Working capital crisis: economic consequences and possible ways out
Working capital has long been the subject of heavy research in the field of finance, specifically its relationship with profitability and liquidity. An efficient working capital management mechanism is often equated as a sign of a 'well run' company, although the true meaning of 'efficiency' in this regard is a debatable subtopic -- with different managers, academicians and investors putting forward their own opinions on what constitutes ideal working capital management. In reality, however, like many other concepts, it is never straightforward and is always a product of numerous factors, many of which are not in control of the company itself. What we probably already know - A brief background In general, many industries and companies are heavily reliant on working capital to not only keep themselves afloat but use it as leverage to take risk, grow business volume and create further wealth which goes back into the business/industry. It has been likened to the bloodstrea...