WORKING CAPITAL MANAGEMENT
Working capital primarily supports the day-to-day financial operations of an organization. It includes the purchase of stock, the payment, and financing of credit sales. If this system deteriorates, the company’s ability to meet up with its financial obligations, fund operations, re-investment and payments will grossly be affected. The better a company manages their working capital, the less the company needs to borrow, even companies with cash surpluses need to manage their working capital to ensure that those surpluses are invested in ways that will generate suitable returns for investors.
Many organisations that are profitable on paper are forced to cease trading due to an inability to meet short-term debts when they fall due. In order to remain in business it is essential that an organization successfully manage its working capital (kehinde 2000:231).
Efficient management of working capital is extremely important to any organisation. Holding too much working capital is inefficient, holding too little is dangerous to the organisation's survival (Philip 2000:23)
Management of Working capital is a key point to consider in the overall financial management of any organization since it often constitutes a substantial proportion of its aggregate financing.
Capital occupies a vital position in the life of an organization, it plays the role of a cushion for losses resulting from crystallization of the various risks a business entity is exposed to. Management of working capital is a key point to consider in the overall financial policy and management of any organization. It often constitutes a substantial proportion of its aggregate financing. Working capital encompasses the planning and control of the level and mix of the firm’s current assets and the financing of these liquid assets, accounts receivable and inventories that can be held at any point in time. Working capital is expressed as current assets less current liabilities....