Analysis of the Operation and Financial Condition of the Enterprise

Analysis of the Operation and Financial Condition of the EnterprisecapitalBy analysing Table 5.4 it can be found that the amount of current assets of theenterprise is too small to sustain a sufficient working capital. According to the most recentdata further 75 thous. CU would be required for the working capital of the enterprise to besufficient. Besides, by looking at the dynamics of the working capital one can project thatthe enterprise could be short for the 2X10 summer period even with the 75 thous. CU.Another solution for increasing of the working capital would be a more efficient use of theexisting current assets. The possibilities for a more efficient use of the current assets at thedisposal of the enterprise will be looked at in further sections under the topic of currentasset management in the enterprise.5.3. Activity ratio analysis of Enterprise NCurrent asset turnover ratioFor the estimation of this value the current asset turnover ratio formula 4.13 is used.In order to estimate the current asset turnover ratio, it is necessary to know the net turnoverfigure for the enterprise together with the average amount of current assets for the periodunder consideration.The average amount of current assets is arrived at by adding the period openingand the closing value of current assets and dividing the amount by two. As it is impossibleto obtain data on the average value of current assts as of 31/12/2XX7, the current assetturnover ratio for this period end will not be estimated. Noting that the period underconsideration is a quarter, but not a year, the algorithm for calculation of the current assetturnover ratio must be corrected a little bit, because the total value of net turnover increaseseach quarter, while the amount of current assets does not have the trend of going up eachquarter by the amount of increase in each preceding quarter on average. Therefore, in orderto estimate the current asset turnover ratio for the first quarter, i.e., as of the end of March,the net turnover amount has to be multiplied by 4. In order to arrive at the value of thisratio at the end of June, net turnover has to be multiplied by 2, and in order to calculate thesame ratio at the end of September, the net turnover amount has to be divided by 3 andmultiplied by 4. However, to make the same estimate as of the end year, no adjustment hasto be made to net turnover.By looking at Table 5.5 ‘Estimate of the current asset turnover ratio for the periodfrom 31/03/2XX8 to 31/12/2XX9 in Enterprise N’ it can be noticed that within one year onaverage the current assets are turned over at least 3 times. There is an exception in theperiod from the beginning of 2XX9 until the middle of 2XX9 when the current assetturnover ratio was below 2.5. The improvement in the current asset turnover ratio duringthe two last quarters of 2XX9 is not due to an increase in the net turnover figure, but ratherdue to a decrease in current assets that may not be positively evaluated as there is a needfor additional working capital for enhancement of the enterprise liquidity.5.5.Table96