Managing working capital and making money in a few Indian businesses

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The relationship between working capital and profitability plays a very important role for the long-term survival or growth of the company. Hence, it should be managed efficiently

to ensure th

Working capital is one of the most complicated factors of any business organization. In general, working capital represents the difference between current assets and current liabilities. But this numerical difference is not suitable for making effective managerial decision

in the present scenario. Therefore, the different components of working capital should be examined very critically, so that the importance of each component is taken into account in determining the working capital.

Part of the current asset which is financed by long term liabilities is working capital. As working capital is the difference of current asset and current liabilities, which implies the current assets is financed by two sources. Some portion of current assets is financed by current liabilities and the remaining part of the current asset is financed by the long term liabilities. The cost involving for maintaining current liabilities is much lower than raising long term liabilities.