WORKING CAPITAL MANAGEMENT

Working capital management is a substantial component of corporate finance management because it function all the financial activities and has direct impact on the profitability of the corporate. It enabled the enterprise to function smoothly its day-to-day operational activities. Working capital management of a firm initiated right from organizing funds beyond the investment in purchasing raw materials and extended up to the cost of collecting receivables. Eventually, the important of working capital management intimates logical connection with shareholder’s wealth maximization.

However, the complexity in managing working capital are often disregarded by the finance managers since it involved financial decision making regarding to financing and investing in current liabilities and current assets for short period of duration. Moreover, it is also often ignored from the fact that the need of working capital varies from industry to industries.

In services industry, unique approaches of working capital management have witness where raw materials are substituted with human capital. The Indian IT MNCs is observed with negligible amount of investment on inventory management and has possessed huge amount of cash and cash equivalents during the observations. Thus, the book also highlighted that the system of working capital management in Indian IT MNCs is diversified from other form of business concern. Further, the present study also gives notion to the point that working capital management alone is not only the ultimate source of profit maximization in IT industry but rather supported that human capital are also one of the major contributors.