Question

What is the difference between working capital management and current asset management and where does financial analysis fit it?

Answer 1

Working capital managment is strategy which deals to insure that a company operates effectively by analysing and using its current assests and laibilities.

A company working capital mainly exist of current assests and current laibilities.Current assests means those assests which can be converted into cash within 1 year, for example debtors,and stock and prepaid expenses and with current liabilities we mean the day debt incurred by buisness in its running.for example creditors,outstanding expenses.

The working capital management refers to management of these two short term liquidity of the firm.The interaction between current assets and current liabilities is therefore the main objective of the theory of working capital management.

whereas current assets of a company or an organisation can be defined as the assets which is equivalent of cash or assets which can be liquidated or converted in to cash within a year all short assets are considered as current assets because it can easily calculate the liquidity of the firm and also help in managing the day to day debt of the firm basically current assets management deals with the managing of all the current assets of the firm can be define as the assets which is equivalent of cash or assets managing current assets may require more attention and time than fixed assets.The financial manager cannot simply decide the level of current assets and stop there.The level of investment in each of the current assets varies from day to day.Current assets management is therefore important factor in running a firm.

Finacial analysis fit in working caoital management because it means analysis of financial statements for calculating performance of business in terms of profitability,solvency and debt to equity so on.