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Chapter 21. Working Cap management (WCM)

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May 20, 2019 at 5:01 pm #516606
abbasisaeed
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Ref. Page. 601 Kaplan Text
One of the objective of WCM is profitability which states “maximising the return on Capital Employed (roce) hence minimising investment in working Capital”.
I have the following queries.
1. I don’t understand this entire statement. What is it trying to say?
2. How’s ROCE and WC related?
May 21, 2019 at 9:02 pm #516783
P2-D2
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Hi,
It is essentially saying that we should be seeking to use more long term capital (debt/equity) to fund the business and not having cash tied up within inventory/receivables. It is important to get the balance right, which is difficult to achieve.
Thanks
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