Permanent working capital is the minimum investment in the form of inventory of raw materials, work-in-progress, finished goods, stores and book debs to facilitate uninterrupted operation in a firm. 2. Permanent working capital, or PWC, is the permanent layer of working capital that, month after month, year after year, never goes away. i) “Fixed” or “Permanent” Working Capital ii) “Variable” or “Temporary” Working Capital (4 marks) Q6. It continues to exist. The temporary or varying working capital changes with the volume of operations. The difference between variable working capital and permanent working capital is as follows: 1) Permanent working capital is referred to finance to stock of finished goods, debtors balances etc. The size of permanent working capital grows with the growth of the business. Temporary working Capital: Otherwise known as variable working capital, it is that portion of capital which is needed by the firm along with the permanent working capital, to fulfil short-term working capital needs that emerge out of fluctuation in the sales volume. This part of the working capital being a permanent investment needs to be financed via long-term funds. This is in contrast to temporary working capital, which is revenue coming from sources that may or may not continue. It keeps on changing its form from one current asset to another. They are: Temporary WC. The operating cycle, thus, creates the need for current assets (working capital). Westeros Auto Co is considering evaluating a new project for manufacturing high-end automobile components for exports. Temporary Working capital. Many times, companies face a sudden surge in demand, which may be for a short period. Thus, permanent working capital is perennially needed one though not fixed in volume. In Other workds, an amount over and above the permanent level of working capital is temporary, fluctuating or variable working capital. However there are kinds of working capital available including gross or net, temporary, permanent, negative, reserve, regular and many more. However, they does not come to an end after the cycle is completed. Managing it efficiently not only ensures that short-term requirements are met adequately but also sets … As long as the firm is a going concern, working capital cannot be substantially reduced. To explain this computing need of current assets, a distinction should be drawn between permanent and the working capital. It fluctuates along with the scale of operations. It should be regarded as part of the long-term capital structure of the company. Permanent working capital loans are needed when the working capital cycle is continuous for a company Any additional working capital apart from permanent working capital required to support the changing production and sales activities is referred to as temporary or variable working capital. (2) Temporary or Variable Working Capital. Permanent And Temporary Working Capital: Working capital is the primary component when it comes to a business’s operational competency and growth potential. Variable working capital is used to carry out day to day operations. Permanent working capital is that portion of working capital that is expected to generate on a consistent and uninterrupted. Project Cost of Setting up the factory is estimated at Rs 20 cr. working capital. Permanent and Temporary Working Capital. 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