Characteristics of working capital:

1. Short term capital: Working capital is a short term capital.
2. Investment in current assets: Working capital (Gross) is used in current assets such as bill receivables, debtors, short term marketable securities, bank balance, cash, etc.
3. Liquidity: Liquidity is the basic feature of working capital. All the current assets in which working capital is employed are converted into cash easily.
4. Less risk: Working capital gets circulated for short term and it is easily convertible cash (i.e. it has high liquidity). Hence, there is less risk in working capital.
5. Changing form: The form of working capital keeps on changing constantly. For example, raw material is converted into semi-finished goods and finally into finished goods. Finished goods are converted into debtors if they get sold on credit, and into cash, if sold on cash.
6. To pay day-to-day expenses: Working capital is needed constantly to pay day-to-day expenses.
7. No depreciation: Since the form of working capital keeps on changing, its depreciation is not calculated.
8. Requirement according to type and form of business: Need of working capital depends upon the form and type of business. Thus its ratio is different in each business.