Working Capital: Definition, Concept, Types, Benefits, Uses, Management, and Turnover.

There are two main concepts in working capital – net working capital and gross working capital. When an accountant uses the term working capital, it usually refers to net working capital, which is the dollar difference between current assets and current liabilities. This is one measure of the extent to which a company is protected from liquidity issues. Judging from a management point of view, it makes little sense to talk about trying to actively manage the net difference between current assets and current liabilities, especially when that difference is constantly changing. Financial analysts, on the other hand, actually always talk about current assets when they talk about working capital. Therefore, their focus is on gross working capital.

Dadang Prasetyo Jatmiko, SE, M.Comm, PhD
Civil Servant at The National Standardization Agency of Indonesia
President Commissioner at PT. Raga Gunung Gede
President Director at PT. Jatmiko International Group
Lecturer at Universitas Mercubuana, Menteng