Page 6 - PowerPoint Presentation

MANAGEMENT OF WORKING CAPITAL

Overview

• Working capital management, also known as short-term

financial management, involves management of the current
assets and current liabilities of an entity.

• A business that fails to match decisions about current assets
and current liabilities, cannot survive in the long run.

• Working capital refers to current assets and includes cash

and short-term investments, inventory and accounts
receivable.

• Businesses may choose to finance their current assets
through short-term or long-term finance. Use of long-term

finance may however reduce competitiveness, as a business

may have less financial capacity for long-term growth.

• It is important to distinguish from current liabilities that

result from long-term decisions, for instance, the current
portion of long-term liabilities or short-term debt used to

finance fixed assets.

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