Working capital management is considered as the fundamental of finance. Working capital management is linked to accomplish current assets and current financial obligation. It is exceedingly significant for long term financial obligation and compensating day to day disbursements.

Working capital is that function of business firm's capital which is employed for purchasing raw material and impact in mixed debitors. It is well understood that a capitalist know that current assets are extremely substantial for proper functioning of fixed assets. Expect to be true, if capitalist have expended the money to purchase machines of business firm and if capitalist do not have any more sum of money to leverage raw material, then the machinery will not employed for any yield without raw material. From this illustration, capitalist can substantiate that working capital is extremely effectual for operating any business organization. Capitalist can also assume one more  liquid item of current assets which is hard currency. If capitalist experience bo hard currency in hand, then capitalist can not compensate for several disbursements of business firm and at that time, various business projects may held over for not compensating certain disbursements. If capitalist describe working capital in extremely simple form, then capitalist can state that working capital is the surplus of current assets over current financial obligation.

Imposing an effectual working capital management system is an higher-ranking mode for many business firms to ameliorate their net income. The two major characteristics of working capital management are ratio analysis and management of individual elements of working capital

Roles of Working Capital are mentioned below:

1. Gross working capital
Gross working capital is the working capital which is utilized for all current assets. Total value of current assets will correspond to gross working capital.

2. Net Working Capital
Net working capital is the redundant of current assets over current financial obligation.
Net Working Capital = Total Current Assets - Total Current financial obligation
This sum of money designates that if capitalist deduct total current financial obligation from total current assets, then balance sum of money can be utilized for repayment of long term debts at any time.

3. Permanent Working Capital
Permanent working capital is that quantity of capital which must be in current assets or hard currency for legal proceeding the natural process of business.

4. Temporary Working Capital
At a previous time, it may be come-at-able that capitalist have to compensate business  firm financial obligation and at that time capitalist call for working capital which is more than enduring working capital, then this surplus sum of money will be temp working capital. In worldwide working of business, capitalist do not call for  such capital.

In working capital management, capitalist analyze following three aims:

I) Requirement for working capital

After canvassing the characteristic of yield, capitalist can judge the call for working capital. If business firm formulates products at prominent scale and continues on producing goods, then business firm call for high sum of money of working capital.

II) Optimum level of working capital in business

Prominent sum of money of working capital will cut down the return on investment funds and depleted sum of money of working capital will elevate the danger of business. In the way indicated, it is very substantial conclusion to get optimal level of working capital where both profitableness and risk will be symmetrical. For accomplishing optimal degree of working capital, finance officer had better also canvass the elements which impacts the prerequisite of various elements and  working capital of current assets. If investor will handle hard currency, debtorand  inventory then working capital will mechanically make optimal.

III) Main Working capital policies of businesses

Policies are the rules of thumb which are effectual to direct business. Finance officer can also make practicing capital policies.

1st Working capital policy

Liquidity policy
In this policy, finance officer will raise the sum of money of liquidity for grading down the risk of business. If business firm has prominent bank balance and  volume of hard currency, then business can easily counterbalances his dues at due date. But finance officer had better not disremember that the extra hard currency will not bring forth and bring back on investment and earning will diminish. So liquidity policy had better be make optimal.

2nd Working Capital Policy

Profitability policy
In this policy, finance officer will hold low sum of money of hard currency in business and endeavor to expend level best sum of money of hard currency and bank balance. It will be sure that net income of business will bring up due to raising of investment thoroughly but the  risk of business will also elevate as liquidity of business will fall and it can produce bankruptcy position of business. Therefore, profitableness policy shall make after ascertaining liquidity policy and afterwards both policies will practicable for thoroughly management of working capital.

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