ABSTRACT
The term working capital has several meanings in business and economic development finance. From a financing perspective, working capital refers to the firm's investment in two types of assets. In one instance, working capital means a business investment in short-term assets needed to operate over a normal business cycle. A second broader meaning of working capital is the company's overall non-fixed asset investments. Operating cycle is the number of days taken by a company to realize its inventories in cash. The length of the operating cycle determines the amount of investment required in working capital of an organization. Negative working capital occurs when current liabilities exceed current assets, which can lead to bankruptcy. As the operating cycle is a continuous process, the need for working capital also arises continuously. However, there is always a minimum level of current assets. This level is known as permanent or fixed working capital. Production policy also determines the working capital level of a firm.
