Study Of Working Capital Size And Quality Management Issues

The management of working capital is one of the most important aspects in contemporary corporate management which will bring unexpected profit to the company. If the management of working capital is effective, it may solve the most difficult problem in corporate management, the cash flow management. This paper first addressed the importance of working capital in the financial position of a corporation and the relationships between working capital and the cash flow from operating activities. After the above standard analysis of working capital in theories, the paper focused on the quantitative analysis of the balance point of risk and payoff through logistic deduction. It involves choosing the indications of the risk and payoff and to compute the balance point through the logistic deduction, which establishes a foundation of theory in this field. But in contemporary corporation management, there are plenty of cases that the working capital of a company is zero or even negative, in such cases, the quantitative analysis of the balance point of risk and payoff through logistic deduction can not hold on. So the paper gives deduction in theories about the condition how to achieve the status of zero or negative working capital, and stated how to achieve the status in terms of the management of inventories, account receivables and informative management. Except for the management of zero and negative working capital, this paper also addressed how to manage working capital when it is a positive number. From examples and data in reality, it proves that it is very important for a company to manage the whole structure of working capital, and the structure of working capital includes the financing structure of working capital, the proportion of key items of both current assets and current liabilities. The paper addressed the above three aspects in detail. The research of this paper have brought forward a unique aspects on the quality analysis and management of working capital, hopefully it will contributes to the research followers in this field.