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Appropriate Determination of Net Working Capital in Corporate Financial Management

Author

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  • Zdeněk Motlíček

    (Department of Business Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic)

  • Josef Polák

    (Department of Business Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic)

Abstract

Liquidity and working capital management belongs to one of the fundamental tasks of short-term financial management. However, in the context of net working capital, the issue of management of current assets and liabilities significantly overlaps with long-term financial management, in which the effects of various decisions have long-term consequences, with considerable inertia and possibility of high losses. The present study is therefore focused on the determination of appropriate amount of working capital, as an important part of financial decision making process in the company. The paper presents an empirical research aiming to identify the appropriate approach to accurate calculations of net working capital and determining its needs. The main contribution of the study can be found in the verification of calculation method of net working capital needs, which, according to the authors, may be beneficial both for business practice and teaching of financial management at universities.

Suggested Citation

  • Zdeněk Motlíček & Josef Polák, 2015. "Appropriate Determination of Net Working Capital in Corporate Financial Management," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 63(4), pages 1323-1330.
    • Handle: RePEc:mup:actaun:actaun_2015063041323
    DOI: 10.11118/actaun201563041323
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    References listed on IDEAS

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    5. Al-Najjar, Basil, 2013. "The financial determinants of corporate cash holdings: Evidence from some emerging markets," International Business Review, Elsevier, vol. 22(1), pages 77-88.
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