Question

Write short notes on Types of working Capital and Sources of Working Capital.

Answer 1

1. Positive Working Capital.
2. Negative Working Capital.

  3.  Zero Working Capital.

Sources of Working Capital:

Sources of working capital can be spontaneous, short term and long term. Spontaneous working capital includes mainly trade credit such as the sundry creditor, bills payable, and notes payable. Short term sources are tax provisions, dividend provisions, bank overdraft, cash credit, trade deposits, public deposits, bills discounting, short-term loans, inter-corporate loans, and commercial paper. Long-term sources are retained profits, provision for depreciation, share capital, long-term loans, and debentures.

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