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Sources of working capital

An efficient finance manager is always interested in maintaining the correct amount of working capital at the right time, at a reasonable cost and at the best possible favourable terms. The following are the important sources of working capital.


To obtain the working capital in the following two major divisions.

(A) Long term sources

(B) Short term sources


(A) Long-term Sources


(i) Share capital

(ii) Sale of debentures

(iii) Ploughing back of profits

(iv) Sale of fixed assets

(v) Term loans.


(B) Short-term Sources


I. Internal Sources :

(i) Depreciation Funds

(ii) Provision for Taxation

(iii) Accrued Expenses.


II. External Sources :

(i) Trade credit

(ii) Bank credit

(iii) Credit papers

(iv) Public deposits

(v) Government’s assistance

(vi) Loans from directors etc.

(vii) Factoring.