Journal of Economics

In the activities of agricultural enterprises play an important role working capital to ensure the uninterrupted functioning of the process of production and sales. They represent cash advances to create productive assets and working capital funds of the treatment, which, in turn, have a complex composition and structure. The volume of circulating capital in the enterprise depends on the level of organization of production (production cycle, technology, engineering, etc.). Cost of funds in circulation is mainly determined by the terms of sales, the current system of supply and marketing.

Industrial revolving funds – this is the means of production that are wholly consumed in one production cycle, fully transfer their value to the newly created product, they are divided into inventory, work in progress and deferred expenses.

Inventories – are items that have not yet entered the process of productive consumption. In agriculture, these include seeds and planting materials, fertilizers, pesticides, feed, fuel and lubricants, spare parts, minor equipment, etc.

Their composition also include young animals and animal fattening, although the economic nature of these current assets are not inventory, since they are in a stage production. The size of inventories is determined by the volume of production, standards, and the nature of their consumption, and must ensure continuity of the production process.

Work in process and semifinished products of own manufacture – is revolving funds, which are one hundred ¬ stage of production. They include the costs for the yield of future years (for soil preparation, sowing of winter crops), the cost of unfinished incubation of eggs, stocking ponds, the cost of the transition supply of honey in the hive, and so forth, and in industrial production – materials, parts, components and products in the process of treatment, as well as semi-house, not finished completely in some shops, and subject to further processing in other departments of the same company.

Deferred expenses – it costs related to the next year or several years, but made ​​this year. In agriculture, these include, inter alia, the costs of construction and maintenance of summer camps, barns, sheds and other animal facilities non-capital nature, the costs of commissioning work in animal farms, hothouse plants, etc. in the industry – the costs of preparing and development of new products that are produced in the current year, but are the products of the future period. These costs include its cost in equal installments over 2-3 years.

The degree of influence on the results of production revolving funds are divided into two groups. The first includes working capital, directly contributing to increased production and increase its economic efficiency: seed, fertilizer, feed, animals in breeding and fattening, etc. The second group includes items of work supporting the operation of industrial plant and equipment and maintain them in working order – the fuel and lubricants, spare parts, etc., they only indirectly affect the production process and its effectiveness.

Funds treatment – it means serving the process of implementation: finished goods inventory shipped but not paid for, cash on hand and balances, the funds in the calculations (receivables).

Time during which current assets make a complete circuit, including the production period and the period of treatment, called the period of their turnover, this index characterizes the average speed of vehicles. It does not coincide with the actual timing of production and sale of certain products.

Formation of working capital in agricultural production has some special features. Because the production cycle is quite large, it is necessary to keep large stocks for a long time. Seasonality of agriculture and processing industry is the sharp fluctuations in the volume of turnover of productive assets in periods of the year. A significant portion of inventory industry is formed by its own production (seeds, feed, animals in breeding and fattening, etc.).

Under the structure of working capital refers to the percentage ratio between their individual elements or groups.This ratio may change under the influence of many factors (specialization in production, climatic conditions, development of scientific and technical progress, etc.).

Due to the seasonality of production in agriculture and processing industry of current assets unequally ¬ mately used in different periods of the year, which greatly affects their structure. Thus, in winter much of the current assets in stocks of seeds and fodder, and in summer – in stocks of petroleum products and spare parts for machinery, work in progress. The sources of formation of current assets are their own and borrowed funds. For replenishment of working capital is used along with capital gains and the so-called stable liabilities. These include normal, moving from month to month, arrears of wages and deductions for social insurance, the balance of the reserve fund, etc. In the agricultural enterprises own funds generated from the share of finished products (seed, feed, etc.).

During the year, the need for working capital changes, therefore it is expedient to form part of their borrowed funds – short-term bank loans and accounts payable of all kinds.

The need for working capital is determined by enterprises in the development of industrial and financial plan. Their value is not constant. The size of working capital depends on the volume of production, conditions of supply and sales, product line, used forms of payment. In the agricultural and processing enterprises there is a cyclic use of working capital during the year. This should be considered in the formation of working capital and the stockpiling of resources for successful implementation of plans for production. Recommended, inter alia, to determine the minimum requirement in the most intense period of production.

When standardizing the working capital they need is defined as in-kind and in cash terms. Current assets of its own production (seeds, feed, etc.) at cost, purchase (raw materials, fertilizers, pesticides, spare parts, etc.) – the price of acquisition, plus costs for delivery. With rationing of working capital in the enterprise must take into account the needs of not only basic but also ancillary industries.

Necessary amount of production of circulating capital is determined on the basis of developed by the company rules. Thus, the demand for raw materials is determined on the basis of the norms of its consumption per unit of production, the need to seed – based on the sound of seeding rates (including safety stock) and the cultivated area. Size of feed stocks is calculated based on accepted norms in the sector of animal feed and livestock and poultry. The need for fuel and lubricants is determined by the number of tractors, cars of different brands, the planned scope of work and norms of the consumption of petroleum products. Similarly, the calculated need of the enterprise and other inventories.

Efficient use of working capital significantly affects the results of operations, to evaluate the use different indicators – turnover ratio of current assets, the duration of one rotation, the load factor in the turnover of funds, materials consumption, and others (all refer to the training manual).

Turnover ratio shows the number of revolutions of the circulating capital for the period (usually one year) or, equivalently, – the volume of products sold per 1 USD. working capital. Acceleration of turnover may be either an increase in output per unit of working capital, or a decrease in working capital needed to produce the same amount of products. Consequently, the higher under these conditions turnover ratio, the more efficient use working capital.