Appropriate Determination of Net Working Capital in Corporate Financial Management

Zdeněk Motlíček and Josef Polák
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Zdeněk Motlíček: Department of Business Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic
Josef Polák: Department of Business Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2015, vol. 63, issue 4, 1323-1330

Abstract: Liquidity and working capital management belongs to one of the fundamental tasks of short-term financial management. However, in the context of net working capital, the issue of management of current assets and liabilities significantly overlaps with long-term financial management, in which the effects of various decisions have long-term consequences, with considerable inertia and possibility of high losses. The present study is therefore focused on the determination of appropriate amount of working capital, as an important part of financial decision making process in the company. The paper presents an empirical research aiming to identify the appropriate approach to accurate calculations of net working capital and determining its needs. The main contribution of the study can be found in the verification of calculation method of net working capital needs, which, according to the authors, may be beneficial both for business practice and teaching of financial management at universities.

Keywords: net working capital; current assets; short-term funds; cash conversion cycle; production and sales costs; business; receivables; inventories; payables (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:mup:actaun:actaun_2015063041323

DOI: 10.11118/actaun201563041323

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