Finance for business: Working Capital Management Techniques

Working Capital Management Techniques
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WORKING CAPITAL MANAGEMENT TECHNIQUES
Working capital that is also called net working capital can be defined as a measurement of the current assets of a business. This happens after deduction of short-term liabilities that are classically classified as short term (Mathur, 2003). It is also called operating capital at times and this would mean valuation of assets that an organization or a business has on hand to build and manage business. The management techniques for the working capital are very efficient tools in the management of effectual and efficiency of working capital. The focus is usually on the current assets since the current liabilities crop up because of current assets only. Thus, managing automatically managed current liabilities. There are distinguished management techniques for the working capital and some, for particular reasons are preferable for finance managers.
All the management techniques for the working capital try to search for optimum stage of working capital, since both shortage and excess of working capital engrosses cost to the trade. The main winning condition or the main goal for any business manager is looking for the most favorable of working capital. The various techniques that is applicable in finding the most favorable stage of the working capital or organization of dissimilar articles of working capital. Shortage Cost and Carrying Cost intersection is one of the best methods used in finding the most favorable working capital level (Vijayakumar, 2001). It is the stage where intersection of shortage cost and carrying cost is represented in a graph.
The financing policy of the working capital is a method or a technique where working capital is dividable into two sections namely, the temporary and the permanent. The permanent working capital can be termed as the stage of working capital that is always maintained and required. The working capital on temporary basis is the fraction of working capital that tends to maintain fluctuation....