Title: The Importance of Working Capital Management
Headings: The Importance of Working Capital Management
The Importance of Working Capital Management
Key Takeaways
The Importance of Working Capital Management

Content: The Importance of Working Capital Management
Corporate Finance & Accounting Financial Analysis
The Importance of Working Capital Management
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Julia Hawley is a full-time writer focusing on investing. She combines her writing skills with her experience in personal wealth management. Learn about our editorial policies
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Peggy James is a CPA with 8 years of experience in corporate accounting and finance who currently works at a private university. Article Reviewed on April 17, 2021
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Margaret James
Updated Apr 17, 2021
Proper management of working capital is essential to a company’s fundamental financial health and operational success as a business. A hallmark of good business management is the ability to utilize working capital management to maintain a solid balance between growth, profitability and liquidity. A business uses working capital in its daily operations; working capital is the difference between a business's current assets and current liabilities or debts. Working capital serves as a metric for how efficiently a company is operating and how financially stable it is in the short-term. The working capital ratio, which divides current assets by current liabilities, indicates whether a company has adequate cash flow to cover short-term debts and expenses. Key Takeaways
The goal of working capital management is to maximize operational efficiency.