The funds required for meeting the day-to-day expenses is known as working capital. There are types of working capital according to assets and liabilities of an organisation.
  • Gross working capital is calculated as total amount of current assets of a company.
  • Net working capital is achieved by subtracting current liabilities from current assets.
Based on the timeline, there are two more kinds of working capital - temporary and permanent working capital.

Temporary working capital is necessary for meeting specific demands that arise during particular time frames. Seasonal working capital is one such type that caters to seasonal expenses. Another type is special working capital, for expenses like advertising and promotion, product launch, etc.
Permanent working capital is the minimum funds required for all regular expenses. It can be either regular working capital, necessary to convert current assets into cash. Or, it can be the reserve working capital, funds kept as a contingency in case of emergencies like inflation, strikes, etc.
If you are starting your own small startup company then you should know how to avail finance for small business in India so that you can start most profitable manufacturing business in India.
Businesses need to follow some ways to increase all of the above. For example, they can start with better working capital management. They should also define reorder levels now and then to restock inventory in as per ever-changing requirements.
Controlling expenses, clearing debts, and collecting debts within due date are some other ways to improve working capital. Businesses also need to refrain from using the same for funding fixed assets. They can instead take a short-term loan.
In case of shortages, companies can take a business loan, inventory financing, or accounts receivable financing. However, comparing the rate of interest before doing so is essential to avoid crunches in working capital.