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(a) Excess of payment of fixed assets over permanent working capital. (b) Excess of Fixed assets over fixed liabilities. (c) Excess of cash inflows over cash outflows. (d)Excess of inflows of fund over outflow of funds.
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(a) Excess of payment of fixed assets over permanent working capital.
Because Sometime, it may possible that we have to pay fixed liabilities, at that time we need working capital which is more than permanent working capital, then this excess amount will be temporary working capital. In normal working of business, we don’t need such capital.
A firm is required to maintain an additional current asset temporarily over and above the permanent working capital to satisfy cyclical demands. 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.
Therefore the answer is (a) Excess of payment of fixed assets over permanent working capital.
Temporary working capital is the excess of working capital over the permanent working capital.
Temporary working capital is also called variable, fluctuating, or cyclical working capital. Temporary working capital can be further dived into the following categories:
Seasonal working capital: temporary working capital required to meet seasonal demands
Special working capital: temporary working capital required to meet special demands
Temporary working capital differs from permanent working capital because of its cyclicality. As the result, temporary working capital usually requires a different source of financing than permanent working capital. While permanent working capital is usually financed through a long-term financing source such as equity capital and debt, temporary working capital is often financed by short-term funds.
(d)Excess of inflows of fund over outflow of funds.
