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.

Updated on: 25-Sep-2020

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