Working Capital Management

working cap heed is an integral severalize of business management. Working capital consists of a federations current assets and current liabilities. Working capital management is the management of bills, accounts receivable, inventories, accounts payable and short investments. All of these items appoint the heart of an transcription.

Cash is king. Cash flow is the life of a society. Managing cash flow means controlling the collection, outgo, and investment of cash. When it comes to managing working capital, conviction is money. Business managers must consider collection time and procedures, disbursement float, positive uses for idle cash including holding versus investing, and credit policies.

Proper archive management can make or break a company. For more businesses, the inventory is a major investment. There atomic number 18 several different ways to manage inventory, including the ABC approach, the scotch order quantity model, and derived-demand. Since inventory control ties into so many aspects of the business, including sales and collections, management must understand the importance of implementing best inventory procedures.

Mismanagement of inventory can result not only(prenominal) in the companys increase costs but in managements going of employment. By neglecting the inventory control at his company, the CEO of Gillette company allowed the receivables period to grow to 106 days, resulting in a 50 slash in stock value and the loss of his job.

match to Andrew Harris, one company that understands the concept of working capital management is Bank of America. Harris states, According to the Chief Financial Officer, the key ... is straightforward: to ensure the organization is able to fund the difference between short-term assets and short-term liabilities (2005, para. 1).

Working capital management is a very important part of the current business environment. Successful working capital management can reduce costs, utilize inventory, raise profits, and increase shareholder value.

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