What is working capital
The Working capital Also called current assets, designates all assets of a company that are to be converted, i.e. the inventory of which changes frequently due to additions and disposals. The Working capital is often financed with short-term outside capital and supplier credits and therefore does not have to be fully covered by long-term credits. Nevertheless, when applying for outside capital, the Working capital be explained in the financial section of the business plan.
The assets that make up the Working capital recorded, are only in the company for a short time, but serve not only the fixed assets but also the business operations. It is therefore necessary to determine how much when starting a business Working capital must be spent and what type of financing for the Working capital should be used. Objects that are intended for the operational processes of production and sales are mostly used for Working capital counted.
The Commercial Code prescribes that the Working capital must be shown in the balance sheet on the assets side. The Working capital consists of the inventory assets, such as raw and operating materials, finished products and goods; from accounts receivable such as accounts receivable from deliveries and services and from liquid funds such as checks, cash in hand and credit balances with banks
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