Working capital management seeks to make better use of a company's resources by tracking and optimising the use of current assets and liabilities. The goal is to maximise profitability while maintaining sufficient cash flow to meet its short-term operating costs and debt obligations. Working capital management is critical to the cash conversion cycle (CCC), or the time it takes a company to convert its working capital into usable cash.

Working capital management refers to the strategic administration of a company's short-term assets and liabilities to ensure efficient operational functionality. It revolves around maintaining an optimal balance between current assets, like cash, inventory, and accounts receivable, and current liabilities, such as accounts payable and short-term debt. The primary goal is to guarantee that a business has sufficient liquidity to meet its short-term obligations and capitalize on opportunities.

Effective working capital management involves assessing the cash conversion cycle, the time it takes to convert raw materials into cash through sales. Streamlining this cycle reduces the need for excessive working capital, minimizing financing costs and enhancing profitability. Skillful management enables companies to navigate economic fluctuations, respond to unexpected expenses, and seize market opportunities. Striking the right balance ensures a company's day-to-day operations run smoothly, contributing to overall financial stability and sustained growth.