What are the possible reasons for a short period? Discover the 11 key factors that can contribute to a shortened menstrual cycle, including hormonal imbalances, lifestyle factors, and underlying health conditions.

The Significance of a Normal Menstrual Cycle

Your menstrual cycle is a vital sign of your overall health and hormonal balance. A normal period typically lasts between 3-7 days, with a cycle length of 21-35 days, although a range of 24-25 days is considered ideal. Deviations from this norm, such as a short period that lasts less than 3 days or a short cycle of less than 21 days, can indicate underlying issues that require attention.

Hormonal Imbalances and Short Periods

The primary drivers of your menstrual cycle are the hormones estrogen and progesterone. Imbalances in these hormones can lead to a shorter-than-normal period. Let’s explore the specific ways in which low estrogen and low progesterone can contribute to a short period:

Low Estrogen

Estrogen is a growth hormone responsible for the development and maintenance of the female reproductive system. It is released in high amounts during the follicular phase, the first two weeks leading up to ovulation. Low estrogen levels can result in a weakened uterine lining, leading to a shorter period. Factors that can cause low estrogen include undereating, excessive exercise, and certain health conditions.

Low Progesterone

Progesterone is a sex hormone released by the ovaries that is crucial for conception and maintaining a healthy pregnancy. If your egg is not fertilized, progesterone levels decline, and the uterine lining is shed, resulting in a period. Low progesterone levels can lead to an inadequate buildup of the uterine lining, leading to a shorter period.

Lifestyle Factors and Short Periods

In addition to hormonal imbalances, certain lifestyle factors can also contribute to a shortened menstrual cycle. Let’s explore two of the most common culprits:

Undereating

Undereating, whether intentional or unintentional, can lead to low estrogen levels and a short period. When the body is in a state of calorie restriction, it prioritizes survival over reproductive functions, resulting in a decline in hormone levels and a shorter menstrual cycle.

Overexercising

Excessive exercise, especially in the absence of adequate rest and recovery, can also lead to low estrogen levels and a short period. This is because the body’s stress response to intense exercise can disrupt the delicate hormonal balance required for a normal menstrual cycle.

Other Potential Causes of a Short Period

While hormonal imbalances and lifestyle factors are the most common reasons for a short period, there are a few other potential causes to consider:

Polycystic Ovary Syndrome (PCOS)

PCOS is a hormonal disorder that can lead to irregular menstrual cycles, including short periods. The underlying cause of PCOS is an imbalance in reproductive hormones, often characterized by high androgen levels.

Thyroid Dysfunction

Both hypothyroidism (underactive thyroid) and hyperthyroidism (overactive thyroid) can disrupt the delicate balance of hormones required for a normal menstrual cycle, potentially leading to a short period.

Stress

Chronic stress can also contribute to hormonal imbalances, including low estrogen and progesterone levels, which can result in a shorter-than-normal period.

Addressing the Underlying Causes

If you are experiencing a consistently short period, it is important to consult with a healthcare professional to determine the underlying cause. They can perform appropriate tests and assessments to identify any hormonal imbalances or other underlying conditions that may be contributing to the issue. Once the root cause is identified, your healthcare provider can develop a personalized treatment plan to help regulate your menstrual cycle and address the underlying problem.

Maintaining a Healthy Menstrual Cycle

To support a healthy menstrual cycle and prevent a short period, it is important to maintain a balanced lifestyle that includes a nutritious diet, regular exercise, and stress management techniques. Tracking your menstrual cycle and being aware of any changes can also help you identify potential issues early on and seek appropriate medical attention if necessary.

11 Reasons for a Short Period — Composed Nutrition | Hormone, PCOS, Fertility Nutrition

Your period is a vital sign of what is going on with your overall health & hormones.

Let’s talk about short periods. A short period is one that lasts for less than 3 days. You could also be experiencing a short cycle (time from your period until your next period). A short cycle would be less than 21 days. You could also see light pink blood instead of bright or dark red.

A normal period is 3-7 days and a normal cycle is 21-35 days (although I prefer to see it around 24-25 days).

So why could you be experiencing a short period?

It’s time to take a look into your estrogen and progesterone levels – these could be low if you are experiencing short periods.

Here are 11 possible reasons for a short period:

1. Low Estrogen

Estrogen is a growth hormone responsible for the development and maintenance of the female reproductive system. It is released in high amounts during the follicular phase of the menstrual cycle which is the first 2 weeks leading up to ovulation. Estrogen is released from the ovaries, fat tissue, and adrenal glands because it has a connection between fertility and body fat composition. The main functions include building up the uterine wall for the menstrual cycle, stimulating the growth of the egg follicle, developing breast tissue, stabilizing bone density, and controlling the metabolism of glucose and lipids. Low levels of estrogen can be harmful because it can cause weak bones, mood swings, hot flashes, loss of period, and fatigue. Low estrogen is one of the reasons for a short period because we need optimal levels of estrogen to its function to prepare for ovulation. 

Source: 30855848, 23051593

2. Low Progesterone

Progesterone is a sex hormone released from the ovaries that is vital for conceiving and maintaining a healthy pregnancy. The hormone can be broken down as, pro meaning before and gesterone meaning gestation or pregnancy. Progesterone has 2 different paths each month depending on fertilization. If your egg is fertilized, then progesterone rises after ovulation to help thicken the uterine lining for pregnancy. If your egg does not become fertilized after ovulation, then progesterone peaks and then declines, because you do not need to prepare for pregnancy. The uterine lining will shed and become a period. Progesterone is also involved in breast development and breastfeeding. Problems can arise when progesterone levels are too low and is one of the reasons for a short period. This is because if we don’t have enough progesterone, the body will not build up the endometrial lining thick enough to last a long time.  

Source: 25587053 

3. Undereating

Undereating is one of the reasons for a short period because of its effect on hormone levels. Undereating refers to the decrease in your calorie intake below your energy output per day. If undereating is intentional to the point of starvation, then this can be a symptom of anorexia nervosa. Another form of food restriction comes from the binge and purge mentality stemming from bulimia. Though, every case is different, it is important to signal that these behaviors are possible cases for what causes low estrogen levels. These patterns put our body into a state of panic and stress because we are trying to survive at an energy level insufficient for our current size. From this stress, estrogen and progesterone levels decrease because we are not prepared for pregnancy. Our body fat percentage is most likely decreasing as well due to the under eating and therefore can be one of the reasons for a short period. 

Source:  7021778

4. Overexercising

In addition to undereating, over exercising puts a similar result on the body in terms of estrogen levels. Over exercising can be what causes low estrogen because of the high stress it puts on the body. Over exercising can be identified as any exercise performed at a high frequency and intensity during the week with minimal to no rest days. It is important to note that exercising in general is okay and actually beneficial for hormone levels, but it is the excessive nature of exercise that is harmful. The main issue with this is that our bodies need a stable body fat percentage to maintain a normal menstrual cycle, and estrogen levels will drop as body fat drops. As a rule of thumb, most females need at least 17% body fat to maintain a normal menstrual cycle to ovulate. Additionally, over exercising, especially in endurance athletes, puts a large stress on the body from the impact on our bones and the large energy output. If you are overexercising your body has a hard time recovering and will not prioritize a menstrual cycle or ovulation because those things require a lot of energy. 

Source: 31341450, 22408332

5. Stress

Stress can be another one of the reasons for a short period. When we are stressed we release high levels of cortisol, a stress hormone. In response to this, our body is trying to survive given threatening circumstances, so the body will pump the brakes to avoid pregnancy. This is because our body wouldn’t predict us to be healthy enough to survive a pregnancy under stressful conditions. Stress can be caused from a high pace job environment, family problems, too much exercise, and a common one is stress from the act of conceiving itself. 

Source: 27757157, 26772181 

FREE HAPPY HORMONE MEAL PLAN:

6. Low Thyroid 

Low thyroid or hypothyroidism, can be another reason as to what causes low progesterone levels. The thyroid is a gland in our throat that needs to release hormones to maintain a stable metabolism among other things. If these hormones are not released as frequently as they should, then this is called low thyroid or in more intense situations, hypothyroidism. As mentioned low thyroid and high prolactin have a connection to what causes low progesterone. Our body will try to stimulate more thyroid output, so additional hormones in the brain, specifically the hypothalamus, will be released to try to generate more thyroid hormones. These hormones, unfortunately, can also increase the prolactin production and will therefore decrease progesterone. Decreasing progesterone as we know will affect the build up of the endometrial lining and is one one of the reasons for a short period. 

Source: 9846161

7. Nutrient Deficiencies

Vitamin B6 deficiency may be one of the reasons for a short period for you because B6 is a vital water soluble nutrient necessary for ovulation and conception. Without the vitamin, it puts you at risk for developing an unhealthy pregnancy. Some of its main roles in pregnancy are healthy brain development, curing morning sickness, and immune function. 

Zinc is another vital mineral for hormone production, so if levels are low it can be one of the reasons for a short period. It has been shown that low levels of zinc have been correlated with a longer time to conceive. A large function of zinc is its antioxidant function which can help reduce the internal stress response. 

Magnesium deficiency can be another one of the reasons for a short period because magnesium is vital for the promotion of progesterone and estrogen levels. It is also a relaxant mineral that helps to soothe muscle contractions associated with cramping. Magnesium is also important for ovulation and conception. 

Source: 6684167, 31315178, 17099205, 6684167

8. Anovulatory Cycles

Anovulatory cycles is when you are not ovulating meaning you are not releasing an egg from the follicle. You may bleed on an anovulatory cycle or you may not bleed. Usually, releasing the egg will stimulate progesterone to then promote the rest of the fertilization into pregnancy, but if the egg is not released then progesterone is low and you may still be bleeding. This is an anovulatory cycle, and usually if you are bleeding it will be heavy but short. Estrogen dominance can usually occur during this time which is why the anovulatory cycle is one of the reasons for a short period. 

Source: 26726266

9. Hormonal Birth Control

Hormonal birth control can be one of the reasons for a short period because it completely inhibits the body’s natural mechanism for producing hormones. While on birth control, estrogen and progesterone are administered to your body artificially in different doses every day to get you on a regular 28 schedule. The amounts of these hormones may not be the same amounts as if you weren’t on birth control so this can be one of the reasons for a short period. If you are coming off of hormonal birth control then you may have a short period due to lack of ovulation. 

Source: 25681845 , Book on the Menstrual Cycle

10. Breastfeeding

If you are breastfeeding, this is another reason for a short period. This is because when you are breastfeeding, you are inhibiting ovulation because you just gave birth recently. Due to this your estrogen and progesterone levels will be low and you will find spotting more common and shorter periods because of this. 

Source:1967336

11. Premature Ovarian Failure (POF)

Premature ovarian failure is when your ovaries fail to function properly before age 40. POF is one of the reasons for a short period because you don’t produce enough estrogen and progesterone for a healthy cycle. Other symptoms include hot flashes, irritability, and infertility. POF can be caused by genetic factors, recent chemotherapy, radiation, environmental toxins, or autoimmune conditions. 

Source: 24963360

What Does Your Menstrual Cycle Say About Your Fertility?

One of the most common questions OB/GYN’s have for their patients is “When was the first day of your last period?”. The answer to this question may feel like part of the usual routine at your annual OB/GYN appointment. If you have been trying to conceive without success, the answer could provide important insight into factors central to the menstrual cycle and conception such as hormonal imbalances and ovulation.

Medical contribution by Isaac E. Sasson, M.D., Ph.D.

Isaac E. Sasson, M.D., Ph.D., FACOG, is board certified in obstetrics and gynecology and reproductive endocrinology and infertility. He has expertise in the diagnosis and treatment of infertility, including in vitro fertilization, donor egg treatment, endometriosis, polycystic ovary syndrome, and preimplantation genetic diagnosis. Dr. Sasson sees patients at SGF’s Chesterbrook, Pennsylvania, office.

What is a menstrual cycle?

Hint, it is more than just your period. 
The menstrual cycle is a series of changes a woman’s body goes through each month whereby the ovary releases an egg and the uterus prepares for pregnancy. The cycle can be divided into two phases: the follicular phase and the luteal phase.

The first day of your menses – or period – is day 1 of your cycle and the start of the follicular phase. During this phase, follicle stimulating hormone (FSH), is released from the brain to stimulate the development of a single dominant follicle which contains one egg. During its maturation, the follicle releases estrogen which stimulates growth and thickening of the uterine lining. The follicular phase concludes at the start of ovulation – the process of releasing a mature egg from the dominant follicle. The length of the follicular phase is variable between individuals, resulting in most variations of total cycle length.

The luteal phase starts after ovulation and continues until the onset of the next menses. During this phase, the ovary releases progesterone which changes the uterine lining and opens the window of implantation – the time during which the embryo can attach to the uterus. If pregnancy does not occur, the progesterone level drops and bleeding occurs. The luteal phase is usually between 12-14 days.

Does the length of a menstrual cycle matter?

The length of a menstrual cycle is determined by the number of days from the first day of bleeding to the start of the next menses. The length of your cycle, while not on any form of birth control, can be a key indicator to hormonal imbalances and whether or not ovulation is occurring in a predictable manner. Hormonal imbalances can affect if and when ovulation occurs during your cycle. Without ovulation, pregnancy cannot occur.

Normal menstrual cycle:

Days: 24 to 35 days

Ovulation Indicator: Regular cycles indicate that ovulation has occurred

What Do Normal Cycles Tell Your Doctor?Cycles of a normal length suggest regular ovulation and that all of the sex hormones are balanced to support natural conception.

Short menstrual cycle:

Days:Less than 24 days

Ovulation Indicator:Ovulation may not have occurred or occurred much earlier than normal

What Do Short Cycles Tell Your Doctor?Shortened cycles can be an indication that the ovaries contain fewer eggs than expected. This is typically a pattern seen in women in the years leading up to perimenopause. Alternatively, a short cycle could indicate that ovulation is not occurring. If blood work confirms this to be the case, natural conception can be more difficult.

What Causes a Shorter Cycle? As a woman grows older, her menstrual cycle shortens. As the number of eggs available in the ovary decrease, their quality also declines. These dysfunctional ovaries lose their ability to effectively communicate with the brain. Additionally, the brain needs to release more follicle stimulating hormone (FSH) to stimulate these abnormal eggs to mature. As a result, the dominant follicle is ready for ovulation very early in the follicular phase and consequently produces a short cycle length. In addition, sometimes bleeding can occur even when ovulation does not occur, and this may appear as shortened and irregular cycles.

Learn about fertility testing.

Long or irregular menstrual cycle:

Days: More than 35 days

Ovulation Indicator: Ovulation is either not occurring or occurring irregularly

What Do Longer Cycles Tell Your Doctor?Longer cycles are an indicator that ovulation is not occurring or at least not in a regular manner which can make conception difficult.

What Causes Long Menstrual Cycles?Longer cycles are caused by a lack of regular ovulation. During a normal cycle, it is the fall of progesterone that brings upon bleeding. If a follicle does not mature and ovulate, progesterone is never released and the lining of the uterus continues to build in response to estrogen. Eventually, the lining gets so thick that it becomes unstable and like a tower of blocks, eventually falls and bleeding occurs. This bleeding can be unpredictable, and oftentimes very heavy and lasting a prolonged period of time.

There are many causes of oligo-ovulation, the medical term used to describe when ovaries do not grow a dominant follicle and release a mature egg on a regular basis.  Polycystic ovarian syndrome (PCOS), the most common cause for oligo-ovulation, is a syndrome resulted from being born with too many eggs. This can result in an imbalance in the sex hormones, and failure to grow a dominant follicle and unpredictable or absent ovulation. In addition, irregularities with the thyroid gland or elevations of the hormone prolactin can disrupt the brain’s ability to communicate with the ovary and result in anovulation.

When menstrual bleeding lasts more than 5-7 days:

Days:More than 7 days

Ovulation Indicator:It is possible that there is a hormonal problem resulting in a delay in follicular growth or a structural problem in the uterus making the lining unstable.

What Do Longer Cycles Tell Your Doctor?Prolonged bleeding tells your doctor that the ovary is not responding to the brain signals to grow a lead follicle. This can be a sign of a delayed or absent ovulation. Alternatively, there may be something disrupting the lining of the uterus.

What Causes Long Periods of Bleeding?There are many causes of prolonged bleeding. From a hormonal perspective, what stops a woman’s period is estrogen from the growing follicle. If follicular growth is not occurring regularly, then prolonged and irregular bleeding can occur. Intermenstrual bleeding or prolonged bleeding may be caused by structural problem like polyps, fibroids, cancer or infection within the uterus or cervix. In these situations, should an embryo enter the uterus, implantation can be compromised resulting in lower pregnancy rates or an increased chance of a miscarriage. Although rare, a problem with blood clotting can also cause prolonged bleeding and this requires evaluation and care by a specialist.

What if I never menstruate? 

Days:Rarely or Never

Ovulation Indicator: Ovulation may not be occurring

What does a Lack of Menstruation tell your Doctor? Either ovulation is not occurring or there is something blocking menstrual blood flow. The patient will have difficultly conceiving naturally without intervention.

What Causes Cycles to Stop Occurring?When a woman does not have a period, this can be caused by a failure to ovulate. Hypothalamic amenorrhea is a potential cause, as well as any of the hormonal imbalances that can cause irregular cycles can also stop the cycles completely.   It is common in women who are considered underweight by the body mass index (BMI) standards to stop having a cycle. The body requires a certain level of body fat for reproduction and menstrual cycles to occur, and many women who are able to gain weight will see the return of their cycle.

Weight is not the only cause to consider. There are several other causes that should be evaluated as well. If a woman has never had menstrual bleeding, there may have been a problem with the normal development of the uterus or the vagina. If a woman had menstrual cycles previously, but then stopped, this could be due to a problem with the uterus itself, like scar tissue inside the cavity, or may be due to premature menopause. If the uterus has not formed or if menopause has occurred, pregnancy is not possible. If the absence of menses is due to scar tissue inside the uterus, then this scar tissue will need to be removed as it can interfere with implantation.

If you do not have a normal monthly menses, no matter the amount of time you have been trying to conceive, you should be evaluated by a specialist. Irregular or absent ovulation makes conception very difficult without intervention. Any woman less than 35 years of age with normal cycles who has not gotten pregnant after a year of trying should see an infertility specialist. If you are 35 or older with a normal menstrual cycle and have been trying for 6 months without success, you should seek care as well. Normal menstruation indicates that you are ovulating; however, there are other reasons why you may not be able to get pregnant, and these should also be evaluated.

Editor’s Note: This post was originally published in October 2014 and has been updated for accuracy and comprehensiveness as of March 2021.

For more information about your menstrual cycle or to schedule an appointment with one of our physicians, please speak with one of our New Patient Liaisons at 877-971-7755 or fill out this brief form.

Basic financial ratios for analyzing the activities of the enterprise

I. Liquidity ratios

1. Absolute liquidity ratio

Shows what proportion of current debt liabilities (accounts payable, short-term bank loans and other liabilities) ) can be repaid immediately out of cash and cash equivalents.

K _AL = (Cash + Short-term financial investments) / Current liabilities

Recommended values: 0.2 – 0.5

The ratio of the most liquid part of current assets (cash , receivables, short-term financial investments) to short-term liabilities.

C _SL = (Cash + Short-term financial investments + Short-term receivables) / Current liabilities

Recommended values: 0.7 – 1

assets

K _TL = Current assets / Current liabilities

Recommended values: 2 – 3

1. 0013

Shows the extent to which current assets are formed at the expense of equity capital.

SOS = Equity – Non-current assets

1. 12 Working capital ratio

K _oss = SOS / Current assets

The minimum recommended value is 0.2.

6. Net working capital

Shows the excess of working capital over current liabilities. Reflects the ability of the enterprise to continue current production activities after repayment of its short-term liabilities.

NFC = Current assets – Current liabilities = Equity + Long-term liabilities – Non-current assets

Recommended values: at least half of the total current assets.

II. Capital structure indicators (financial stability ratios)

.

K _A = Equity / Balance

Minimum recommended value 0.5 – 0.6

8. Funding ratio the amount of borrowed funds per unit of equity capital.

C _F = Debt / Equity

Maximum recommended value 1

9. Current debt ratio characterizes the share of short-term borrowed capital in the total amount of capital.

C _TK = Current liabilities / Balance currency

Recommended value 0.1 – 0.2

90 006 10. Financial stability ratio (long-term financial independence)

shows the extent to which the company’s assets are formed from its own and long-term borrowed funds.

K _FU = Equity capital + Long-term borrowed capital / Balance sheet currency

Recommended value 0.8 – 0.9

III. Profitability ratios

11. Sales profitability ratio, %

Demonstrates the share of net profit in the company’s sales volume. It is calculated for all products in general and for individual assortment types.

ROS = Net profit from sales / Sales proceeds * 100% 2. Return on current assets, %

in relation to the company’s working capital. The higher the value of this ratio, the more efficiently working capital is used.

RCA = Net profit * 100% / Average current assets

012, %

Along with the ROE indicator, it is the main indicator used in market countries economy to characterize the effectiveness of investments in activities of one kind or another.

ROA = Profit * 100% / Average Asset Value

14. Return on equity, %

Allows you to determine the efficiency of using the capital invested by the owners of the enterprise. Usually this indicator is compared with a possible alternative investment in other assets.

ROE = Net income * 100% / Equity 005

15. Return on investment ratio

Shows how many monetary units the company needed to receive one monetary unit of profit. This indicator is one of the most important indicators of competitiveness.

ROI = net profit* 100% / (own capital + long -term obligations)

IV. Turnover ratios (business activity)

K _OS = Sales proceeds / Average cost of fixed assets transformation ratio, resource efficiency)

Characterizes the effectiveness of the company’s use of all available resources, regardless of the sources of their attraction.

K _OA = Sales proceeds / Average asset value

Reflects the rate at which stocks are sold.

K _OC = Cost of goods sold / Average inventory

funds frozen in accounts receivable, the more mobile the current assets of the enterprise.

K _ODZ = Sales proceeds / Average value of accounts receivable0003 T _IDZ \u003d 365 / K _ODZ

K _OKZ = Cost of goods sold / Average accounts payable

V. Market activity ratios

Shows the share of net profit (in monetary units) attributable to one ordinary share.

EPS = (Net income – Preferred dividends) / Number of shares of common stock

22. Dividends per share

Shows the amount of dividends distributed to each ordinary share.

DPS = Dividends paid on ordinary shares) / Number of ordinary shares

23. Share price-to-earnings ratio

This ratio shows how many monetary units shareholders are willing to pay for one monetary unit of the company’s net income. It also shows how quickly an investment in a company’s stock can pay off.

P / E = Share Market Price / EPS

24. Economic growth sustainability ratio

This ratio shows the rate at which equity capital increases through financial and economic activity, and not through attracting additional equity capital.

sgr = (Net profit – Total amount of dividends paid) / Equity

Working capital: what it is and how to calculate it

RBC Investments tells about working capital – what it is, how it is calculated and what it shows0005

Photo: Shutterstock

In the review you will learn:

1. What is
2. How to calculate
3. Components
4. When the capital is very large
5. When capital is negative
6. Coefficients

What is working capital

adv.rbc.ru

Working capital is the company’s own funds, the value of which can be transferred to operating costs during one production or sales cycle.

A more accurate name for the indicator is net working capital, both options are found.

A company’s working capital is an important indicator that characterizes its current (short-term) financial position.

To explain what the essence of working capital is, we must first consider what capital is in general, and how the main financial statement is structured – the statement of financial position or balance sheet.

Under the capital, or equity of the company, understand its own funds. What does it mean?

Every company has its assets and liabilities. Assets are what the company has at its disposal – these are property, money, financial investments, as well as various obligations of counterparties to the company. Liabilities are the sum of what a company owes to others. They include loans and borrowings taken, as well as various obligations that arise in the course of its activities, for example, obligations to pay salaries to employees, deliver goods against a prepayment received, pay for services received by the company, and so on.

The difference between a company’s assets and its liabilities is the company’s equity or capital.

For a better understanding, you can apply this to yourself. Suppose you have an apartment, a car, you are waiting for a salary at the end of the month, you have deposits in the bank and
securities
. These are all your assets. But you have a mortgage debt, and you need to pay for your child’s education in a music school – these are your obligations. And your capital is the difference between all your assets and your liabilities.

The amount of capital is an important indicator of financial condition. If your liabilities exceed all that you have, then your capital will be negative and this is a cause for alarm.

The main form of a company’s financial statements is a statement of financial position, more commonly referred to as a balance sheet. On one side of the balance sheet are assets and on the other side are liabilities. Liabilities are the liabilities and equity of a company combined. The balance is that the sum of assets is always equal to the sum of liabilities.

To understand the essence of working capital, it is important to know that the assets in the balance sheet are arranged in ascending order or, conversely, in descending order of their liquidity. At the same time, liabilities in liabilities are arranged according to the timing of their fulfillment, and the order of their location corresponds to the order in assets. For example, if the balance sheet first indicates low-liquid assets, and the most
liquid
Assets – money are marked at the end of the list, then liabilities will be shown in order from the longest to the shortest.

At the same time, the assets are divided into two sections – non-current and current. Liabilities in the balance sheet are also divided into long-term (duration over a year) and short-term.

Working capital is a special case of capital. It shows the amount of current own funds as the difference between current assets and short-term liabilities.

Thus, if the equity characterizes the financial position of the company as a whole, then the working capital characterizes the financial position in the very near future.

The amount of working capital shows how stable the company is in each production or sales cycle. Working capital helps to understand whether the company is in danger of defaulting on current obligations and how urgently it needs to raise money.

Positive working capital is usually a sign of a company’s short-term financial health. The company has enough liquid assets both to pay off short-term liabilities and to finance the growth of its business on its own.

Negative working capital means, as a rule, that assets are used inefficiently. With negative working capital, the company may face a liquidity crunch, and the company will have to borrow money to cover the so-called “cash gap”, or even increase the amount of borrowing, which may even exacerbate the problem.

How to calculate working capital

Working capital is calculated as the difference between the sum of current assets and the sum of current liabilities.

OK \u003d OA – KO , where

OK – working capital,
ОА — current assets,
TO – short-term liabilities.

The values ​​for the calculation of working capital are reported directly on the company’s balance sheet as “Total Current Assets” and “Total Current Liabilities”.

What is working capital calculated from

Components of working capital

In addition to the size of working capital and its direct components – the volume of short-term liabilities and the size of current assets, for a better understanding of short-term financial stability, it is useful to know a more detailed composition and structure of these assets and liabilities. Such detail will provide an opportunity to more accurately understand the effectiveness of the company.

It is important to highlight such groups of current assets :

• Inventories
• Accounts receivable
• Money and short-term financial investments
• Other current assets

From short-term liabilities it is important to highlight:

• Accounts payable
• Financial debt
• Other current liabilities

Current assets

Current assets include the most liquid assets. But the criterion of turnover is not even liquidity, but how the value of these assets goes into costs. If the equipment transfers its cost to costs in parts, as it wears out, then the cost of consumables falls into costs in its entirety, as materials are used. Therefore, the machine is a non-current asset, and the metal that is processed on this machine is a current asset.

Inventory

Inventory includes raw materials for production, materials already used in the process, and all finished goods not yet sold.

Accounts receivable

Accounts receivable are obligations of partners to the company that arose in the course of cooperation. Accounts receivable are of two types and arise in two ways.

1. Obligations for advances from suppliers and contractors. Such obligations arise when a company has paid contractors and suppliers for raw materials or services and expects partners to fulfill obligations to it.
2. Obligations to pay for products by the consumer on the terms of advance delivery. Such obligations arise when a company has sold its products or services to customers and expects payment for its work.

Money and short-term financial investments

These are the company’s most liquid assets. The company expects the return of short-term financial investments within a year, and the company can use the money for its needs at any time.

Other current assets

Such assets include liquid property or liabilities to the company, which it has in addition to its main activities. For example, such other current assets may include fines and compensations in favor of the company that have not yet been received by court order.

Current liabilities

Current liabilities are all financial or property obligations of a company that it must fulfill within a year.

Accounts payable

Accounts payable is a receivable in reverse. These are the obligations of the company to its partners arising in the course of the main activity. Like accounts receivable, accounts payable are of two types and can, accordingly, arise in two ways.

1. Obligations to pay for products or services of suppliers and contractors. Such obligations arise when the company has received materials from suppliers and contractors or used their services, and must pay the invoices issued.
2. Obligations for advances from buyers and customers. Such obligations arise when a company has received an advance from buyers and customers and must deliver goods or provide paid services.

Financial debt

This includes liabilities on received loans and borrowings, as well as on issued bonds.

Other current liabilities

These include both liabilities related to the company’s core business and various non-production or non-trading liabilities. For example this:

• Wage or social security obligations;
• Liabilities to pay dividends;
• Tax liabilities;
• Imposed fines, etc.

Various comparisons and comparisons of working capital components both with each other and with other indicators provide more detailed information about the current financial position of the company.

Is it always good when the working capital is large?

A significant amount of capital is a margin of safety and financial stability. Large working capital is a safety margin for short-term or seasonal surges.

However, a significant amount of working capital may indicate that the company has excessive inventories, which improves reliability, or that it does not invest excess cash in development.

For example, the working capital of Surgutneftegaz is about ₽1.4 trillion. Only the cash reserve on the company’s accounts makes it possible to cover all current liabilities, but at the same time, the company constantly keeps more than ₽1 trillion on bank deposits.

Large working capital on the example of PJSC “Surgutneftegas”

Is it always bad when the working capital is negative?

Working capital adequacy can vary greatly depending on the business model or sector of the company. In some cases, negative working capital is quite normal. If a company has a short production or sales cycle, or, in other words, a high turnover, then negative working capital is no longer so important. Examples are grocery stores with high daily cash flow and significant daily shelf turnover. If we look, for example, at the balance sheet of Magnit, we will see that the company’s short-term liabilities are consistently higher than current assets. However, this does not interfere with the activities of the trading network.

Negative net working capital on the example of PJSC “Magnit”

On the contrary, for companies producing piece, expensive and capital-intensive products, such as aircraft manufacturers, working capital should be sufficient, and negative working capital can become a significant problem.

Fine-tuning

Working capital is an important indicator, but it only gives a general picture of the company’s current financial situation. Moreover, working only with the indicator of working capital, you can not notice the important processes taking place in the company. Suppose the company’s current assets consisted almost entirely of money in the accounts – and a year later the size of short-term liabilities and current assets remained the same, but instead of money in the accounts, the company now has overdue receivables. The amount of working capital remained the same, but the company’s ability to meet its obligations has changed fundamentally.

Therefore, for a more detailed and in-depth study of the financial condition of the company, financial analysts use different indicators built with the participation of working capital components.

An example of such a finer adjustment is the key figure of operating working capital .

OOK \u003d (OA – KFV) – (KO – KZS) , where

OOK – operating working capital;
ОА — current assets;
KFV – short-term financial investments;
KO – short-term liabilities;
KLC – short-term borrowed funds.

That is, when calculating the operating working capital, assets and liabilities of a financial nature will not be taken into account. In the Surgutneftegaz example, the values ​​of working capital and operating working capital will differ greatly.

Current liquidity ratio can be obtained by dividing the size of current assets by the size of short-term liabilities (KTL = OA / KO). This ratio shows the level of solvency in the short term.

In addition to operating working capital and the current liquidity ratio, the following coefficients based on working capital components are widely used in financial analysis:

• Working capital mobility coefficient

How it is calculated: The amount of cash and financial investments is divided by the amount of current assets.
What shows: The level of liquidity of current assets.

• Property mobility coefficient

How it is calculated: The amount of current assets is divided by the amount of all assets.
What it shows: The degree of liquidity of assets.

• Working capital ratio

How it is calculated: Own capital minus the amount of non-current assets is divided by the amount of current assets.
What shows: The degree of financial stability.

• Inventory turnover ratio

Calculation: Revenue divided by the average annual inventory.
What shows: Inventory management efficiency.

• Accounts receivable turnover ratio

How it is calculated: The amount of revenue is divided by the average annual amount of accounts receivable.
What it shows: Efficiency of receivables management.

• Current assets turnover ratio

How it is calculated: The amount of proceeds is divided by the average annual amount of current assets.