Question

Why is working capital called as circulating capital?

Answer 1

Working Capital is required to run the business on daily basis.It is required to pay day-to-day expenses.It is generally employed in current assets such as B/R,Debtors etc..It remains constantly circulating in business,therefore it is called the life-blood of the business

Answer 2

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Working Capital is the funds which are used in the day to day business operations of a company or to manage their daily running cost.

Working Capital = Current Assets - Current Liabilities

• Current Assets → Inventory, cash, and account receivables
• Current Liabilities → Account Payables And Short Term Loans