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Working capital in general-
Whenever a company talks about its working capital, it is clear that he is talking about the excess of current assets over its liabilities. It processes the liquidity funds that are needed to raise a business or to even run a business precisely. It is calculated by subtracting currents assets from its current liabilities, but if it goes the other way if the said thins sit exactly opposite round that, then it is a very complicated subject of its own as company will in this situation goes bankrupt.
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On basis of time there are two kinds of working capital which is classified below with their differences for you to understand better:
Distinction of permanent and temporary working capital-
| Permanent Working Capital | Temporary Working Capital |
|---|---|
| Fixed working capital | Flexible working capital |
| Longer term period | Shorter term period |
| Used for fixed assets | Used for temporary or seasonal needs. |
| Will always be stable | Will always fluctuate |
| Have regular funds for everyday work | Temporary funds for seasonal works |
| Will always have reserve capital for uncertain circumstances like lock out, strike or depressions. | Will be there only for special needs like advertisements of any products, etc. |
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