8.1 CONCEPT OF WORKING CAPITAL
8.1.1 Gross and Net Working Capital
A firm’s balance sheet shows both liabilities and assets. The liabilities are either current liabilities or long-term liabilities. Similarly, the assets are either fixed assets like plant and machinery, land and building, etc., or the current assets. The current assets are represented by:
- Cash in hand and at bank;
- Near-cash assets or short-term marketable securities in which the surplus cash is invested;
- Accounts receivable which include sundry debtors or credit sales and the amount the firm has paid in advance to the supplier of the inputs;
- Inventory including raw material, semi-finished goods and finished goods.
The current assets are also known as the circulating assets because ...
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