10 papers analyzed
These studies suggest that effective working capital management is crucial for improving a firm's cash flow, profitability, and overall value by balancing costs and benefits, ensuring smooth operations, and positively impacting shareholders' wealth.
Working capital management (WCM) is a critical aspect of corporate finance that involves managing a firm's short-term assets and liabilities to ensure smooth operations and financial stability. Effective WCM can significantly impact a firm's profitability, liquidity, and overall performance.
Importance of Balancing Current Assets and Liabilities:
Optimal Level of Working Capital:
Impact on Profitability:
Strategic Role of Working Capital:
Financial Constraints and Working Capital:
Sector and Market Differences:
Effective working capital management is essential for ensuring a firm's operational efficiency and financial health. By balancing current assets and liabilities, firms can optimize their working capital levels to maximize profitability and firm value. Strategic WCM can prevent operational disruptions and exploit financial opportunities, making it a vital component of corporate finance. The optimal level of working capital varies depending on financial constraints and market conditions, highlighting the need for tailored WCM strategies.
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