Strategic Decisions for Working Capital Management during Financial and Economic Crisis

The management of working capital during crisis became more important because of limited access to financing for many real companies and the inefficient approach to management before 2007. The unexpected and rapid change in credit conditions caused the need to look for new and flexible solutions to stabilize the business. Imme­diate activities concerning liabilities and invest­ments had to be bounded by strategic decisions to achieve sustainability of profitability and financial position. Strategies for managing working capital are usually limited to studies of certain ratios be­tween the main categories of assets and liabilities, respectively the values of working and net working capital. The emphasis is on the relationship be­tween long-term and short-term investments and the timing of companies’ liabilities while achieving a balance between liquidity and profitability in the relevant restrictions and shocks from the external environment. In terms of the Bulgarian economy companies choose a balanced strategy for man­aging the working capital with a high proportion of long-term financing, low risk, stable coverage of fixed assets and optimum positive value of net working capital. Companies with low share of working capital apply more aggressive manage­ment strategy with dynamically changing net work­ing capital and twice lower returns compared to companies with a high proportion of investment in current assets. Overall, financial management achieves its goal of maintaining liquidity through in­ternal resources, but failed to create the necessary momentum to improve financial performance and increase the value of the business.