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Content: For example, an increase in working capital can be explained by sales increase, but can also be explained by slow collection or inadequate increase in inventory. Working Capital management
Working capital managementrefers to the decisions relating to working capital and short-term financing. The goal of working capital management is to ensure that the company is able to continue its operations and that it has sufficient cash flow to satisfy the short-term debt and operating expenses. These involve managing the current assets and the current liabilities of the company. Most common policies and techniques for the management of working capital are: Cash management: identify the optimal balance. This allows a business to meet day to day expenses and payments, but reduces cash holding cost; Inventory management: identify the optimal level of inventory.