Working capital management strategies and techniques

Under this approach current assets are maintained just to meet. This strategy is called a working capital management. A good management strategy is focusing on maintaining the efficient levels of working capital, and its components of current assets and current liabilities. It goes without saying that being discipline in your. Working capital management definition investopedia. Techniques for finding optimal level of working capital. Conservative, aggressive, hedging or maturity matching approach. These strategies are different because of their different tradeoff between risk and profitability. Prudent inventory management is an important factor in making the most of your working capital. Working capital is commonly understood as the fund needed to meet the daytoday expenses of an enterprise.

Strategies and techniques book online at best prices in india on. Five tips for effectively managing working capital softco. A conservative strategy suggests not to take any risk in working capital. Key takeaways working capital management requires monitoring a companys assets and liabilities to maintain sufficient cash flow. Describe the two major components of a working capital.

The terms methods of working capital management, strategies and approaches to working capital management are interchangeably used in. On the other hand, insufficient stock can result in lost sales and damage to customer relations. Companies must measure risk, develop, then implement strategies for maintaining a positive cash flow. Excessive stocks can place a heavy burden on the cash resources of any business. Working capital management is the management of current assets, current. Working capital managementstrategies and techniques kopykitab.

There are broadly 3 working capital management strategies approaches like conservative, aggressive, hedging or maturity matching. He has also been director of united bank of india and undp fellow on international financial management at wharton school, university of pennsylvania. By maximizing supply chain management and insisting on a transparent environment throughout the process, firms will find that their working capital situation will, on average, substantially improve. Strategies and techniques, prentice hall, new delhi. Continuous monitoring of the metrics is crucial to maintaining a sound working capital management strategy. Working capital managementstrategies and techniques by bhattacharya. Various techniques are used by a business to determine optimum. Strategies and techniques kindle edition by hrishikes bhattacharya. For a finance manager it is the funds locked up in current assets and therefore he finds liquidity support in net working capital nwc which is equivalent to the.

There are broadly 3 working capital management strategies approaches to choose the mix of long and shortterm funds for financing the net working capital of a firm viz. Working capital management is a business strategy designed to ensure that a company operates efficiently by monitoring and using its current. A finance manager finds that the funds for meeting these expenses get blocked in current assets. Strategies and techniques hrishikes bhattacharya on. In working capital management arrange the cash flow in a business then business. It refers to the challenges that a business has to encounter while managing such current assets, current liabilities and their inter relationship. Effectively keeping track of the amount of inventory you have at any given time is one of the hallmarks of an. A good management strategy is focusing on maintaining the efficient levels of working. Working capital managementstrategies and techniques. Working capital management techniques such as the intersection of carrying cost and shortage cost, working capital financing policy, cash budgeting, eoq and jit are applied to manage different components of working capital like cash, inventories, debtors, financing of working capital etc. Buy working capital managementstrategies and techniques by bhattacharya pdf online. On the liability side, there are a number of strategies a business owner can utilize to improve his working capital situation.