IMPACT ON WORKING CAPITAL MANAGEMENT AND PROFITABILITY

Abstract

Working capital is the difference between a company's current assets and its current liabilities. Current assets include cash, inventory, accounts receivable, and other assets that are expected to be converted into cash within one year. Current liabilities include accounts payable, short-term loans, and other obligations that are due within one year. Effective working capital management involves balancing the inflow and outflow of cash to ensure that a company has enough cash to cover its expenses and invest in growth opportunities.

One of the key ways that working capital management affects profitability is through its impact on cash flow. A company that manages its working capital effectively can ensure that it has enough cash on hand to cover its operating expenses and invest in growth opportunities, while also minimizing its financing costs.