Cash Working Capital vs Balance Sheet Working Capital-An Analysis Based on Four Cases

Working Capital An Analysis Based on Four Cases S K Chakraborty Working Capital in Common Parlance THE conventional definition of working capital in terms of offsetting the current claims against the firm against the current claims of the firm seems somewhat confusing. The surplus left after such offsetting is in fact equivalent to a portion of the long-term claims against the firm. One has only to visualise the Balance Sheet layout to appreciate this point. Working Capital so defined is thus really a part of long- term finance used to support current activities. This is the working capital margin money which is treated as fixed investment for project appraisals. The following simple illustration will make the point clear: