Working capital is the lifeblood of any organization. Working capital refers to that part of the capital of the company that is required for the financing of current assets, such as cash, marketable securities, debtors and inventories. Working capital is required to cover the daily expenses of a business. No business can operate successfully without an adequate amount of working capital. There are two concepts of working capital: gross concept and network concept. Gross working capital represents total current assets. Net working capital is the difference between current assets and current liabilities. The company must maintain a solid working capital position.
Working capital management is very important in companies as it is used to generate higher returns for the stakeholders. When working capital is managed inappropriately, allocating more than enough will make management ineffective and reduce the benefits of short-term investments. On the other hand, if the working capital is too low, the company can lose many profitable investment opportunities or suffer short-term liquidity crises, which leads to the company's credit crunch, since it can not effectively respond to the temporary capital requirements. Effective management of working capital involves the management of various components of working capital in such a way as to maintain an adequate amount of working capital for the proper functioning of a company and for meeting liquidity and profitability objectives.
The management of working capital in cooperative enterprises refers to the management of the current account of the company, which covers current assets and current liabilities. The management of working capital in cooperatives is one of the most special aspects of general industrial financial management. If the cooperative enterprise can not maintain a satisfactory level of working capital, it is likely to break. The current assets of the cooperative must be large enough to cover its current liabilities in order to maintain a reasonable margin of financial security. Working capital management in Cooperativa deals with the actual management of current assets and current liabilities in the company.