Working Capital Formula
Working Capital Formula
Working capital is the capital of a business which is used in day today of business activity.
Example
Purchase raw material
Salary payment
Factory Rent paid
What is Working Capital ?
Working capital is the difference between current assets such as bank, cash, debtor, inventories, bills receivable. less current liabilities such as creditor, expenditure payable.
What is the Working capital Formula
The working capital formula is :
Working capital = Current Assets- Current Liabilities
The working capital mean a short term liquid assets after deduction of current liabilities
Example of calculation of working capital
Sankhla Limited balance sheet as at 31-3-2022 is as follow
Current asset
Cash Rs or $1,00,000
Bank Rs. or $ 2,00,000
Inventories Rs. or $ 3,00,000
Bill receivable Rs. or $ 50,000
Sundry Debtors Rs or $ 80,000
Current Liabilities
Creditors Rs. or $ 60,000
Bill Payable Rs. or $ 45,000
Electricity bill Rs Rs or$ 5000
First we calculate total of current assets and current liabilities
so current asset total: 100000+200000+300000+50000+80000= Rs or $ 7,30,000
Total of Current liabilities:60,000+45,000+5,000 = Rs. or $ 110000
So working capital= Total of current assets- total of current liabilities
7,30,000-1,10,000
= Rs. or & 6,20,000
So Sankhla ltd working capital as at 31-3-2022 is