Managing Working Capital Essay Example | Topics and Well Written Essays - 750 words

Managing Working Capital - Essay Example Fundamentally, the working capital is total current assets of GHS (Jain, p.13.4). Langabeer (2008) explained further that this is the â€Å"funds necessary to finance the conversion operating cycle for a hospital – from delivering services to receiving funds to paying invoices for materials used† (p.59). The net working capital, on the other hand, is the difference in GHS’s current assets and current liabilities or that portion of current assets that are financed with long-term funds (Jain, p.13.4). These conceptual s definitions underscore the requirement to manage working capital because it determines the ability of an institution such as GHS to pay its debt and enhance its value. According to Langabeer, it reflects the efficiency of a hospital in the manner it orders, stores and pay for goods and services, hence, â€Å"the key with working capital management is to match the amount of money needed in the short term with the amount of funds available and keep a ll other assets in assets with higher returns† (p.59). For instance, working capital management in GHS involves initiatives such as the investment in an equity fund or the purchase of property and the construction of a facility that would yield profitability. GHS’s treasurer plays an important role in the working capital management. This is highlighted by the fact that the working capital needs of GHS can be affected by several factors such as the nature of business, the seasonality of operations, the production policy, market conditions and the conditions of supply (Chandra, 2011, p.574). He must ensure an efficient management because it will inevitably lead to increased organizational performance, quality in service delivery and profitability. The activities follow the GHS working capital cycle, which – as in the case of all organizations – is a process in which it purchases or produces inventory, holds it for a time, and