State of the Art of Working Capital Management

Abstract

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Key factors in working capital management in the Brazilian market

“…The lack of understanding about its impact on profitability, the lack of clarity about its key factors, the lack of management ability to plan and control working capital components may lead to insolvency and bankruptcy. Smith (1973) suggested that many businesses have failed due to the inability of financial managers to plan and control current assets and current liabilities in their companies. In Brazil, a recent study with 14,181 small companies had the same findings (SEBrAE, 2005).…”

Cash Conversion Cycle Management in Small Firms: Relationships with Liquidity, Invested Capital, and Firm Performance

“…The availability of cash dictates whether the firm can pay employees, suppliers, banks, landlords, and even the owner's salary; in short, small business management is cash flow management. However, it is widely recognized that small firms face serious difficulties when it comes to managing cash and working capital (Dodge, Fullerton, and Robbins, 1994), and that ineffective management of working capital is prevalent in small firms (Dunn and Cheatham, 1993;Berryman, 1983;Smith, 1973).…”

The Determinant of Working Capital Management of Manufacturing Companies

“…According to Eljelly (2004), the management of working capital is both the planning and the handling of current assets and current liabilities to reduce the default risk or the chance in which companies or individuals will be unable to make the required payments on their debt obligations at a certain period of time, while on the other side it is essential to avoid investment on excessive assets. When a company experience operational difficulties or, in other words, cannot maintain its business properly, it may lead to bankruptcy (Smith, 1973). In the United States, a department store filed for bankruptcy after experiencing cash flow deficit in its operational activity for eight years in the past 10 years (Largay and Stickney, 1980).…”