With regard to the management of working capital, there are two major implications. Firstly, the decisions that affect the level of working capital are frequent and repetitive. Such decisions should be consistent with the objectives and goals of a firm, and a framework of unambiguous rules should be created for the implementation of those decisions by the lower operating levels. Secondly, efficient management of one component of working capital cannot be undertaken without simultaneous consideration of other components because of close interaction among them. The characteristic feature of the three basic activities of a manufacturing firm, viz., production, sales, and collection is that they are non-instantaneous, unsynchronized, and determine the life span of the components of working capital. The element of uncertainty, when added to this situation, creates a more intense need for effective working capital management. There are two important objectives of working capital:
- Profitability
- Liquidity
Financial management cannot afford to stick to only one of these objectives. There should be a proper balance between the two so that one objective does not suffer at the expense of the other.
For Citation use:
- Ul, I. Z. (2014). Working capital management of selected small-scale industries in Jammu and Kashmir state with special reference to Kashmir division.
