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Working Capital Calculation

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WORKING CAPITAL Submitted by:Spenziks   Funds required for short term purposes or day to day expenses are working capital. WC refers to part of firm’s capital reqd. for financing short term or current assets also known as revolving or short term capital or circulating capital Working Capital may be classified in two ways: On the basis of concept - gross working capital - net working capital  On the basis of time - permanent or fixed WC a) regular WC b) reserve WC - temporary or variable WC a) seasonal WC b) special WC  It refers to the firm’s investment in current assets. Current assets are the assets, which can be converted into cash within an accounting year or within an operating cycle. You can include here cash, short-term securities, debtors (accounts receivable & book debts), bills receivable and stock.  enables enterprise to provide correct amount of WC at the right time.  every management is interested in total current assets with which it has to operate than the sources.  gross concepts takes into considerations that every increase in the funds would increase the working capital.  gross concepts of WC is more useful in determining rate of return on investments in WC.      The net working capital refers to the difference between current assets and current liabilities. Current liabilities are those claims of outsider, which are expected to mature for payment within an accounting year & include creditors, bills ...
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