Differentiate between temporary working capital and permanent working capital.

The major differences between temporary working capital and permanent working capital are as follows −

Temporary working capital

• It’s the additional working capital to permanent working capital.
• Variable working capital.
• Dependent on variable factors.
• Sometimes increase/decreases (fluctuates from time to time) in nature.
• Financed through short term funds.
• Categorised into seasonal working capital and special working capital.

Permanent working capital

• It’s the minimum capital to maintain in order to meet operational levels.
• Fixed working capital.
• Independent of variable factors.
• Stable in nature.
• Financed through long term funds.
• Categorised into Regular working capital and reserve working capital.