)", when current assets are reflected only in Section II respectively [1]. Thus, current assets of enterprise are current funds of enterprise in which its working capital is invested, but current assets are only part of flow assets (current funds) and part of working capital. Current assets will be equal to the flow assets (current funds) of enterprise in absence of an enterprise (form No 1, Section III of balance sheet asset), noncurrent assets held for sale, and disposal groups (figure 1).

Effective management of current assets of an enterprise is not possible without classification of current assets in accordance with the objectives of the study. Thus, research of scientific works of foreign and domestic scientists showed that there is no single approach to their classification (table 2).

Table 2 Fragment of approaches to the classification of current assets in scientific publications *

* Compiled by the author on the basis of analysis of sources [3, 4, 6, 7, 10, 16, 21, 22]

The data analysis of table 2 showed that such scholars as Betehtina L.O., Bilyk M.D., Blank I.O., Bubnyak I.M., Nepochatenko O.O. and Melnichuk N.Y. [3, 4, 5, 7, 16] classify current assets on the following grounds: by nature of financial sources of formation, by types, by nature of participation in operating process, by period of operation.

The classification of Demchenko T.A. and Filimonenkov O.S. is quite different from that of most scholars in [10, 22]. Thus, they divide current assets only by source of formation and their types. It should be noted that Bilyk M.D., Demchenko T.A., Nepochatenko O.O. and Melnychuk N.Y. [4, 10, 16] classifying current assets distinguish such an important feature for financial condition of an enterprise and its solvency as degree of liquidity.

Monetary funds, as the most liquid assets of enterprise, constitute an important element of working capital including own current funds, and therefore current assets, therefore the characteristic of current assets by degree of liquidity is very important. In determining level of liquidity you can learn about status of accounts receivable, availability of reserves and monetary funds and current financial investments, solvency of enterprise.

Practical state, structure and dynamics of current assets in which the working capital of the enterprise was invested in general, but also by separate elements, were was investigated on the basis of food industry enterprise of Odessa region - PLC “Odesaconditer” for 2012-2015 (table 3-4).

According to table 3 it is shown that current assets in 2012-2013 decreased by 9.4%, in 2013-2014 they increased by 3.5%, and in 2014-2015 they decreased again by 29.6%, that is, there is unstable tendency of their changes. In the structure of current assets in 2012-2013, the largest share was occupied by reserves (46.3% and 56.8% respectively), while in 2014-2015 there were accounts receivable (52.2% and 52.9% respectively) , which affects negatively on the financial state of the company and distracts part of working capital of the enterprise, because accounts receivable are an important element of working capital of the enterprise which reflects interest-free loan of debtors-buyers and clients of the enterprise. As the research showed, in the structure of accounts receivable of the enterprise, accounts receivable for goods, works and services from 2012 to 2015 ranges from 75.1% to 77.7%, which is a negative tendency. Raw materials and materials occupy the largest share in the structure of reserves of the enterprise, but in 2012 - 62.1% against 36.6% in 2015, which is associated with decrease in production and sales process, which is also negative trend.

Liquidity of assets of an enterprise, as it was emphasized above, in conditions of market economy is an important indicator of activity of economic entity, confirming its position on the market, forming relationship with financial institutions, investors, suppliers, etc., therefore the important task of working capital management (WC), which is invested in its current assets, is assessment of impact of its turnover on liquidity of assets of enterprise [24].

Thus, the methodological recommendations for assessment impact of reversal of WC on liquidity of its current assets, which allow to conduct such assessment, cover the following stages [24, p. 59-66]:

1. The calculation of relative indicators of balance liquidity. Due to the fact that in the numerator of the formulas for calculating these coefficients there are elements of WC, increasing of its efficiency and solvency of an enterprise are in direct dependence.

2. Determination of one-day needs of an enterprise in WC.

3. Calculation of indicators of turnover of WC according to the turnover rate and period of one turnover WC.

4. Determination of WC value, which is released due to increase in its turnover (improving efficiency of use) or its additional value which is involved due to efficiency deterioration of its use.

5. Determination of amount of accounts ayable which was formed at the end of the reporting year, provided that WC had turnover rate at level of the previous reporting period.

6. Calculation of amount of current liabilities at the end of the reporting year, taking into account impact of turnover rate of WC at the leved of the previous reporting period.

7. Determination of the calculated indicators of liquidity, as a ratio of elements of WC according to a degree of liquidity to the value of calculated estimated liabilities.

8. The analysis of deviations of liquidity ratios determined in accordance with an enterprise balance sheet and estimated liquidity indicators, the value of which indicates the degree of influence of WC use on increase or decrease of elements liquidity of WC.

The analysis of WC use of enterprise for 20142015 is carried out in table 4.

Table 4 The analysis of WC use of enterprise which is invested in its current assets*

According to table 4 it is shown that efficiency of WC use of an enterprise in the reporting year in comparison with the previous year deteriorated, as it is evidenced by decrease in turnover rate by 0.29 revs, increase in coefficient of loading by 0.1 and duration of one turnover of WC by 23.2 days (due to increase in time of availability of funds in reserves - by 6 days, in funds in calculations - by 19.3 days, in other current funds - by 0.2 days). This led to implication of the additional amount of WC in amount of 3129.7 thousand UAH which negatively affects financial state of on enterprise. If WC

Table 5The analysis of balance liquidity of the enterprise by relative indicators

* Compiled and calculated by authors on the basis of financial statements of PLC “Odesaconditer”

From table 5 it is clear that the calculated indicators of fast and current liquidity compared with the indicators by the end of 2015 are much higher - more by 0,119 and 0,222 respectively. This result indicates loss in liquidity of the enterprise assets in 2015 compared to 2014 due to deterioration in turnover of WC of the enterprise (reducing of turnover and increasing of duration of was used at the level of the previous year then accounts payable wound amount to 16118.3 thousand UAH.

The preliminary study of liquidity analysis of the enterprise balance sheet showed that the enterprise is not completely liquid. The results of the analysis of the impact of the turnover of the enterprise WC on liquidity of its current assets are shown in table 5. Calculated current liabilities according to the methodological recommendations [24] amounted to 22248,3 thousand UAH, taking into account calculated accounts payable from table 4.

In order to improve efficiency of operation of the enterprise and accelerate turnover of the working capital invested in its current assets, we suggest using comprehensive methodological approach to conducting economic analysis of current assets in order to organize their qualitative internal control by the state of current assets of on enterprise and their elements in order to accelerate its turnover and decrease in value and improvement of assets liquidity of an enterprise which covers: the analysis of the state, structure and dynamics of current assets; the analysis of structure of working capital allocation (current funds); the analysis of composition, structure and dynamics of elements of current assets: accounts receivable, monetary funds, reserves; the analysis of use of current funds and effect of their turnover on liquidity of assets of an enterprise and use of separate methods of working capital management (for example, method of coefficients, stock rate fixing, method of ABC analysis, method of analysis of impact of turnover of the working capital on liquidity of current assets, etc.).

Conclusions and prospects of the further investigations

The conducted research allows to make the following conclusions:

- conceptual-categorical apparatus of essence of categories of "current assets", "working capital", "current funds" and relationship between these categories showed that the working capital - is part of the capital of an enterprise invested in its floating, and not only in its current assets, because to the composition of floating assets we can refer, except current assets, goods - non-current assets held for sale, and disposal groups. Floating assets of an enterprise are current funds of an enterprise in which its working capital is invested, but current assets are only a part of floating assets (current funds) and part of the working capital.

- research of scientific works of foreign and domestic scientists showed that there is no single approach to their classification, but effective management of current assets of enterprise is impossible without classification of current assets in accordance with the objectives of the study;

- the analysis of composition, structure and dynamics of working capital of PLC “Odesaconditer” which is invested in its current assets and its individual elements for 2012-2015 showed that there is an unstable trend in the their changes, in structure of current assets the largest share was occupied by reserves and accounts receivable, and in structure of accounts receivable of the enterprise there are accounts receivable for goods, works and services which negatively affects the financial state of the enterprise;

in order to increase the efficiency of operation of the enterprise and accelerate the turnover of working capital invested in its current assets, it is advisable to use the comprehensive methodological approach to conducting the economic analysis of current assets and use separate methods of working capital management

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