Working Capital Management Essentials: Principles, Strategies, and Implications for Business Performance

Abstract

Working capital management (WCM) is critical to maintaining a firm's liquidity, operational efficiency, and overall financial health. It involves the management of short-term assets and liabilities to ensure the smooth functioning of day-to-day operations while minimizing the cost of capital. This article explores the core components of working capital—inventory, receivables, payables, and cash—and examines strategies to optimize each. It also discusses how effective WCM impacts profitability, risk, and firm value. The study incorporates theoretical frameworks and empirical findings to present best practices for managing working capital across various industries