Working Capital

Definition

Working capital is an amount up to a maximum of 60 days of expenditures the recharge center can retain to fund operations during fluctuations of revenue and expenditures. This is the maximum balance the recharge can retain in its operating budget at any given time.

Acquiring working capital

Recharge centers can acquire working capital by using an existing surplus, adding surcharges to external users, or transferring funds from non-federal sources.

Recharge centers cannot acquire working capital by increasing rates to internal users.

The center calculates and MAAi approves the amount of working capital retained by recharge centers. Cost center working capital is approved by the appropriate Dean's/VP's office.

Calculating working capital

To calculate the maximum working capital the recharge center is allowed to retain, take an average of two months of operating expenditures over one or more years.

Example: The financial report shows cumulative expenditures for the fiscal year to be $150,000. The maximum balance a recharge center can retain in its operating budget is:

$150,000 / 12 months * 2 months equals $25,000.

Note: Working capital desired cannot exceed 60 days of operating expenditures.

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