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Working Capital

Capital required for a business can be classified under two categories: fixed capital and working capital. Long-term funds are required to create production facilities through purchase of fixed assets such as plant, machinery, land, building, furniture, etc. The capital which is used in this regard is fixed capital. Funds are also needed for short term purpose for the purchase of raw materials, payments to wages and other day to day expenses, etc. These funds are known as working capital. So this fund is used on current assets such are being constantly converted into cash. So it is also known as revolving or circulating capital.Tere are two conclusion of working capital
Gross concept : In the broad sense, the term 'working capital' refers to the gross working capital and represents the amount of funds invested in current assets. Thus, the gross working capital is the capital invested in total current assets of the enterprise.
Net working capital concept : In a narrow sense, the term 'working capital' refers to the net working capital in the excess of current assets over current liabilities.

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  1. David RaffertyFebruary 16, 2017 at 5:56 AM

    Outsourcing your accounting needs saves your business money, money that you can invest in other things that are more important like marketing or franchising.
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    ReplyDelete

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