Question

Define the working capital management. Why is it important to study the management of working capital as a separate area in financial management?

19 Apr 2025
Answer :
Word Count : 526

Working capital management refers to the administration of a firm's short-term assets and liabilities to ensure the company maintains sufficient liquidity to carry out its day-to-day operations efficiently. It primarily involves managing the components of current assets—such as cash, accounts receivable, inventory—and current liabilities—such as accounts payable and short-term borrowings. The main objective of working capital management is to ensure a balance between profitability and liquidity, so that the firm can meet its short-term obligations without facing financial distress.

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