International Research Journal of Education and Technology

Working capital is the lifeblood and nerve center of a business. Just as circulation of blood is essential in the human body for maintaining life, working capital is very essential to maintain the smooth running of a business. No business can run successfully without an adequate amount of working capital.

The Working Capital is necessary to run the day-to-day business activities. It is very difficult to find a business firm, which does not require any amount of working capital. However, firms differ in their requirements of the working capital. Companies aim at maximizing the wealth of shareholders. In their efforts to maximize shareholder’s wealth, they should earn sufficient return from their operations. Earning a steady amount of profit requires successful sales activity. The firm has to invest enough funds in current assets for the efficient sales activity. Sales do not convert into cash immediately. There is always an operating cycle involved in the conversion of sales into cash.

KEYWORDS:Asset,Capital,Dividend,Liability,shareholder,wealth etc