Nargiza kasimova farkhod mukhamedov elkan harebov

Participating 
Not participating 
Risk level 
Depending on 
seasonal and cyclical 
fluctuations in sales 
By participating in the 
production process 
and sales of products 
 
63 

---

Budget appropriations are received by state and municipal enterprises, 
enterprises implementing state programs, etc. 
Other sources include foreign investment, accounts payable, loans, funds 
raised based on joint activities, etc. 
The liquidity and solvency of the enterprise  depend on the structure of 
sources of working capital formation. 
The difference between current assets and current liabilities is the net 
working capital of the enterprise or its own working capital. 
Thus, working capital as a separate object of enterprise management 
consists of working capital and short-term financial investments. And the 
sources of its reproduction are the net profit remaining at the disposal of the 
enterprise, stable liabilities, short-term bank loans, budget allocations and other 
sources. 
Working capital items vary in liquidity level. Immediately marketable are 
all funds in the current, settlement, currency account and cash desk, as well as 
investments in the money market. Quickly sold include, for example, 
investments in highly liquid securities, receivables secured by a pledge, 
guarantee, or bank guarantee and for which the limitation period has not 
expired. Inventories are slow to sell. Hard-to-implement articles of working 
capital include stale stocks of raw materials and finished products, and bad debts 
are illiquid, i.e. accounts receivable for which the limitation period has expired 
or the obligation is terminated due to the bankruptcy of the buyer and its 
liquidation. 
If we consider investments in working capital from the point of  view of 
risk, then risk-free investments can be recognized as investments in the money 
market subject to its stability. Accounts receivable, depending on the conditions 
of its formation, can have any degree of risk: medium, low, or zero. It depends 
on the financial condition of the debtor, conditions, and forms of payments. 
Working capital can also be divided into permanent and temporary, 
depending on the influence of seasonal and cyclical fluctuations in demand for 
products manufactured by the enterprise. Permanent capital does not depend on 
fluctuations in market conditions, and temporary capital is additional to constant 
and is created under seasonal and cyclical fluctuations in sales. 
In addition, part of the working capital is directly involved in the 
production and sale of products, and part is distracted from this process. Without 
working capital, production and sale of products cannot occur, and short-term 
financial investments are diverted from the production and sale of products and 
are used only in the financial market with the goal of a quick increase in 
monetary assets. Thus, short-term financial investments perform the function of 
ensuring the increment of money. 
Depending on the financial performance of the enterprise, you can 
characterize its working capital management policy, which can be formed in 
several ways: conservative, aggressive, and moderate. 
 
64 

---

With a conservative policy, the company restrains the growth of current 
assets and seeks to minimize their volume. Their share in the total volume of 
property is small, and the turnover period is small, which ensures a high return 
on assets. This policy is carried out in the absence or low proportion of short-
term loans and borrowings in sources of financing. All the need for working 
capital is covered only by our own sources and long-term liabilities. 
Conservative policies can be implemented in two cases. If it is necessary to save 
all types of resources to maintain and strengthen the financial situation of the 
enterprise, as well as in conditions of complete certainty in the capital markets, 
capital goods and commodity markets. 
However, in the event of unforeseen circumstances in the commodity and 
financial markets, there may be a risk of technical insolvency (delay or 
calculation error, leading to a violation of the terms of receipt and payment of 
funds). 
Aggressive policies lead to an increase in stocks of raw materials, 
materials, finished products, an increase in receivables and cash assets in bank 
accounts. The share of current assets in the property is high, and the turnover 
period is quite long, which ensures a relatively low profitability. Financing of 
the need for current assets is carried out due to the large volume of short-term 
loans and borrowings, which make up a significant share in the total amount of 
liabilities. The company increases fixed costs due to the costs of servicing loans. 
In this regard, the strength of the impact of financial and operating leverage is 
increasing, indicating a high entrepreneurial risk. 
Such a policy can be allowed if the enterprise has a monopoly position on 
the market or a very high level of profitability of sales and production is 
achieved due to the exclusivity of goods or services and with a stable 
macroeconomic situation. 
A moderate working capital management policy is characterized by an 
average level of indicators such as the weight of current assets in the property, 
economic profitability of current assets, the period of their turnover, etc. 
Financing needs comes from the average level of short-term and long-term loans 
and borrowings in the total amount of sources. Moderate policy can be applied 
in any market situation, as it helps to reduce risks. 
The main function of working capital is to ensure the production process. 
This process should take place rhythmically, in connection with which it is 
necessary to determine in advance the need for working capital to avoid 
production stoppage due to lack of raw materials, materials or cash. 
A number of factors affect the efficiency of working capital management: 
the volume and composition of current assets, their liquidity, the ratio of own 
and borrowed sources of coverage of current assets, the amount of net working 
capital, the ratio of constant and variable capital, etc. 
As applied to the phases of the life cycle, it can be noted that when entering 
the market and in the growth phase, it is more advisable to apply a conservative 
 
65 

---

or moderate policy, and in the maturity phase, an aggressive policy, but subject 
to increased production volumes. In a crisis, strategies are better based on 
conservative or moderate policies, and in crises of profitability and liquidity, it 
is only necessary to adhere to the principles of conservative policies. In the 
insolvency phase, it is not advisable to develop such a policy. 
The principles and indicators underlying the formation and evaluation of 
the implementation of the working capital management policy are presented in 
Table 11. 
Table 11.