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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.
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