Working Capital Management

Jul 17, 2026

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Working Capital Management outlines how net current assets support daily operating activities, including inventory purchases, credit sales financing, and payment of salaries and expenses. It explains the definition of working capital as current assets minus current liabilities, and details why mismanagement threatens liquidity and business survival. The session contrasts having too little versus too much working capital, describing resulting cash flow problems or inefficient capital use. It also frames the core trade-off between liquidity and profitability, emphasizing the need to determine an optimum level and avoid undercapitalisation and overcapitalisation.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages26

Reading Time1 h 6 min

AccessFree to download

Session 13 Working Capital Management FOCUS This session covers the following content from the ACCA Study Guide. | C . Working Capital Management | | --- | |
1. The nature, elements and importance of working capital
a) Describe the nature of working capital and identify its elements.
b) Identify the objectives of working capital management in terms of liquidity and profitability, and discuss the conflict between them.
c) Discuss the central role of working capital management in financial management.
2. Management of inventories, accounts receivable, accounts payable and cash
a) Explain the cash operating cycle and the role of accounts payable and accounts receivable.
b) Explain and apply relevant accounting ratios.
3. Determine working capital needs and funding strategies
a) Calculate the level of working capital investment in current assets and discuss the key factors determining this level.
b) Describe and discuss the key factors in determining working capital funding strategies.
| | G . Risk Management | |
2. Causes of exchange rate differences and interest rate fluctuations
c) Describe the causes of interest rate fluctuations

i) structure of interest rates and yield curves
ii) expectations theory
iii) liquidity preference theory
iv) market segmentation | (see ACCA Study Guide for expanded learning objectives) ~~ Session 13 Guidance ~~ Read through this entire session as it gives a good introduction to this major topic. Later sessions will cover the specific areas of receivables, payables, cash and inventory management. Understand the critical importance of working capital (s.1. 1) and how there is a trade-off in trying to find an optimum level of working capital (s.1.2) . Work through Illustrations 1–3. (continued on next page) F9 Financial Management Becker Professional Education | ACCA Study System Al[i Niaz-ali.niaz777@gmail.com](i Niaz-ali.niaz777@gmail.com) VISUAL OVERVIEW Objective: To appreciate the importance of working capital and therefore its effective management. WORKING CAPITAL • Importance • Optimum Level • Current Assets Investment Policy ~~ Session 13 Guidance ~~ Know how working capital is funded (s. 2) including the costs of short-v long-term funding, and theories describing the shape of the yield curve. Memorise the key working capital ratios (s. 3) . Try Example 1 on the cash operating cycle. © 2014 DeVry/Becker Educational Development Corp. All rights reserved. 13-1 Al[i Niaz-ali.niaz777@gmail.com](i Niaz-ali.niaz777@gmail.com) Session 13 • Working Capital Management F9 Financial Management 1 Working Capital 1.1 Importance Working capital—the capital represented by net current assets which is available for day-to-day operating activities. It normally includes inventories, trade receivables, cash and cash equivalents, less trade payables. The definition of working capital is fairly simple; it is the differen

Jul 17, 2026

Upload by Ezra