- О проекте
- Результаты и Награды
- Партнерские программы
- Международные услуги
Jelena Volkova, преподаватель, кандидат экономических наук, докторант
Высшая школа Резекне, Латвия
Участник первенства: Национальное первенство по научной аналитике - "Латвия";
The aim of the study is to determine, classify and assess the factors that influence current asset management.The study involved application of generally accepted methods of economic and statistical analysis:logical-constructive method, monographic method and method content analysis of theliterature. Through the study of current asset role in the development of business development, the authors in their research examined influence of individual internalfactors on the company's assets. The authors provedthat working capital management is focused on the company's ability to build, maintain and control the elements of current assets and their funding sources to ensure the most efficient use of resources and to gain profit.
Keywords: current assets, working capital management, internal and external environmental factors.
In current globalrecessionary economic environment, the sustainable development of a company depends on the ability to exercise effective financial management functions. From the perspective of profitability and liquidity, the management of working capital plays an important role in corporate financial management. Study of the literature allowed the authors to draw the conclusionsthat a number of scientists carrying out research on the current asset management in an enterprise pay great attention to external and internal factors, which influence current assets and their management. Recognition of these factors and evaluation of their impact is a key issue in the management of current assets.
The aim of the this study is to determine, classify and assess the factors that influence current asset management. In the other studies the authors had proved that the economic processes in the world, as well as national economic growth affect business activity indicators and the dynamics of current assets, in particular. The terms of references are make the analisis of literature,to provide classification of Internal Factorsthat influence current asset management and to make conclusions and suggestions.
The impact of the external environment is frequently cannot be controlled and influenced therefore more serious attention is paid to the internal environment and the factors influencing it.
The internal factors,which influence current asset management, can be described from different perspectives: factors of production; financial management factors; accounting and financial management accounting and organization; organizational factors and other.
Internalfactors can be classified in the group of up to hundred of different factors that are unique to a particular enterprise. The studies of Russian scientist L. Giljarovskoj (Л.Т.Гиляровскa, 2003) show that in 90% of the financial failure cases in enterprises are based/due to managerial factors that are most often manifested as a lack of experience, inadequate level of competence, and unjustified management decisions.
Table 1. provides theauthors’ summary of the internal factors which can be influenced the company itself, and which theyhave an impact on current assets and their management opportunities.
Table 1. Internal Factors that Influence Current Asset Management
SCOPE OF FACTOR APPLICATION
Type of activity
Implementation of technologies
Source: The Authors
Identification of the factorsaffecting the performance is based on complex research of the company’s activity, while the results of the analysis serve for future development strategy and management decision-making (Averina, 2009).
As it is pointed out byBocharov (Бочаров, 2000), business sector is one of the key factorswhich determine formation of current assets. The structure of current assets and their proportion in total assets is dependent on the company's activity, strategic aims and internal policies. The first and foremost condition for the development of current asset management policy is its consistency with the overall business strategy which must include the standards of current assets, intended use of the current assets and other requirements set out for the current assets.
The authorsbelieve that the current asset management policies can vary not only within the industry, but they can also be affected by the sub-sector. According to the NACE classification, within a sector, there exists a more detailed breakdown in sub-sectors, which differ from each other by investments in current assets structure, size, etc.
Historical experiencesand the culture implemented at the company, which are essential factors in the asset management, in general, also play an important in the management of current assets. As it is indicated in E. F. Brigham’s (1999) studies, the companies which use the best practices for current assets management, also tend to form working capital when the economy is strong, while during the downturn, they selloff stocks and develop a strict debtor management policy. As it is rather difficult to predict duration and the direction of business cycle, then, according to M. J. Peel and N. Wilson (1996) and F. C. Scherr (1989), working capital management is an on-going challenge, and must be managed with great care.[6;7]
In the literature, management of individual current asset types is considered to be one of the keymanagement aspects. M. S. Nazir and T. Afza (2008) explain that companies can reduce the risk of current asset management and improve the overall working capital levels by properly understanding the role of this category in business.  Therefore it is important to understand the components of working capital in order to maintain its optimal amount. The optimal working capital levels play a crucial role in achieving the balance between risk and efficiency. However, maintenance of the optimum working capital level requires constant supervision of various components, such as accounts receivable and payable balances, inventory, money, etc. Scientists indicate that it is one of the key issues which have to be addressed by the company's management.
The effect of the company’s sizeon the level of current assets and liabilities were studied by scientists R. Pass and C. Pike (1984).  The study concluded that the working capital accounts for a substantial part of the company's assets and liabilities, where small and medium-sized companies tend to create a relatively larger level of current assets and current liabilities than their larger counterparts. A similar study was conducted by Spanish scientists P. J.Garcia-Teruel and P. Martinez-Solano (2007), who found out that in Spanish SME sector current assets constitute 69% of total assets, while short-term obligations form more than 52% of total assets.
M.K.Kolay(1991) notes that an effective working capital management is frequently recognized only at a later stage, when the company experiencesfinancial difficulties. Kolay’s study describes the crisis in current asset management as an exponential way in which problems in the past exacerbate due to the distress of the crisis and chaotic management practices.
The authorsbelieve that the current asset management is to a great extent influenced also by senior and middle management understanding of the organization, its technological processes, as well as management attitudes towards financial control and discipline; corporate culture and corporate thinking, as well as employees who play the key role in the implementation of management development. The Chief Executive Officer is the one who provides implementation of meaningful changes, communication with managers, banks and customers, who evaluates risks, takes steps to increase the value. The researches in personnel management carried out by the authors, as well as their practical experience allow drawing conclusions that, from the perspective of current asset management, the executives have a crucial role.
Working capitalmanagement is focused on the company's ability to build, maintain and control the elements of current assets and their funding sources to ensure the most efficient use of resources and to gain profit. According to A.Shatunov (Шатунов А.Н., 2010), the internal factors may be changing and constantly in their nature therefore they affect the working capital in time. The management can yield both positive and negative results. The study emphasizes that working capital management policies should be effective and based on experience and analysis, and in no case it may be the result of chaotic decisions. The authors agree with the scientist’s view that the assessment of factors and problems in time, when one of the factors may become more influential or lose the influence, is a vital step in the process of asset management in a company. Despite the fact that at any given moment one of the management issues is or may become more important than others, the current asset management must be carried out as a complex set of measures.
The main task of the company management is to find and implement the most appropriate methods of working capital management. A.Hariss (2006), in his study, concludes that the concept of working capital management has been developed in order to ensure the company’s capacity to finance the difference between short-term asset management and to meet short-term business goals. The author believes that the paying capacity/solvency of a company is mostly based on the working capital, while the liquidity is the main goal of working capital management concept and strategy. The findings of scientific studies suggest that the management of working capital is a complex of company's daily activitiesand occupies an important place in the financial management processes, where it is essential to be aware of and apply financial management methods appropriately.
Based on the results of the analysis,the authors conclude that working capital management is focused on the company's ability to build, maintain and control the elements of current assets and their funding sources to ensure the most efficient use of resources and to gain profit. In differentcompanies, the structure and volume of current assets are determined by the business sector, organizational structure, manufacturing process and the level of its modernization, debtor and creditor ratio, accounting policies and other factors.
It is frequently impossible to control the influence of external environment and therefore greater attention should be paidto the internal environment and the factors influencing it.
Studies have proven that: