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Essay On Working Capital Management

1075 Words5 Pages

WORKING CAPITAL
Definition : A company’s fundamental financial health and operational success depends upon the proper management of its working capital. A hallmark of a good business management is the ability to utilize its working capital management to maintain a solid balanced growth, profitability and liquidity.

Working capital is an inevitable factor in the day to day functioning of a firm. . It is calculated as the difference between the current assets and current liabilities or debts of the firm . It serves as a metric for how efficiently a company is operating and how financially stable it is in the short term Many businesses that appears to be profitable are sometimes liquidated mainly because of the …show more content…

Improper management of working capital can also lead the firm to bankruptcy and there are also some retail companies in the past to state this fact. The main problem and issue in working capital management is to maintain a proper balance between its current assets and current liabilities.

Currently Axiom Telecom faces a negative working capital, which can create a negative impact on the profitability and liquidity of the organization and it should be dealt with seriousness to survive among the competitors. Negative working capital is a state where the firm doesn’t have necessary capital to operate as its current liabilities are more than current assets. The reasons for the existence of negative WC is due to the duration of stock holdings and extended credit to the customers. The stock holding level of the company varies from 25 to 35 days based on turnover from different brands and channels. Axiom has a wide diversity of customers which includes small, mid and large customers. Thus due to these reasons the firm faces a huge challenge of obtaining banking credit lines to meet their working capital

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