Working capital is part of the total capital employed by a company and is often defined as the difference between short-term liabilities and short-term assets. Practically speaking, it is the cash required to run the daily, weekly and monthly operations of a business. Working capital management is, therefore, the process of managing the short-term assets and liabilities so that a firm has sufficient liquidity to run its operations smoothly.

Importance Of Working Capital

Working capital is a vital part of a business and can provide the following advantages to a business:

• Higher Return On Capital
• Higher Profitability
• Higher Liquidity
• Increased Business Value
• Favorable Financing Conditions
• Uninterepted Production
• Ability to Face Shocks & Peak Demand
• Competitive Advantage