Management of Working Capital Essay Example | Topics and Well Written Essays - 1500 words

Management of working(a) Capital - Essay ExampleA discussion relating to working metropolis cycle, methods of managing working not bad(p), working capital management in UK companies and suggestions for improvement has been presented below.The working capital of the business is defined as the net of online assets over current liabilities. It is an important liquidity measure of the firm. The current assets include not only cash, receivables except also inventories as it can be easily liquidated whereas the current liabilities include short term loans and creedors (University of California, n.d.). A business with scarce working capital faces difficulty in meeting its short term obligations from the accessible cash resources if there is a sudden or continuous f solely in sales. Therefore, it is important to harbor an optimum amount of working capital in the business and it must be carefully monitored by the managers (Nix & McFetridge, n.d.).Working capital forms an important par t of a firms operations. Maintaining an ideal level of archive ensures that the firm does not have to face the problem of material deficit in meeting its performance targets. Similarly the receivables figure in the balance sheet indicates the willingness of the firm to extend goods on credit. As credit sale is risky the management must be careful in the choice of debtors.Working capital consists of current assets like cash, inventory and current liability like creditors and short term loans. The pattern of all the above components of working capital varies with the business cycle. When there is a fall in the market direct there is a rise in the stock of finished goods. Later when this fall in lease takes the form of recession the firm lowers the stock of inventories, delays the payment of loans and accelerates the realization of receivables. This implies that with the worsening of the recession there is a decrease in the working capital. Therefore the efficient management of wor king