Page 4 - 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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