Overview of the Working Capital Financing Decision

Management of working capital requires evaluating factors affecting cash flows -- including the evaluation of appropriate interest rates.

The main considerations of working capital management decisions are (1) cash flow/ liquidity and (2) profitability/return on capital.

Management uses policies and techniques for the management of working capital such as cash, inventory, debtors and short term financing.

The main accounts which affect the value of working capital are accounts receivable, inventory, and accounts payable.