Question :Harish is working as a finance manager in ‘Kozee Softwares Ltd.’ He has
been awarded ‘Best employee of the year Award because of his
foresightedness. He always aims at smooth operations of all the financial
activities by focusing on fund requirements and their availability in the
light of financial decisions. He takes into consideration the growth,
performance, investments and requirement of funds for a given period so
that financial resources are not left idle and don’t unnecessarily add to the
cost.
By doing all this Harish strives to achieve the two main objectives of an
important concept of financial management. Identify the concept and
_ explain its two objectives.
The correct answer is -The concept of financial management referred to in the given scenario is ‘working capital management.’
The two main objectives of working capital management are:
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Ensuring the availability of adequate funds: One of the primary objectives of working capital management is to ensure that an organization has enough funds to meet its short-term obligations and run its operations smoothly. This involves maintaining an optimum level of working capital that can finance the day-to-day operations of the business, such as paying salaries, purchasing raw materials, and maintaining inventory.
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Optimizing the utilization of funds: The second objective of working capital management is to ensure that the available funds are used efficiently to generate the maximum possible return on investment. This involves managing the various components of working capital, such as receivables, payables, and inventory, in a way that minimizes the cost of funds and maximizes the returns. An efficient working capital management system can help an organization to improve its profitability, reduce its operating costs, and improve its cash flow.
