The task of asset management company
Assets include all types of property companies belonging to him by right of ownership and used for its statutory activities. The policy of asset management undertakings based on an understanding of them as sources of cash flow.
Describing assets as the object of financial management, it should be noted features of their individual components. Thus, the fixed assets are the least mobile of the property, which is the main difference lies in the repeated use in the economic activity and the partial amortization during each operating cycle. In the process of the formation and management of non-current assets should be aware of the pros and cons compared with current assets.
By current assets of the company include the types of assets that are fully consumed in one production cycle. It is necessary to realize that elements of working capital invested in current assets, constantly moving from the production into circulation again returned to production. That part of the working capital, which is constantly in production, called revolving funds.
The composition of current assets include: inventories, work in progress, semi own production costs in future periods.
The second part of the working capital is in circulation and therefore called fund circulation (finished products in stock, shipped goods, cash, receivables, current financial investments and other current assets).
Depending on the level of control over the process of formation and use of current assets of the company are:
- Normalized (all circulating funds and funds of turnover and that represented the remains unsold in the warehouse);
- Nonnormable (all other elements of the circulation of funds, except for the remnants of unsold goods).
Normalized current assets are the subject of financial planning and must appear in business plans and budgets of the current company. Irregular working capital are generally not planned.
In managing current assets necessary to comprehensively assess their positive and negative aspects compared to non-current assets.
The main objective of non-current assets management is to ensure the timely replacement of fixed assets and greater efficiency of use. Opportunities operational management of non-current assets are insignificant.
Conversely, current assets management policy is characterized by the maneuverability, the possibility of active influence on their size, composition, structure, turnover, liquidity and profitability. Accordingly, in the management of current assets solved a lot more range of tasks of financial management.
The main tasks of managing current assets include:
1. Ensuring continuity of the production process. For this task you must create certain types of assets in amounts of business enterprises and the duration of its operational and financial cycles.
As you can see from the pictures, the financial cycle different from operating on the rotation payable suppliers of raw materials and other inputs.
• The lower the duration of the financial cycle, the less financial resources required to finance the production needs of the company (with the need to provide customers delay payments products for sales promotion and opportunities for delays in payments from suppliers).
• Reduce the financial cycle can be achieved by accelerating the turnover of inventory and receivables turnover and uncritical slowing payable enterprise suppliers.
In the financial cycle duration is influenced by such factors:
- The duration industrial and commercial (or operational) cycle enterprise and its separate stages;
- Growth in business;
- Inflation and the need for the establishment of insurance reserves of inventory;
- The seasonality of production, sale and supply of raw materials;
- The state of the situation on the market of raw materials and finished products market.
That is, the high demand for raw materials the company is difficult to use deferred payment from suppliers, which reduces the time the turnover of accounts payable and the simultaneous increase in the duration of the financial cycle. Conversely, when the suppliers in low demand for raw materials had the purpose of promoting actively provide delay payments to its customers, the company is possible to slow down uncritically payables and thereby reduce the overall need for their own financial resources.
The nature of the impact of the state of the situation in the market of finished products directly opposite. Thus, in a high demand for products the company is no need to soften the terms of payment from buyers. As a result, reduced the duration of the turnover of accounts receivable and reduced the total duration of the financial cycle. Conversely, in low demand for company products to enhance sales forced wide to provide its customers commercial loans, which results in slower movement of accounts receivable and an increase in the need for their own financial resources.
As the foreign and domestic experience, some small enterprises, mainly engaged in the sale and purchase transactions with low value added in the total value of sales, due to successful maneuver deferred payment not only cover the financing needs of stocks and receivables, but with an additional source of financing through commercial credit providers.
2. Accelerating the turnover of the total amount of current assets. It is the task of managing current assets realized by increasing the share of high asset turnover and reduce the share of assets, rotating slowly.
Assets with a high turnover include:
- Stocks of raw materials, which are created insurance reserves;
- Stocks of finished products which are in great demand;
- Cash resident in payment transactions.
Assets under low turnover include:
- Seasonal supplies of raw materials;
- Stocks of finished products with low demand;
- Long-term and short-term receivables;
- All forms of current financial investments for more than six months;
- Illiquid financial instruments.
3. Providing liquidity of current assets, sufficient to maintain solvency under current financial liabilities. This management task is realized through constant monitoring of the size of current assets in cash, totally liquid form, and by providing the relevant part of liquid assets in the form of current financial investments and other assets that are necessary can be quickly transformed into cash.
4. Ensure increase the profitability of current assets. Implement a management task can be achieved by timely use of temporarily idle cash balances of assets for the formation of efficient portfolio of current financial investments that can bring direct revenue to the enterprise in the form of interest or dividends, placing funds on deposit, current account opening bank accounts. In order maksymzatsiyi profitability of current assets necessary to combine assets that provide direct income and those assets that do not bring such income.
5. Minimizing risks and losses associated with the formation and use of current assets. All kinds of current assets to some extent related to the risk of loss. Thus, monetary assets mainly inherent risk of inflationary losses; current financial investments - the risk of loss of income due to unfavorable financial market, and the risk of inflationary losses; receivables - the risk of default or late return and risk inflationary losses; stocks of inventory - the risk of loss of force majeure and attrition, and others.
Therefore, current assets management policy must be aimed at minimizing the risk of losses in the company, especially in terms of inflationary factors.
You also need to consider the risk of current assets and their possible negative consequences:
- Lack of funds could lead to disruptions in the production process of default, loss of potential profit;
- Lack of inventory causes interruptions in production, the extra costs, loss of income realizable;
- The presence of excess of current assets results in extra costs for financing, immobilization of financial resources, loss of income and profits.