Title: Working Capital Management Definition
Headings: Working Capital Management
Working Capital Management
What Is Working Capital Management?
Key Takeaways
Working Capital
Understanding Working Capital Management
Working Capital Management Ratios
Current Ratio (Working Capital Ratio)
Collection Ratio
Inventory Turnover Ratio
Frequently Asked Questions
What Is Working Capital Management?
Why Is the Current Ratio Important?
Why Is the Collection Ratio Important?
Why Is the Inventory Ratio Important?

Content: Working capital management can improve a company's earnings and profitability through efficient use of its resources. Management of working capital includes inventory management as well as management of accounts receivables and accounts payables . The objectives of working capital management, in addition to ensuring that the company has enough cash to cover its expenses and debt, are minimizing the cost of money spent on working capital, and maximizing the return on asset investments. Working Capital Management Ratios
There are three ratios that are important in working capital management: The working capital ratio or current ratio; the collection ratio, and the inventory turnover ratio. Working capital management aims at more efficient use of a company's resources. Current Ratio (Working Capital Ratio)
The working capital ratio or current ratio is calculated as current assets divided by current liabilities. It is a key indicator of a company's financial health as it demonstrates its ability to meet its short-term financial obligations. Although numbers vary by industry, a working capital ratio below 1.0 generally indicates that a company is having trouble meeting its short-term obligations.