Working capital in common parlance is the difference between current assets and current liabilities. Current assets usually consist of cash, marketable securities, receivables, and inventory. A major component of current liabilities, on the other hand, is the payables. Management of working capital refers to the practices and techniques designed to control all the items of current assets and current liabilities. In the ordinary sense, working capital management is the function that involves effective and efficient use of all the components of current assets and current liabilities in order to minimize total cost.

* Select 2 listed companies in Malaysia and with the use of the formula, advise the financial director on how best to implement the policy of working capital. In your discussion, detail the merits and demerits of working capital as well as how the current status quo will influence the returns on the company.