Working capital management is essential for a firm's dayto-day operations from "summary" of International Financial Management, Abridged Edition by Jeff Madura
Working capital management is vital for a firm's everyday functions because it deals with the management of current assets and liabilities. Current assets include cash, accounts receivable, and inventory, which are crucial for a company's daily operations. Current liabilities, such as accounts payable and short-term debt, must be managed effectively to ensure the firm's financial stability. Efficient working capital management ensures that a company has enough liquidity to meet its short-term obligations. By closely monitoring the levels of current assets and liabilities, a firm can maintain a balance that allows for smooth operations. For example, having too much inventory ties up funds that could be used elsewhere, while too little inventory can lead t...
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