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  Working Capital Management The term ‘working capital management’ primarily refers to the efforts of the management towards effective management of current assets and current liabilities. Working capital is nothing but the difference between the current assets and current liabilities. In other words, an efficient working capital management means ensuring sufficient liquidity in the business to be able to satisfy short-term expenses and debts . IMPORTANCE OF EFFECTIVE WORKING CAPITAL MANAGEMENT  Ensures Higher Return on Capital  Improvement in Credit Profle & Solvency  Increased Proftability  Beer Liquidity  Business Value Appreciaon  Classification of Working Capital  Types of working capital on the basis of Concept ã Gross Working Capital : It denotes the company’s overall investment in the current assets. ã Net Working Capita l: It implies the surplus of current assets over current liabilities. A positive net working capital shows the company’s ability to cover short-term liabilities, whereas a negative net working capital indicates the company’s inability in fulfilling short-term obligations.  Types of working capital on the basis of time ã  1) Permanent working capital:  it is also called fixed working capital. It means to carry on the day to day expenses the firm is required to maintain the minimum amount of working capital. For example the firm is required to maintain the minimum level of raw material, finished goods or cash balance etc. ã a) Regular working capital-  it means the minimum amount which the firm has to keep with itself to carry on the day to day operation. ã b) Reserve working capital-  it means the excess amount over the regular working capital for uncertain circumstances like strike, lock out, depression etc.
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