One of the questions in my interview by an audit firm is...What are the types of Working Capital? But when i referred my C.A Final books there is nothing like types in working capital.......
CA CS CIMA Prakash Somani
(Landmark Group)
(23502 Points)
Replied 04 March 2009
Good job Prabeer, I make your reply simplified
Permanent working capital
= minimum amount of investment in all current assets which is required at all times to carry out minimum level of business activities.
Permanent working capital = core current assets
Main features:
1. Amount of permanent working capital remains in the business in one form or other.
2. There is a positive correlation between the amount of permanent working capital and the size of the business.
3. Permanent working capital is permanently needed therefore it should be financed through long-term funds.
Temporary working capital:
The amount of temporary working capital fluctuates depending upon the changes in the production and sales.
Temporary working capital = fluctuating working capital = variable working capital
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