1. I would define working capital as the difference between the current assets and the current liabilities an organization has at any particular moment. Working capital is a measurement tool that can help to determine how much liquid assets an organization has at its disposal to use for building growth.
On the other hand, if the working capital is in the negative it usually means that an organization’s debt outweighs its assets and this will prove to make growing a much more challenging endeavor. I would recommend trying to limit the amount of debt while keeping the liquid assets fluid so that the necessary funds for growth will be on hand. In this way, the Return on Capital (ROC) technique demonstrates the percentage figure that represents the amount of income over the amount of capital in a specified time period. The ROC determines whether or not the organization has the necessary financing and assets available to cover the shorter term earnings and cash flow for a working capital growth strategy.2. Cash management is an organizational strategy that focuses on how to utilize and invest its cash.
As opposed to physical assets such as property and goods, cash is money that is easily accessible either on hand or in the bank. Managing cash flow is crucial because it makes the day-to-day operations of the organization much more efficient and predictable over the long term. I would recommend a cash flow management strategy that is transparent and that provides better cash flow forecasts, optimizes your cash balances and compares your investment options.
I think maintaining a positive cash flow has been a priority for companies over the past several years, but the trend has shifted toward creating the greatest profit which does not necessarily mean maintaining a positive cash flow management strategy, as witnessed by the increasing debts and massive layoffs we are witnessing in the current economic crisis.