Question

Define working capital management.

Discuss the effects of globalization and technology on working capital management.

Answer 1

Working Capital Management

   Working capital management is a business strategy designed to ensure that a company operates efficiently by monitoring and using its current assets and liabilities to the best effect. The primary objective of any financial manager is to maximize the sharehilders wealth. So for this purpose he has to make best decisions about maintanance of asset and liability level. Working capital simply means current asset of the company that can be change from one type to other type during day to day operation of the firm. Working capital can be seen statically as the harmony between current asset and current liabilities. While making decisions we must consider the fact that a certain level of current asset is necessary to meet the short term liabilities and liquidity. Working capital management is an important area in finance because without proper management of working capital it is difficult for organisation to run its operation smoothly.

Now the globalisation and new implemented technologies are highly came into the scenario. So it will definitely affect the working capital management.As the range of solutions grows, choosing the most appropriate one becomes more difficult. Companies must look at what resources they are willing to put behind a working capital optimization program. Doing so there will be another question that how deeply they are able to came into their existing processes and make changes, what their goals are in terms of reducing costs and increasing efficiency in the different stages of the working capital cycle, and how to achieve those goals. So everything is changing in this economy through globalization scenario and so according to that the working capital decisions also need to be updated inorder to get more advanced.

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