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

 

 

Variable Cost Per Unit

 

Leave a Reply

Your email address will not be published.