FIXED OR PERMANENT WORKING CAPITAL
Adequate level of working capital is very important to run a business for long term. Without adequate working capital, it is impossible to meet the entire requirement for smooth operations of the firms. The part of working capital that is utilized for the continuous production is known as Permanent Working Capital. On the other hand, we can say that the minimum investment a firm can must kept itself in the form of raw materials, finished products, stores & spares, receivables, cash etc to facilitate continuous and uninterrupted functions of the firm.
There are two types Permanent working capital which are as follows: -
1. Regular working capital: - It is a part of fixed working capital which is used in the conversion of cash into raw materials, finished products, debtors and finally debtors into cash.
2. Reserve working capital: - It is a part of fixed working capital which is kept preserved to meet the uncertain needs such as price hike, scarcity, natural calamity etc.
VARIABLE OR TEMPORARY WORKING CAPITAL
Besides fixed working capital, an additional working capital is required to meet the demands in the pick hour. This additional working capital is known as Variable or Temporary working Capital. Sometimes the demand of a specific product goes very high in the market. At that time the temporary working capital played a very critical role to increase the production of that product to fulfill the demand. This is very useful for those products which demand is increase in some season.