Working capital management

According to Weston and Brigham working capital refers to the firm’s investment, its shorter current assets and short term securities accounting receivables and inventory. According to the Guttmann and Doug all working capital is excess of current assets over liabilities. According to the Shubin working capital is an amount of funds necessary to cover the cost of operating the enterprise. Working capital management is concerned with the problems that arise in attempting to manage the current assets, and the current liabilities, and their relationships their arise between them. The current assets refers to those assets, which to the ordinary course of business can be, or will be turned into cash within one year without undergoing a diminution in value and with out disrupting the operations of the firm. The major current assets are cash, marketable securities, accounts receivables, and their inception to be paid in the ordinary course of business within a year, out of current assets earnings of the concern. The basis current liabilities are Bills payable, Bank Overdrafts and Outstanding expenses. The goal of working capital management is to manage the firm current assets, and current liabilities in such way that a satisfactory level of working capital is maintained. Working capital management is concerned with the problems that arise in attempting to manage the current assets, and the current liabilities, and their relationships their arise between them.The current assets refers to those assets, which to the ordinary course of business can be, or will be turned into cash within one year without undergoing a diminution in value and with out disrupting the operations of the firm. The major current assets are cash, marketable securities, accounts receivables, and their inception to be paid in the ordinary course of business within a year, out of current assets earnings of the concern. The basis current liabilities are Bills payable, Bank Overdrafts and Outstanding expenses. The goal of working capital management is to manage the firm current assets, and current liabilities in such way that a satisfactory level of working capital is maintained.

[...] Next working helps the management to look after the permanent sources for its financing working capital under this approach does not increase with increase in short term borrowings. Profits are earned with the help of assets, which are partly current working capital sometimes referred as “CIRCULATING CAPITAL”. NEED FOR WORKING CAPITAL: Business firms aim at maximizing the wealth of shareholders. In its endeavor to maximize shareholders wealth a firm should earn sufficient return from its operation. Earning a steady amount of profit required successful sales activity. [...]

[...] The following are the important liquidity ratios CURRENT RATIO OF WORKING CAPITAL RATIO: Current ratio is the ratio of the current liabilities. Current assets are assets which can be converted into cash within one year and include cash in hand and cash at bank, bills receivables, net sundry debtors, stock of raw materials, prepaid expenses and short term or temporary investments, et., current liabilities are liabilities, which are to be repaid within a period of 1 year and include bills payable, sundry creditors, Bank Overdraft, Outstanding Expenses, Short term loans and Advances, etc., are repayable within 1 year. [...]

[...] Working capital management Decisions relating to working capital and short term financing are referred to as working capital management. These involve managing the relationship between a firm's short-term assets and its short-term liabilities. As above, the goal of Corporate Finance is the maximization of firm value. In the context of long term, capital investment decisions, firm value is enhanced through appropriately selecting and funding NPV positive investments. These investments, in turn, have implications in terms of cash flow and cost of capital. [...]