What is involved in working capital management?

Working capital management is fundamentally concerned with managing short-term assets and liabilities to ensure that a company can continue its operations and meet its short-term financial obligations. This involves monitoring and optimizing the components of current assets, such as cash, inventory, and accounts receivable, alongside current liabilities like accounts payable and short-term debt. Effective working capital management ensures that a business has sufficient liquidity to meet its operational needs while maximizing its profitability and minimizing costs associated with short-term funding.

In contrast, the other choices relate to different aspects of financial management. Long-term investment planning focuses on the allocation of resources for fixed assets or long-term projects, which is distinct from the short-term focus of working capital. Controlling fixed asset purchases involves decisions about long-term investment in physical assets, while leveraging equity financing pertains to acquiring funds through equity markets, which is not directly related to the management of day-to-day operational finances. Therefore, managing short-term assets and liabilities is the primary focus of working capital management.