Q. Management of Working Capital?

Working capital, in general practice, refers to the excess of current assets over current liabilities. Management of working capital therefore, is concerned with the problems that arise in attempting to manage the current assets, the current liabilities and the inter-relationship' that exists between them. In order words it refers to all aspects of administration of both current assets and current liabilities.

The basic goal of working capital management is to manage the current assets and current liabilities of a firm in such a way that a satisfactory level of working capital is maintained, Le., it is neither inadequate nor excessive. This is so because both inadequate as well as excessive working capital positions are bad for any business. Inadequacy of working capital may lead the firm. to insolvency and excessive working capital implies idle funds which earn no profits for the business.