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Monday, 14 March 2011

Source and concepts of Working capital

There are two following concepts of working capital:-

( a ) In case of newly Started business:-
"The amount that remain in the hands for the working of the business after the necessary fixed assets have been purchased is called working capital for the for the newly started business".

( b ) In case of Established business:-
Working Capital is defined for an already established business. :The excess of current assets over current liabilities."
It may be stated in the equation:-
Current assets - Current liabilities = Working Capital

The amount of working capital is invested in current assets like stock of raw material, finished and semi-finished products, bills receivables, debtors and seal able securities etc.

Sources of Working Capital

The following are the main sources of the working capital:

( a ) Issue of share of debentures.
( b ) Managing Agents.
( c ) Reduction of losses, expenditure and wasting.
( d ) Loans from internal and external sources.
( e ) Incorporate Saving.
( f ) Public Deposit.
( g ) Disposed of fixed assets.

1 comments:

oswaldo thomas 29 March 2016 at 08:07  

Be sure that you have sufficient working capital to start the operation of your business.

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