Own working capital as an instrument of achieving the financial balance of the enterprise

Iorga Svitlana
PhD in Economics, Associate Professor, General Economic Theory and Economic Policy Department, Odessa National Economic University, E-mail:fiests@ukr.net, ORCID ID: https://orcid.org/0000-0003-1129-1336

Cite this article:

Iorga S. (2019). Own working capital as an instrument of achieving the financial balance of the enterprise. Ed.: D.V. Zavadska (ed.-in-ch.) and others [Vlasnyi oborotnyi kapital yak instrument dosiahnennia finansovoi rivnovahy pidpryiemstva; za red.: D. V. Zavadskoi (gol. red.)], Scientific Bulletin of the Odessa National Economic University, No. 9-10 (272-273), pp. 22–37.

Abstract

The article is devoted to the financial stability of the domestic enterprises in modern conditions and the feasibility of using the value of its own working capital as a tool to achieve it. The necessity to apply the main provisions of the concept of financial equilibrium of the enterprise in the process of functioning of domestic enterprises which proves the expediency of considering own working capital as a tool for achieving financial equilibrium has been substantiated. The research uses the basic provisions of functional balance analysis in which the financial balance of the enterprise is based on the economic functioning of the above mentioned. The study of financial equilibrium was based on a comparison between functional working capital and the need for it. Equity (net) working capital represents that part of the working capital of the enterprise financed by the equity. The analysis of existing approaches to the calculation of the value of working capital has been carried out. The mechanism of calculation of own working capital as the difference between current assets and short-term liabilities has been determined. According to the results of the study, the criterion for measuring the financial equilibrium of an enterprise has been defined. The criterion for achieving cash equilibrium in the short term is considered to be a functional financial equilibrium equation that has the following form: net working capital = need for working capital. The practical significance of this approach means the simplicity of calculating financial equilibrium indicators and the ability to exert managerial influence in accordance with the results obtained.

Keywords

financial equilibrium, working capital management, own working capital, need for own working capital.

JEL classification: G300; G320; G350; G390; DOI: 10.32680/2409-9260-2019-9-10-272-273-22-37

UD classification: 336.132

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