1-3 Concept of Working capital management
Working capital management according to Smith (1987) is significant and affects mutually liquidity and profitability of the business. It includes forecasting and monitoring current assets and current liabilities in a way that reduces the risk of lack of ability to meet due short term debts on the one hand and prevent extreme investment in these assets on the other hand (Eljelly, 2004). Lamberson (1995) said that working capital management has become one of the most significant problems in establishments, where a lot of financial directors find it hard to classify the significant drivers of working capital and the optimal level of working capital. As a result, enterprises can decrease risk and enhance …show more content…
Padachi (2006), emphasized that the management of working capital is significant to the financial strength of companies of all sizes. This significance is hinged on many causes. First, the funds invested in working capital are regularly high compared to total assets employed and so it is vital that these amounts are used in an effective method. Second, the management of working capital straight affects the liquidity and the profitability of the company and therefore it’s net worth (Smith, 1980). Working Capital, therefore, goals is keeping a stability between liquidity and profitability through directing the day-to-day processes of a corporate …show more content…
These studies have focused on large companies working within well-developed currency and capital markets of developed economies. Results from these studies become hard to generalize for comparatively small sized businesses in developing countries that operate within a rather undeveloped financial markets, where companies commonly depend on deeply on owner financing, trade credit, and short-term bank loans to finance their required investment in working capital (Chittenden, et. al; 1998, Saccurato, 1994). Companies offer an push to the economic growth of developing countries and its incentive is gaining widespread recognition. Small enterprises, however, they are measured, found the majority enterprise in all the economies of the world. However, given their dependence on short-term funds, it has been accepted that efficient management of working capital is vital for the survival and growth of small
Working capital management according to Smith (1987) is significant and affects mutually liquidity and profitability of the business. It includes forecasting and monitoring current assets and current liabilities in a way that reduces the risk of lack of ability to meet due short term debts on the one hand and prevent extreme investment in these assets on the other hand (Eljelly, 2004). Lamberson (1995) said that working capital management has become one of the most significant problems in establishments, where a lot of financial directors find it hard to classify the significant drivers of working capital and the optimal level of working capital. As a result, enterprises can decrease risk and enhance …show more content…
Padachi (2006), emphasized that the management of working capital is significant to the financial strength of companies of all sizes. This significance is hinged on many causes. First, the funds invested in working capital are regularly high compared to total assets employed and so it is vital that these amounts are used in an effective method. Second, the management of working capital straight affects the liquidity and the profitability of the company and therefore it’s net worth (Smith, 1980). Working Capital, therefore, goals is keeping a stability between liquidity and profitability through directing the day-to-day processes of a corporate …show more content…
These studies have focused on large companies working within well-developed currency and capital markets of developed economies. Results from these studies become hard to generalize for comparatively small sized businesses in developing countries that operate within a rather undeveloped financial markets, where companies commonly depend on deeply on owner financing, trade credit, and short-term bank loans to finance their required investment in working capital (Chittenden, et. al; 1998, Saccurato, 1994). Companies offer an push to the economic growth of developing countries and its incentive is gaining widespread recognition. Small enterprises, however, they are measured, found the majority enterprise in all the economies of the world. However, given their dependence on short-term funds, it has been accepted that efficient management of working capital is vital for the survival and growth of small