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Working capitaal management

Thee objectivess of woorkingg capittal

managemment

The maain objectivve of workiing capital managemment is to get the balaance of currrent
assets and currennt liabilitiess right

It can bbe seen ass a trade-offf between profitabilitty and liquiidity.

Liquuidity P Profitabiliity

Enssuring
current Investing in
asseets are less liquidd
sufficiently assets in
liquuid to order to
minimmise the maximisee
rissk of return
insolvency

If a bussiness has large amoounts of caash then it sshould be able to payy its bills oon time
– liquiddity is the ppriority.

But thiss cash couuld have beeen investeed elsewheere, for instance in offfering bettter
credit teerms to cuustomers too attract more busineess. This wwould poteentially incrrease
profitabbility but att the expennse of liquiddity.

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