According to the source of formation, working capital is divided into own, borrowed and attracted.
The source of formation of own working capital is the authorized capital or authorized capital. Part of the funds invested by the founders in these funds is directed to cover the constant need for the minimum necessary production stocks of inventory and production costs.
The lack of own working capital is compensated by revenue from the sale of products (works, services), and replenishment is carried out at the expense of net profit (its capitalized part), the sale of excess material values, etc.
Own funds play a major role in the activities of the enterprise because they ensure its property and operational independence, allow them to freely maneuver them in order to increase the efficiency of commercial activities, determine the financial stability of the enterprise. The planned amount of the company’s own working capital is determined by their rationing.
To reduce the total need of the enterprise for its own working capital, as well as to stimulate their effective use, it is advisable to attract borrowed funds. Borrowed funds are mainly short-term loans of the bank, with the help of which temporary additional needs for working capital are satisfied, for example, for seasonal excess inventories of inventory, for shipped products, temporary replenishment of the lack of own working capital; implementation of calculations, etc.
Attracted funds are funds temporarily used in circulation. These are funds that do not belong to the enterprise, but are constantly in its circulation. Such funds serve as a source of formation of working capital in the amount of their minimum balance. These include: accounts payable to suppliers, the minimum monthly wage arrears to employees of the enterprise, reserves to cover upcoming expenses, the minimum carry-over debt to the budget and extra-budgetary funds, creditors’ funds received as an advance payment for products (goods, services), buyers’ funds on pledges for repayable containers, carryover balances of the consumption fund, etc. These funds are used as a reserve in in cases where there are direct violations in the turnover of funds, and there is an urgent need to restore the solvency of the enterprise.
In conditions of full economic independence, the enterprise may have other own funds in circulation, namely temporarily unused balances of the reserve fund, social funds, repair fund and other special funds.
In joint-stock companies, an additional issue of shares and their placement is practiced, which leads to an increase in the authorized capital, that is, the company’s own funds, part of which can be used to replenish working capital.
One of the sources of the formation of working capital is the funds attracted by the enterprise to the economic turnover in the form of accounts payable, which is essentially a free loan provided by other enterprises, organizations, individuals. Part of such debt is natural, as it arises in connection with the peculiarities of calculations. However, in most cases, accounts payable arise as a result of the company’s violation of the terms of payment for products and settlement documents. For such a debt, the company has to pay dearly, up to the initiation of its bankruptcy procedure by creditors.
The correct ratio between own, borrowed and attracted sources of formation of working capital is important in ensuring the financial stability of the enterprise.