Working capital management - a business organizations success Essay

workings chapiter management - a business organizations success - Essay ExampleWorking capital management is essential for a business organizations success and even mere survival. By focusing in this aspect, companies are able to ensure qualified cash flow in order to settle maturing short term obligations and finance expected operational expenses (McClure 2008). Without economical techniques in managing working capital, a play along can show profitability but might be illiquid to settle its current liabilities thereby jeopardizing its relationship with creditors. Working capital management also covers the efficient collection of accounts receivable and sale of inventory in order to generate cash. The better the company manages working capital, the less money it needs to borrow. Holding overweening cash is also seen as inefficient because it can be used for investment which maximizes shareholder wealth.One of the best examples of companies which benefits from focusing on workin g capital management is computer giant Dell, Inc. The companys success can be directly attributed to its efficient inventory management system which eliminates excessive production. In contrast with normal manufacturers, Dells production is tied up with customer demand enabling it to get rid of inventory holding cost.