Working capital is the amount of the company’s finance which can be used for the further work and development of the company and the further production of goods and services. Working capital management is the set of activities and techniques or a complicated policy, which enables the company to manage the limited sum of the capital in order to assure the further existence of the country and its profit. If a businessman wants his business to be profitable, he should organize the work of his company well and to manage the working capital wisely. First of all, he is expected to calculate the sum of money, which can be used for various expenditures, which will not affect the further production badly. It the profit is high enough, the businessman will be able to raise the production of goods or to create some other lines of production which can broaden the choice of goods and services.
Then, it is important to manage the inventory which is used for the production and check its quality and order regularly. In order to manage the working capital professionally, one should keep the credit policy under the constant control. It is essential to pay all the debts on time; otherwise there will be extra percents, which will have to be paid to get rid of the credit. Finally, one should remember that working capital is the synonym of short term financing, because the production of a certain type of goods is mostly planned for the short periods of time. The reason is very simple: if a company spends too much money on the long term production of the unsuccessful product, it will bankrupt very soon; so in order to be on the safe side all the production is limited by term and quantity.
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