Conservative current asset management policy. Choice of the policy of integrated operational management of current assets and short-term liabilities. Current liabilities management policy

One of the main tasks facing the company is the choice of a policy for managing current assets in order to increase the efficiency of their use.

The lack of one or another type of current assets is always some risks for the company, which it must insure through the formation of reserves. A correctly chosen strategy (policy) for managing current assets allows you to compensate for these risks, giving justification for the size of insurance reserves. The value of the minimum required inventory requirement, the receivables limit, and the optimal cash balances in the company's accounts will depend on this.

Thus, the essence and purpose of the policy of operational management of current assets is, on the one hand, in determining the sufficient level and rational structure of this type of assets and in establishing the optimal structure for their financing, on the other.

There are three main types of company's working capital management strategy: aggressive, moderate and conservative. Within each of them, the size of working capital is regulated and a certain ratio of profitability and risk is achieved.

Aggressive strategy ("fat cat") implies the absence of restrictions in increasing current assets. The company generates inflated amounts of insurance and reserve stocks, pursues a strict policy of granting loans, and keeps large insurance cash balances in its accounts. At the same time, the share of current assets in the balance sheet is high, and the turnover period is quite long.

From the point of view of the ratio of profitability and risk, the threat of technical insolvency, production stoppages is minimized, losses from bad receivables are minimal. However, the profitability of current assets decreases, the level of sales is relatively low, and therefore the competitiveness of the product decreases.

conservative strategy ("stingy and skinny") is focused on curbing the growth of current assets. It is characterized by the presence of a minimum amount of stocks (deliveries "just in time"), a flexible lending policy, the storage of a standard balance of funds, and the investment of free funds in highly liquid securities. In this regard, the share of current assets in the total assets of the company is low, and the rate of their turnover is high. When choosing this strategy, the company shows the maximum profitability, but the likelihood of an increase in the share of doubtful (overdue) debts in accounts receivable increases, the risks of stopping production due to lack of inventory are high, situations of current insolvency cannot be ruled out (for example, in connection with attracting additional short-term financing ).

Such a policy with regard to current assets can be afforded by a company operating in conditions of sufficient certainty, having long-term effective contracts with reliable partners, when the timing of payments, the required volume of reserves, etc. are known in advance. Another situation is the need to introduce a strict economy regime.

moderate strategy ("centrist position") - a restrained policy of managing current assets: the formation of reserves in case of typical failures, standard terms of delivery and payment, the formation of small cash reserves (determined by calculation). The risks of insolvency, a fall in the turnover rate of current assets, as well as their profitability are at an average level.

Current assets are formed mainly from short-term sources, respectively, each type of current asset management policy corresponds to the policy of their financing, i.e. management of current liabilities.

A sign of an aggressive current liability management policy is the predominance of short-term loans and borrowings in the total amount of liabilities. The consequence of this choice will be a high effect of financial leverage, but fixed costs will increase due to the amount of interest on the loan, which will entail an increase in the strength of the impact of operating leverage.

The conservative policy of managing current liabilities directs managers to finance activities primarily from their own funds and partly from long-term liabilities; at the same time, the share of short-term liabilities in the balance sheet is small.

Moderate policy is characterized by the presence of a neutral (medium) level of short-term lending.

The practical experience of companies has revealed a certain compatibility of various policies for managing current assets and current liabilities.

An aggressive current asset management strategy corresponds to an aggressive or moderate type of current liability management policy.

A conservative current asset management strategy is combined with a moderate or conservative type of current liability management policy.

A moderate strategy for managing current assets corresponds to any type of policy for managing short-term liabilities.

Below is a comparative description of various working capital management strategies (Table 10.3).

Thus, the working capital management strategy should provide a solution to the previously formulated task - to achieve a compromise between the risk of loss of liquidity and the efficiency of the company. The theory of financial management offers various options for reducing the level of risks: minimizing the total costs of financing through the use of cheaper sources, reducing accounts payable, etc.

What remains to be decided is what should guide company managers when choosing alternative working capital management strategies?

First, one should take into account the influence of various factors on the volume and structure of current assets (discussed earlier).

Table 10.3.

But one of the most significant criteria is the business development strategy chosen by the company as a whole. Below is an illustration of the most popular strategies within the framework of the financial projection and changes in the policy of working capital management, depending on the chosen strategic goal (Fig. 10.2).

As already noted, the modern financial model focuses the company on maximizing its fundamental value. In this case, the working capital management process is integrated into the overall financial strategy of the company and, therefore, any decisions in this area,

Rice. 10.2.

contributing to the increase in the value of the company will be recognized as appropriate.

The essence of this policy is, on the one hand, to determine the sufficient level and rational structure of current assets, and on the other hand, to determine the size and structure of sources of financing of current assets.

Types of integrated TA policy:

1. Aggressive OU policy("fat cat"). It is applicable if the enterprise does not set restrictions on the increase in TA, the share of TA in the total amount of assets is high, and the turnover period for working capital is long. The policy minimizes the risk of technical insolvency (liquidity gap), but does not provide an increased economic profitability of assets.

2. OU Conservative Politics("at the very least"). It is applicable if the company restrains the growth of TA, trying to minimize them, the share of TA in the total assets is low, the turnover period of TA is short. Such a policy of the enterprise is carried out either in conditions of sufficient certainty of the situation, when the volume of sales, the timing of receipts and payments, the required volume of stocks and the time of their consumption are known in advance, or if it is necessary to save resources. The policy provides a high economic return on assets, but carries the risk of technical insolvency due to the slightest hitch or calculation error, leading to desynchronization of the timing of receipts and payments of the enterprise.

3. Moderate OU policy. Applicable if the enterprise adheres to a "centrist position", i.e. the economic profitability of assets, the risk of technical insolvency, the turnover period TA are at medium levels.

Each of the TA TA policy types must be matched by a funding policy, i.e., the TA TA policy.

Types of policies of the integrated OS TP:

1. Aggressive OU policy. Applicable in case of absolute predominance of a short-term loan in the amount of liabilities. The level of the effect of financial leverage increases for the enterprise. Fixed costs are aggravated by interest on the loan, the strength of the operating leverage increases, but still to a lesser extent than with the predominant use of a more expensive long-term loan.

2. OU Conservative Politics. Applicable in the absence or low share of a short-term loan in the amount of liabilities. Both stable and unstable assets are financed mainly by permanent liabilities (SC and DO).

3. Moderate OU policy. Applicable in the case of a neutral (average) level of short-term credit in the amount of liabilities.

Compatibility of types of policies of TA TA and OC TP is shown in the policy selection matrix of the complex OC.

Comprehensive OS Policy Selection Matrix

The matrix shows that:

· the conservative policy of the OU TA may correspond to a moderate or conservative type of policy of the OU TP, but not aggressive;

· moderate policy of OU TA can correspond to any type of policy of OU TP;

· Aggressive policy of OU TA may correspond to aggressive or moderate type of policy of OU TP, but not conservative.

The change in the size of the Republic of Kazakhstan is influenced by the ratio of sources of funding for the OA. If, with the volume of TA remaining unchanged, the share of TAs financed by SCs and DOs grows, then the size of the PSC will increase. In this case, the financial stability of the enterprise will increase, but the effect of financial leverage will decrease and the weighted average cost of capital as a whole will increase (since the interest rate on long-term loans, due to their greater risk, is higher than on short-term loans). If, with the constant participation of the SC and DOs in the formation of TA, the amount of TP increases, then the size of the NRC will decrease. In this case, the weighted average cost of capital is reduced, more efficient use of equity capital is achieved (due to an increase in the effect of financial leverage), but at the same time, the financial stability and solvency of the enterprise will decrease (the decrease in solvency will occur due to an increase in the volume of current liabilities and an increase in the frequency of debt repayments) . The choice of funding sources for the OA determines the ratio between the level of efficiency in the use of capital and the level of risk of the financial stability and solvency of the enterprise. Taking into account these factors, the policy of the OU TA and TP is built.

Static and dynamic representation of TA and TP

LTA - VA; CA - TA (CA = PCA + VCA); RSA - system part of TA; VCA - variable part of TA; CL - TP; LTD - long-term liabilities (borrowed capital); E - SK; LTC - long-term sources of financing (LTC = E + LTD); WC - CHOK (WC = SA - CL).

1. Ideal Model. TA are equal in magnitude to TP, i.e. NPV = 0. It does not occur in practice, it is risky from a liquidity position. Here, long-term capital is used as a source of VA coverage, numerically coincides with their value.

Balance equation (model): LTC = LTA or CL = PCA + VCA

2. Aggressive model. Long-term capital serves as a source of coverage for VA and the system part of TA, i.e. the minimum necessary for carrying out business activities. FER is equal to this minimum (WC = PCA). The varying part of the TA is fully covered by the TP. From a liquidity standpoint, this strategy is also risky, since it is impossible to limit yourself to only a minimum of TA.

Balance equation (model): LTC = LTA + PCA or CL = VCA

3. conservative model. Assumes that the variable portion of TA is covered by long-term liabilities. In this case, there is no short-term KZ, and there is no risk of loss of liquidity. CHOK = TA (WC = SA). From the standpoint of liquidity, the strategy is the least risky and is accompanied by low current profit, since the company is forced to bear additional costs to maintain excess stocks.

Balance equation (model): LTC = LTA + PCA + VCA or CL = 0.

4. Compromise model. Most real. VA, the system part of TA and half of the variable part of TA are financed from long-term sources. PSC = systemic TA + 1/2 variable TA (WC = PCA + 0.5VCA). At some points, the enterprise may have excessive TA, which negatively affects profits, but this is considered as a payment for maintaining the risk of liquidity loss.

Balance equation (model): LTC = LTA + PCA + 0.5 * VCA or CL = 0.5 * VCA

The essence of this policy is, on the one hand, in determining a sufficient level and rational structure of current assets, given that organizations of various fields and scales of activity experience different needs for current assets to maintain a given volume of sales, and on the other hand, in determining the size and structure sources of financing for current assets.

If an organization does not put any restrictions on increasing current assets, holds significant cash, has significant stocks of raw materials and finished products, and, stimulating buyers, inflates receivables, the share of current assets in the total amount of all assets is high, and the turnover period of working capital is long , are signs aggressive current asset management policy, which in the practice of financial management has received the apt name "fat cat". An aggressive policy is able to remove the issue of increasing the risk of technical insolvency from the agenda, but cannot ensure an increased economic profitability of assets (Table 2, Annex 5).

If an organization in every possible way restrains the growth of current assets, trying to minimize them - the share of current assets in the total amount of all assets is low, and the turnover period of working capital is short - this signs of a conservative current asset management policy. Organizations conduct such a policy either in conditions of sufficient certainty of the situation, when the volume of sales, the timing of receipts and payments, the required volume of stocks and the exact time of their consumption, etc. known in advance or, if necessary, the strictest savings on literally everything. A conservative current asset management policy ensures a high economic return on assets (Table 2, Appendix 5), but carries an excessive risk of technical insolvency due to the slightest hitch or calculation error, leading to desynchronization of the organization's receipts and payments.

If the organization adheres to a "centrist position", then this moderate current asset management policy. Both the economic profitability of assets, and the risk of technical insolvency, and the turnover period of working capital are at medium levels.

Each type of current asset management policy corresponds to a specific financing policy, i.e. current liabilities management policy.

Sign of an aggressive current liabilities management policy is the absolute predominance of short-term credit in the total amount of all liabilities. With such a policy, the organization increases the level of the effect of financial leverage. Fixed costs are aggravated by interest on the loan, the strength of the operating leverage increases, but still to a lesser extent than with the predominant use of a more expensive long-term loan, as is usually the case with a conservative current liabilities management policy.

A sign of a conservative current liabilities management policy- the absence or very low share of short-term credit in the total amount of all liabilities of the organization. Both stable and unstable assets are financed mainly by permanent liabilities (own funds and long-term loans and borrowings).

Sign of a moderate current liabilities management policy- neutral (average) level of short-term credit in the total amount of all liabilities of the organization.

Compatibility of different types of current assets and current liabilities management policy is shown in Table. 3, adj. 5.

The matrix shows that:

A conservative current asset management policy may correspond to a moderate or conservative type of current liability management policy, but not aggressive;

Moderate current asset management policy - any type of current liability management policy;

Aggressive current asset management policy - an aggressive or moderate type of current liability management policy, but not a conservative one.

The ratio of sources of financing of current assets has a decisive influence on the change in the size of net working capital. If, with a constant volume of short-term financial liabilities, the share of current assets financed from own sources and long-term borrowed capital grows, then the amount of net working capital will increase. Naturally, in this case, the financial stability of the organization will increase, but the effect of financial leverage will decrease and the weighted average cost of capital as a whole will increase (since the interest rate on long-term loans, due to their greater risk, is higher than on short-term loans). Accordingly, if the amount of short-term financial liabilities increases in the formation of current assets with the constant participation of equity capital and long-term loans, then the amount of net working capital will decrease. In this case, the total weighted average cost of capital can be reduced, a more efficient use of equity can be achieved (due to an increase in the effect of financial leverage), but at the same time, the financial stability and solvency of the organization will decrease (the decrease in solvency will occur due to an increase in the volume of current liabilities and an increase in the frequency of debt payments).

Thus, the choice of appropriate sources of financing of current assets ultimately determines the ratio between the level of efficiency in the use of capital and the level of risk of the financial stability and solvency of the organization. Taking into account these factors, the policy of managing the financing of current assets is being built.

If the amount of working capital is underestimated, then the company will constantly experience a lack of funds, have a low level of liquidity and, as a result, interruptions in the production process, loss of profit. Conversely, the more current assets exceed current liabilities, the higher the liquidity of the enterprise. But an increase in working capital compared to the optimal need for them leads to a slowdown in their turnover and also reduces profits. Thus, the working capital management strategy should be based on ensuring the solvency of the enterprise and determining the optimal volume and structure of working capital. In turn, determining the necessary need for working capital sets the financial manager the task of choosing the optimal structure of sources of financing working capital.

A comprehensive working capital management policy includes the management of current assets and current liabilities.

Management of current assets means determining their size, composition and structure.

The strategy for financing current assets is determined depending on what decision the financial manager makes regarding the sources of covering temporary needs, i.e. coverage of the variable part of working capital.

In financial management, four models of working capital management are distinguished: ideal, aggressive, conservative and moderate.

The ideal model for managing current assets and liabilities:

The very name "ideal" suggests that in practice it is extremely rare.

This is when current assets are fully covered by short-term liabilities. This model is risky in terms of liquidity. In the event of an extreme situation (the need for full settlement with the majority of creditors), the company will be forced to sell part of its fixed assets to cover current accounts payable.

Aggressive current assets and liabilities management model:

This is when the share of working capital is significantly higher than the share of fixed assets. The company has large stocks of raw materials, materials, finished products, significant accounts receivable. A short-term loan finances not only the variable part of current assets (temporary need for working capital), but also part of the permanent current assets. Obviously, the greater the share of short-term credit in the financing of permanent working capital, the more aggressive the financial policy. When managing working capital according to an aggressive model, the company's costs for paying interest on a loan increase, which reduces economic profitability and creates a risk of liquidity loss.

A conservative model for managing current assets and liabilities:

This is if the share of current assets is relatively low. Accordingly, the share of short-term financing in the total value of all liabilities of the enterprise is small. Only a part of the company's variable current assets is covered by a short-term loan. The rest of the need for working capital is covered by permanent liabilities. The financial manager chooses such a policy subject to a deep study of sales volumes, a clear organization of mutual settlements, and established relationships with suppliers of raw materials and materials. Conservative policy contributes to the growth of return on assets. At the same time, it contains elements of risk in case of unforeseen situations in the calculations or in the sale of products.

Moderate current assets and liabilities management model:

The moderate financial policy of working capital management is a compromise between an aggressive and conservative model. In this case, all parameters (economic profitability, turnover, liquidity) are averaged.

Based on a comprehensive assessment of the size, composition and structure of current assets, a financial manager can develop a comprehensive working capital management policy for each specific period of the enterprise's production activities.

As in many other cases in the analysis of financial statements, there are practically no “bad” and “good” balance sheet structures. Depending on this or that share of sections in the structure of the balance sheet, we can only talk about different asset and liability management policies of the enterprise.

The essence of choosing a rational policy for managing current assets and liabilities is to determine the rational structure of capital and the sources of its formation.

Enterprises of various industries experience different needs for assets and the structure of the sources of their formation based on the scale of production, financial strategy, organizational and legal form of management.

In accordance with the value of current assets in the composition of all assets, there are 3 types of asset management:

Aggressive;

Moderate;

Conservative.

This classification of assets includes asset mobility ratio.

TO aggressive type of asset management include enterprises with a mobility ratio of more than 50%.

The main features include:

1. Large stocks of current production assets

2. Possibility of providing commercial (commodity) credit to buyers

3. Ability to form a portfolio of high-risk securities

4. High liquidity and asset turnover

5. Investment attractiveness.

The main disadvantages of this type include:

1. Increasing the tax burden due to excess reserves

2. Non-compliance with the economy mode

TO moderate asset management include enterprises with a value of the coefficient of asset mobility from 30% to 50%. This ratio of assets is considered the most rational.

The main features include:

1. Compliance with the norms of the need for current production assets (raw materials, materials).

2. Provision of a commercial loan under the “spontaneous financing” scheme, i.e. method of providing a deferred payment, taking into account the provision of discounts depending on the terms of the contract.

3. Formation of a rational portfolio of securities, i.е. with low liquidity risk and a high degree of security.

4. Average degree of liquidity and solvency (the second class of crediting).

The main disadvantages include:

The need for strict observance of the cycle of movement of financial resources (production and commercial cycle).

TO conservative type include companies that have the following features:

1. The need to comply with the most severe regimes of savings on materials

2. The possibility of failure of the production program due to insufficient stocks.

3. The need to comply with the synchronism of the cycles of supply, production and marketing of products.

Based on type classification liability management lies the indicator - the share of short-term loans and borrowings in the total liabilities.

TO aggressive type of liability management include enterprises with a value above the considered indicator of more than 30% (conditionally).

Aggressive current liabilities management model indicates a high degree of entrepreneurial and financial risk.

A favorable sign in the application of the aggressive type is the possibility of turning the current operating requirements into a negative value.

Moderate type of liability management characterized by a neutral level of the share of short-term loans and borrowings in total liabilities. To achieve this level, the need for external financing must be determined, according to the formula:

The moderate type includes enterprises with a share of short-term loans and borrowings in the total amount of liabilities from the materiality threshold to 30%.

Conservative type of liability management indicates a low share or complete absence of short-term loans and borrowings in the sources of financing.

This type of liability management can be considered as a temporary measure caused by the enterprise development strategy, industry affiliation, loss of solvency.