CC BY
0UDC 338.1
Petrov Alexei
specialist degree, Saint Petersburg State University Russian Federation, Saint Petersburg
ANALYZING THE IMPACT OF WORKING CAPITAL AND TURNOVER FUNDS ON ENTERPRISE SUSTAINABILITY
Abstract: This article explores the concepts of working capital and turnover funds, analyzing their role in the financial stability and operational efficiency of an enterprise. Working capital refers to the funds required for daily activities, while turnover funds are financial resources allocated to ensure continuous production and sales. The article compares and contrasts the definitions of these concepts and highlights their importance in financial management. It also discusses the classification of turnover funds into fixed and variable assets and the impact of these resources on business sustainability. The management of working capital and turnover funds is essential for companies to meet short-term obligations, optimize resources, and maintain liquidity. The article concludes by emphasizing the need for effective financial management in navigating the challenges of a rapidly changing business environment.
Keywords: working capital, turnover funds, financial management, liquidity, production process, sustainability.
INTRODUCTION
In the modern economic environment, the management of working capital and turnover funds plays a crucial role in ensuring the smooth operation and financial stability of an enterprise. Working capital represents the funds required for the day-today activities of a business, while turnover funds refer to the specific financial resources allocated to ensure the continuity of production and sales processes. Both concepts are fundamental in understanding the financial health of an enterprise, and proper management of these resources is key to achieving long-term success. This article aims to analyze the role of working capital and turnover funds in the economic activity of an enterprise, focusing on the main approaches to their definition, accounting, and management.
Efficient management of working capital and turnover funds is increasingly important as businesses face growing challenges such as global competition, economic uncertainty, and fluctuating demand. Enterprises must adapt their financial strategies
to ensure liquidity while maintaining profitability. In this context, understanding how to balance short-term financial needs with long-term investment strategies is crucial. The article explores the impact of these financial resources on business sustainability, highlighting their role in the production process and in mitigating financial risks.
MAIN PART
In economic theory, a distinction is made between turnover funds and working capital, and these concepts are of significant importance for accounting and financial management of an enterprise [1]. Turnover funds represent the short-term assets of a company that circulate within one production cycle, supporting the current operations of the enterprise. These assets include property values that are entirely consumed within a single cycle, maintaining the production and commercial activities.
Moreover, the distinction between turnover funds and capital is associated with their classification and functional role in management. Turnover funds can be divided into fixed and variable assets, which allows the enterprise to better plan its financial flows and optimize the use of resources under various economic conditions. For example, managing fixed assets such as raw material inventories requires accounting for seasonality and other factors that influence production schedules and inventory turnover rates. Variable assets, on the other hand, are more easily adjusted to meet short-term financial needs [2].
The functioning of working capital is closely tied to the efficiency of enterprise operations. The effective management of turnover funds ensures that the company can meet its operational obligations, avoid liquidity shortages, and finance its production needs in a timely manner. A key factor influencing working capital management is the speed at which assets are converted into cash, which determines the flow of financial resources within the company [3].
One of the primary challenges in managing turnover funds is ensuring that there is a balance between sufficient funds to maintain daily operations and minimizing the risk of excess inventory or capital being tied up. The need for proper liquidity management is particularly acute in industries with fluctuating demand or long
COLD SCIENCE №13/2025 ХОЛОДНАЯ НАУКА
production cycles, where delays in receiving payments or selling goods can lead to financial instability [4].
MAIN APPROACHES TO THE DEFINITION AND DIFFERENCES BETWEEN WORKING CAPITAL AND TURNOVER FUNDS
In economic literature, various approaches can be found regarding the definition of working capital and turnover funds. Working capital is considered as the total of an enterprise's current assets that can be quickly converted into cash within one production cycle or a year. Turnover funds, on the other hand, represent the resources used in the production and circulation processes, including material and production inventories, accounts receivable, and cash.
The main difference between these concepts lies in their interpretation from the perspective of accounting and financial management. In accounting, turnover funds are regarded as the assets of the enterprise, while capital is considered as the source of forming these assets [5]. In economic theory, capital is also understood as the value capable of generating additional value, in contrast to turnover funds, which are seen as the resources actively engaged in the production process.
The classification of turnover funds and working capital is important for understanding their respective roles in financial planning and resource allocation. In practice, turnover funds are further categorized into fixed and variable assets, each of which has its own implications for financial management. Fixed assets are typically used in the production process over an extended period and do not need frequent replenishment, while variable assets are subject to continuous turnover and replenishment as part of the business cycle [6]. This distinction allows enterprises to better forecast their financial needs and maintain an optimal balance between short-term liquidity and long-term stability.
Another crucial aspect is the role of turnover funds in supporting the business's operational continuity. These funds ensure that the enterprise can meet its daily expenses, such as paying employees, purchasing raw materials, and covering other operating costs. Efficient management of turnover funds directly influences the company's ability to remain solvent and avoid financial crises [7]. The timing of cash
inflows and outflows, especially in businesses with seasonal cycles or fluctuating demand, is essential to maintain smooth operations and avoid liquidity shortages.
In contrast, working capital is more closely linked to the overall financial health and growth potential of the enterprise. While turnover funds ensure the day-to-day functionality, working capital provides a broader view of the financial cushion available to the company [8, 9]. A positive working capital balance indicates that the company has sufficient resources to expand its operations, invest in innovation, and pursue new business opportunities. Thus, effective management of both working capital and turnover funds is crucial for ensuring the long-term viability and profitability of the enterprise.
CONCLUSION
The efficient management of working capital and turnover funds is fundamental to ensuring the financial stability and operational success of an enterprise. These resources enable businesses to maintain smooth production and sales processes, avoid liquidity shortages, and optimize the use of assets. Proper allocation and effective management of working capital and turnover funds allow enterprises to meet short-term financial obligations while maintaining the flexibility to invest in long-term growth opportunities. As the business landscape becomes increasingly dynamic and complex, the importance of strategic financial management of these resources will continue to grow.
In conclusion, understanding the distinction between working capital and turnover funds is essential for both financial managers and business owners. By carefully monitoring and managing these financial resources, companies can enhance their overall efficiency, reduce risks, and improve their competitive advantage in a rapidly changing economic environment. Furthermore, the integration of modern financial tools and technologies into financial planning processes can provide valuable insights into the optimal use of working capital and turnover funds.
As businesses face growing challenges, effective management of working capital and turnover funds is no longer optional but a necessity for survival and growth. It is
imperative for enterprises to adopt a proactive approach, constantly analyzing and adjusting their financial strategies to ensure long-term sustainability and success.
REFERENCES
1. Zakharova E.V. Management of Working Capital: Theoretical and Practical Aspects // Bulletin of VSU. Series: Economics and Management. 2019. №. 2. P. 45-50.
2. Piontkovich N.S. Management of Working Capital in an Organization: Theory and Methodology // Finance and Credit. 2016. №. 2. P. 19-26.
3. Volkov A.A. Modern Methods of Inventory Accounting in Enterprises // Financial Accounting and Management. 2020. №. 3. P. 45-53.
4. Federal Accounting Standard FSBU 5/2019 «Inventories» / Ministry of Finance of Russia // URL: https://minfin.gov.ru/ru/document/?id_4=133539-federalnyi (accessed: 12.12.2024).
5. Gromov V.I. Efficiency of Working Capital Management in Modern Enterprises // Economic Analysis: Theory and Practice. 2021. №. 4. P. 28-34.
6. Ivanova T.A. The Role of Turnover Funds in Ensuring Enterprise Liquidity // Journal of Financial Management. 2020. Vol. 15. P. 112-119.
7. Kolesnikova L.V. Financial Management of Working Capital in Small and Medium Enterprises // Business and Finance Review. 2018. Vol. 10. P. 74-81.
8. Federal Law No. 402-FZ of December 6, 2011 on Accounting (as amended) / Official Website of the State Duma of the Russian Federation // URL: http://www.legislation.ru (accessed: 12.12.2024)
9. Chernyshova O.V. Accounting for Working Capital and Turnover Funds in the Context of Digital Transformation// Russian Journal of Accounting and Audit. 2021. №. 2. P. 55-63.
