Gross Working Capital = Total Current Assets

NET WORKING CAPITAL: is the difference between the current assets and current liabilities.

Therefore it is called net working capital. When current assets exceed current liabilities,then the

working capital is positive otherwise negative. Current liabilities include-

_ Bill Payable

_ Sundry creditors

Gross Working Capital = Total Current Assets

_ Outstanding expenses

_ Short term loans

_ Bank overdraft

COMPANY’S NET WORKING CAPITAL

On the BASIS OF TIME, working capital is classified as PERMANENT OR FIXED

WORKING CAPITAL and TEMPORARY OR VERIABLE WORKING CAPITAL:

PERMANENT OR FIXED WORKING CAPITAL: Permanent working capital is the

minimum amount which is required to ensure effective utilization of fixed facilities and or

maintaining the circulation of current assets. There is always a minimum level of current assets

which is continuously required by the enterprise to carry out its normal business operations. For

example, work-in-progress, finished goods and cash balance.

This minimum level of current assets is called permanent working capital as this part of the

capital is permanently blocked in current assets. As the business grows, the requirements of

permanent working capital also increase due to the increase in current assets.

TEMPORARY OR VARIABLE WORKING CAPIAL: Temporary working capital is the

amount of working capital which is required to meet the seasonal demands and some special
exigencies. Variable working capital can be further classified as seasonal working capital and
special working capital. Most of the enterprises have to provide additional working capital to
meet the seasonal and social needs. The capital required to meet the seasonal needs of the