The working capital management is concerned with the problems that arise in attempting to manage the current assets, the current liabilities and the interrelationship between them. The current assets are those assets which are in the ordinary course of the business can be converted in to cash within a year without undergoing a diminution in value. The current assets are cash in hand, cash at bank, sundry debtors, bills receivable, stock, prepaid expenses etc. The current liabilities are those liabilities which are paid in the ordinary course of the business within a year out of the current assets or earning of the firm. The current liabilities are sundry creditors, bills payable, and bank overdraft. Outstanding expenses etc. The goal of the working capital management is to manage the firm's current assets and current liabilities in such a way of working capital is maintained. The basic ingredient of the theory of working capital management includes the optimum level of the current assets, the trade-off between profitability and risk which is associated with the level of the current assets and current liabilities, financing-mix strategies.
working capital, current ratio, Quick ratio, cash ratio
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