Working capital refers to the capital required for short-term assets used in a business's day-to-day operations. There are two types of working capital: gross working capital, which is the total value of all current assets like cash, inventory, and receivables; and net working capital, which is the current assets minus current liabilities. Maintaining sufficient working capital is important for business solvency, reputation, obtaining loans, taking discounts, and meeting regular supply, payment, and return on investment obligations. The level of working capital needed depends on factors like the nature of the business, its size, production and cash cycles, seasonality, economic conditions, credit terms, and inflation.

1. WORKING CAPITAL
Working capital is that portion of
capital required for investing in short
term or current assets.

2. Concept of Working Capital
• Gross Working Capital
• Net Working Capital

3. Gross Working Capital
Working capital is referred to
as the total value of current assets. It is the
total investment in all current assets like cash,
inventories, receivables, prepaid expenses.

4. Net Working Capital
Working capital is defined as
the excess of current assets over current
liabilities like sundry creditors, bills payable,
short term loans, bank overdraft.

5. Operating Cycle of Working
Capital
Cash
Accounts
Receivables
Finished
Goods
Raw
Materials
Work-in
-progress

6. Importance of Working Capital
• Solvency
• Reputation
• Easy loans
• Cash discounts
• Regular supply
• Regular payments
• Regular ROI
• Favorable market conditions

7. Factors Influencing Working
Capital requirements
• Nature of business
• Size of Business
• Working Capital cycle
• Length of production cycle
• Seasonal operations
• Business cycle
• Credit policy
• Price level changes