Towards The Management of Working Capital--A Conceptual Analysis

In recent years a special emphasis has been laid on an examination of the management performance in regard to financial management and a critical analysis of working capital management has been initiated in developing countries, particularly in India. In financial management, one of the important decisions which is very vital is working capital management and the firms have to always analyse its effect to final impact upon profitability and risk. At the time of increasing capital costs and scare funds, the area of working capital management assumes added importance as it deeply influences a firm's liquidity and profitability. A notable feature of utilization of funds is that they are of recurring in nature. Therefore, efficient working capital management requires a proper balance between generation and utilization of these funds without which either shortage of funds will cause obstruction in the smoother functioning of the organization or excess funds will prevent the firm from conducting its business efficiently. For the efficient use of working capital every firm and every student of business management must acquainted with the basis concepts of working capital, the firms may have optimum level of working capital used in an efficient way to ensure profits. For a student knowledge about the concepts of working capital is essential to improve his entrepreneurship as he is the future-manager or entrepreneur of a firm.