Working capital management refers to the decisions and managing the working capital (cash or cash equivalents, inventory, finished goods) efficiently during the normal course of business operation. This involves proper management of company’s total current assets and current liabilities.
The main aim of Working capital management is to ensure that the company utilizes the working capital properly and generates sufficient cash from the business to satisfy all the short term liabilities. The ultimate goal is to generate profits and increase the value of the company.
Management of working capital
There are some important process through which working capital can be managed. The processes are
Working capital is required to achieve the normal business process and it completely depends on the management’s efficiency to have a proper working capital management process.
The term Net working capital (NWC) can be defined as the difference between current assets and current liabilities. NWC is that portion of current assets which is financed with long-term funds. It is negative when current Liabilities exceeds current Assets
Check the Main Factors for Working Capital Management for more information.