Working capital management refers to the administration of all aspects of current assets, namely cash, marketable securities, debtors and stock (inventories) and current liabilities. The financial manager must determine levels and composition of current assets. He must see that right sources are tapped to finance current assets, and that current liabilities are paid in time. He must see that right sources are tapped to finance current assets, and that current liabilities are paid in time.
There are many aspects of working capital management, which make it an important function of the financial manager:
• Time: working capital management requires much of the financial manager’s time.
• Investment: working capital represents a large portion of the total investments in assets.
• Significance: working capital management has great significance for all firms but it is very critical for small firms.
• Growth: the need for working capital is directly related to the firm’s growth.
Investment in current assets represents a very significant portion of the total investment in assets. Working capital management is critical for all firms. A small firm may not have much investment in fixed assets, but it has to invest to in current assets. Small firms in India face a severe problem of collecting their debtors.
Banks have their own policies to assess the working capital of the firm to finance them with the shortage. Bank of Maharashtra adopts certain method for financing their customer’s working capital requirements. There are certain recommendations from the committees for the banks to finance the working capital needs of their clients.
It may, thus, be concluded that all precautions should be taken for the effective and efficient management of working capital. The finance manager should pay regular attention to the levels of current assets and the financing of current assets.