What is the primary goal of working capital management?

The primary goal of working capital management is to ensure short-term financial stability. This is pivotal for maintaining an organization's liquidity, enabling it to meet its short-term obligations such as paying suppliers, employees, and other operational costs without facing financial strain. Effective working capital management involves managing current assets and current liabilities to make sure that sufficient cash flow is available to sustain day-to-day operations. It supports the smooth functioning of the business by balancing the timing of cash inflows and outflows, which is essential for avoiding liquidity crises and ensuring that the company can respond to unforeseen expenses or opportunities.

While maximizing profits, increasing long-term investments, and decreasing operational costs are valuable business objectives, they do not specifically reflect the core aim of working capital management. The focus here is on short-term financial health, which ultimately supports overall business stability and growth.