# 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