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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?
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.