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Concept Of Working Capital


Working capital can be classified or understood with the help of the following two important concepts.

(1). Gross Working Capital

(2). Net Working Capital

[Post Image Courtesy of Zole4 at FreeDigitalPhotos.net]

Gross Working Capital

Gross Working Capital is the general concept which determines the working capital concept. Thus, the gross working capital is the capital invested in total current assets of the business concern.

Gross Working Capital is simply called as the total current assets of the concern.


Net Working Capital

Net Working Capital is the specific concept, which, considers both current assets and current liability of the concern.

Net Working Capital is the excess of current assets over the current liability of the concern during a particular period.

If the current assets exceed the current liabilities it is said to be positive working capital; it is reverse, it is said to be Negative working capital.

NWC = C A – CL

About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

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