What is the primary goal of managing working capital?
Practice Questions
Q1
What is the primary goal of managing working capital?
Maximizing shareholder wealth
Minimizing operational costs
Ensuring liquidity and operational efficiency
Maximizing asset turnover
Questions & Step-by-Step Solutions
What is the primary goal of managing working capital?
Step 1: Understand what working capital is. Working capital is the money a company uses for its day-to-day operations.
Step 2: Recognize the importance of liquidity. Liquidity means having enough cash available to pay bills and meet short-term obligations.
Step 3: Learn about operational efficiency. This means using resources effectively to maximize productivity and minimize costs.
Step 4: Realize that managing working capital helps ensure that a company can pay its employees, suppliers, and other expenses on time.
Step 5: Conclude that the primary goal of managing working capital is to maintain a balance between having enough cash (liquidity) and using resources efficiently (operational efficiency).
