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 Definition
Corporate Finance & Accounting Financial Statements
Working Capital Management
By
Alicia Tuovila
Reviewed by
Full Bio
Amy Drury is an investment banking instructor, financial writer, and a teacher of professional qualifications. Article Reviewed on June 30, 2020
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Amy Drury
Updated Mar 1, 2021
What Is Working Capital Management? Working capital management is a business strategy designed to ensure that a company operates efficiently by monitoring and using its current assets and liabilities to the best effect. Key Takeaways
Working capital management requires monitoring a company's assets and liabilities to maintain sufficient cash flow to meet its short-term operating costs and short-term debt obligations. Working capital management involves tracking three ratios namely the working capital ratio, the collection ratio, and the inventory ratio. Working capital management can improve a company's earnings and profitability through efficient use of its resources. 1:58
Working Capital
Understanding Working Capital Management
The primary purpose of working capital management is to enable the company to maintain sufficient cash flow to meet its short-term operating costs and short-term debt obligations. A company's working capital is made up of its current assets minus its current liabilities. Current assets include anything that can be easily converted into cash within 12 months. These are the company's highly liquid assets.