Sources of working capital, Managerial Accounting

Sources of Working Capital Finance

Working capital finance may be classified in the subsequent:

  • Spontaneous Source of Finance

Finance that naturally arises in the course of business is termed as spontaneous financing. Trade creditors, credit from suppliers of services, credit from workers etc. are the illustrations of spontaneous financing.

  • Negotiated Financing

Financing that has to be negotiated along with lenders, that are commercial banks, general public, financial institutions is termed as negotiated financing. This type of financing may either be short or may be long-term in nature.

Before negotiated and spontaneous sources of finance, the latter is more costly and inconvenient to rise. Spontaneous source of finance decreases the amount of negotiated financing. Working capital can be categorizes in long- and short- term sources, that can be analyzed as demonstrated in figure 4.


Figure: Financing Mix of Working Capital

Posted Date: 4/9/2013 3:03:16 AM | Location : United States

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