Scholarly record

WORKING CAPITAL IN A COMPANY

G. Zimon

Abstract

Background: Working capital is an element that has a significant impact on the financial security of an entity, its profitability and the efficiency of its asset management and its selected liabilities. Working capital management is designed to keep an enterprise engaged in its day-to-day “financial health”. This is a complicated and time-consuming process because it involves the management of current assets and current liabilities. Therefore, it is important to choose appropriate management strategies for individual assets and liabilities that affect working capital levels. A well-chosen strategy of working capital management makes it possible to achieve a positive financial result of an enterprise Methods: An analysis of working capital management was carried out on the basis of financial data from 30 manufacturing, commercial and service companies. In the study a preliminary financial analysis of financial statements and selected financial ratios have been applied. Results: The research has shown how choosing the right working capital management strategy affects the safety of individual companies. Conclusions: Companies, depending on the type of business, adopt different working capital management strategies. This is due to another structure of current assets in commercial, service or manufacturing units. Most often companies use indirect strategies to manage working capital. This is a moderate strategy that minimizes the weaknesses of classic strategies but instead it introduces what is best in them. Choosing aggressive strategies is risky because it often leads to bankruptcy. In turn, the management of working capital in a conservative way is expensive, which negatively affects the final financial result of the companies.

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DOI resolver: doi.org/10.5593/sgemsocial2017/13/S03.093

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