Circulation of capital: stages, formula. Capital flow

Circulation of capital: stages, formula. Capital flow
Circulation of capital: stages, formula. Capital flow
Anonim

In various economic schools, the concept of capital is often interpreted differently. According to the writings of Ricardo, this word denotes a part of the national we alth used in production. And Karl Marx called capital goods that, with reasonable use, allow increasing their quantitative value through investment in production.

circulation of capital

Modern concept

Capital is not something individually specific, neither a product nor finances, but as for the latter, of course, it happens at the stage when it is launched into production in order to make a profit. This is, as it were, a completely ordinary form of materialization of property, a kind of circulation of the owner's funds, aimed at obtaining a certain income. And therefore, the general concept of capital means everything that can generate income. Therefore, it can be means of production, and finished goods, and finances.

Reverse process

The circulation of capital is the path followedits continuous movement through production circulations and spheres, which ensures the creation of surplus value and its new reproduction. In the conditions of market relations, current financial investments are considered especially important. This is largely due to the fact that they are part of the creative category. And this is the same component that transfers its own invested value to the newly created product in full, and then, at the end of each circuit, returns to the businessman-industrialist in a monetary form, which in quantitative terms will be greater than the one that was invested. From which it follows that working capital has been and will be one of the most important criteria in determining the profit of production.

Capital Circulation: Formula and Stage 1

In the course of its movement, capital goes through several stages, the so-called stages, after which it returns to its original form. That is, initially advanced in the form of cash, it goes through three stages of circulation.

). Both Sp and Rs at this stage of the circulation of capital are goods purchased for the organization of the production processes of the enterprise. Due to the fact that in order to start an activity, not only working equipment is needed, for the purchase of which a part of the capital is spent, but also the services of hired employees, informula, they are also designated as a commodity - due to the allocation of funds to pay for their labor. circulation and circulation of capital

Stage 2

Further, the forms of capital change, "cash" (D) goes into "productive" (P). As a result of the functioning of the production process, it then acquires a commodity form (T). Produced goods, of course, differ from those purchased at the first stage, both qualitatively (according to the external aspects of the newly created product) and quantitatively (according to the calculated cost of consumption plus the surplus value). For example, at the first D-stage, sewing equipment, materials, etc. were purchased for part of the capital, as well as cutters, seamstresses, etc. were hired. Well, at the second P-stage, tracksuits were sewn. This example clearly shows the difference between the goods of the first stage and those received as a result of the production process.

Stage 3

At the third stage, the circulation of the capital of an enterprise again passes into the sphere of circulation: the entrepreneur brings to the market and sells the goods produced there, receiving in money the value spent on them and additionally surplus. As a result, the invested finances were transformed from the commodity form (T) back into the monetary form (D).

At the third stage, the movement of capital is the sale of production goods to the consumer. The return back to the treasury, together with the surplus value in the form of money (D), means that its circular movement has ended and arrived in its original form at its original position. Only now the businessman already has muchmore money than before. Then he restarts the circulation and circulation of capital from one form to another, again leading it through the three stages of circulation. This is due to the continuity of the process.

what is working capital

Ensuring Continuity

So, from what has been said above, we see that the circulation of capital is accomplished through the passage of three functionally active stages. Where the second, that is, productive, is considered the most important, because it is in it that the creation of surplus value takes place. The path of successive passage of each stage changes the forms of capital from one to another. In fact, by itself, the movement of capital will not be limited to just one circuit, since the entrepreneur will again and again set the funds in motion, having a completely understandable goal - to provide himself and his business with even greater and steadily growing surplus value. And the continuity of the production process can be achieved if capital not only passes from one form to another, but is constantly present simultaneously in all three forms.

Assignment of working capital

Means that serve the process of activity and at the same time participate directly in the creation of new goods, and at the same time in the process of selling products, allow the concept of what working capital is. Its main purpose is to ensure the rhythm and continuity of the financial production cycle. Acquired means of production (Sp) have a different name - "capitalenterprises". The concept of it as Sp, in turn, is divided into objects of labor that take part in the creation of marketable products and services (RS), they also have a functional difference in participation in the production process.

capital movement

Principal difference

The peculiarity of working capital is that it is not spent, not consumed, but advanced into various types of current costs of entrepreneurial activity. The purpose of such an advance is the creation of inventories, the arrangement of unfinished elements of production in order to increase the amount of production of finished products and organize even better conditions for its successful implementation.

Investment in the creation of production

Advance payment means that the funds allocated for launching into the capital circulation are returned to production after each completion of the cycle, which includes:

  1. Production of products.
  2. It is sold to the consumer.
  3. Receiving sales proceeds.

In other words, it is from the proceeds from the sale of manufactured goods that the advanced material part is reimbursed, and specifically, its return to its original (D) value. Thus, it becomes clear what working capital is. It can be characterized as a set of financial resources launched for the organization, the establishment of the production process through the use of circulation funds and working capital investments.

forms of capital

Productioncapital

Instruments of labor constitute the property content of the main production assets, such as the main part of finance, workshops, working equipment and other production negotiable instruments relating to the future development policy of the enterprise in order to increase profitability.

Regardless of the division of the capital of an enterprise into its own, fixed, borrowed, or circulating, as well as permanent or variable, it is in a constant process of continuous movement, just taking on various forms, due to being in a specific stage through which to the current moment is the circulation of funds.

Means of production

Means of production include objects of labor, including materials, raw materials, components, semi-finished products and the like. All of them participate in the production and technological cycle that makes the circulation of capital, and at the same time they are completely consumed during the time interval of one such circle. The money spent on this quickly turns around, covering the cost with living productive labor, creating marketable products in the same techno-production cycle.

stages of capital circulation

Speed ​​measurement

One of the important evaluation criteria characterizing the circulation and circulation of capital is the determination of the speed of its movement. The first measurement of speed is the value of the time period during which the entire amount of money advanced by him is returned to the capitalist in the form of proceeds, while increasing by the amount of profit. Suchthe length of time is 1 revolution.

The second measurement of the turnover rate of capital is the number of calls of the advanced investment in 1 year. This measurement is derived from the first one and is calculated by dividing 12 annual months by the time of 1 revolution.

The individual parts representing the movement of capital in the industrial sector are distinguished by the individual characteristics of the material means of production and will turn around at different speeds.

And as for the means of labor, which include structures, structures, machine tools, machines and other equipment, the period of their operation is calculated from several years to several decades. They are part of the material and technical base of an industrial enterprise and consistently participate in most production and technological cycles.

circulation of enterprise capital

Target prescriptions

Working capital is required to be maintained in an amount that provides steering optimization management of production activities. To do this, it is necessary to decide on the formulation of attitudes pursuing strategic goals.

For example, the financial and economic characteristic of production is its liquidity, that is, the possibility of converting assets into cash in order to pay off payment obligations. Its sufficiently high level for any enterprise is the most important characteristic of the stability of activity. The loss of liquidity can result not only in additional costs, but also in periodicstop the production process.

The low level of capital turnover will not be able to properly support production activities. Therefore, loss of liquidity, failures in work and, as a result, low profit are possible. For every business there is an optimal level at which maximum profit is possible.

Conclusion

All the stages through which the capital passes, making its circuit, are closely interconnected and dependent on each other. And of course, the second stage in this series of metamorphoses is of the most decisive importance. Because it is at this stage that the creative component of the whole process begins, when a product is produced and a new value is created. And therefore, the transformation of capital from a productive into a commodity form is a real transformation of it, in contrast to its metamorphoses at the 1st and 3rd stages, in which there is only a change of forms one into another, but there is no increase in capital. It is on such a construction of the circular movement of funds that the activity of any production is built.

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