Working Capital Calculation

May 19th, 2015
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Aberystwyth University
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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.

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WORKING CAPITALSubmitted by:SpenziksFunds required for short term purposes or day to day expensesare working capital.WC refers to part of firms capital reqd. for financing short termor current assets also known as revolving or short term capitalor circulating capitalWorking 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 WCa) regular WCb) reserve WC- temporary or variable WCa) seasonal WCb) special WCIt refers to the firms investment in current assets. Currentassets are the assets, which can be converted into cash withinan accounting year or within an operating cycle. You caninclude here cash, short-term securities, debtors (accountsreceivable & book debts), bills receivable and stock. enables enterprise to provide correct amount of WC at theright time. every management is interested in total current assets withwhich it has to operate than the sources. gross concepts takes into considerations that everyincrease in the funds would increase the working capital. gross concepts of WC is more useful in determining rate ofreturn on investments in WC.The net working capital refers to the difference betweencurrent assets and current liabilities. Current liabilities arethose claims of outsider, which are expected to mature forpayment within an accounting year & include creditors, bills

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