22-05-2017, 09:50 AM
The management of working capital refers to the company's management accounting strategy designed to monitor and use the two components of working capital, current assets and current liabilities, to ensure the most efficient financial operation of the company. The primary purpose of working capital management is to ensure that the company always maintains sufficient cash flow to cover its short-term operating costs and short-term debt obligations.
The management of working capital implies the relationship between the short-term assets of a company and its short-term liabilities. The objective of working capital management is to ensure that a company can continue its operations and that it has sufficient capacity to satisfy both the short-term debt that matures and the upcoming operational expenses. The management of working capital consists of the administration of inventories, accounts receivable and payable, and cash.
Decisions related to working capital and short-term financing are called working capital management. This involves managing the relationship between a company's short-term assets and its short-term liabilities. The purpose of working capital management is to ensure that the company is able to continue its operations and has sufficient cash flow to satisfy both mature short-term debt and upcoming operating expenses.
A management accounting strategy focused on maintaining efficient levels of both working capital components, current assets and current liabilities, among themselves. The working capital management ensures that the company has sufficient cash flow to meet its short-term debt obligations and its operating expenses.
