Working Capital and Corporate Strategy

Lorenzo A. Preve and Virginia Sarria-Allende

in Working Capital Management

Published in print March 2010 | ISBN: 9780199737413
Published online May 2010 | e-ISBN: 9780199775637 | DOI:


Working Capital and Corporate Strategy

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In this chapter, we discuss working capital management as a strategic tool. We provide an integrated view of working capital management policies, and of how they can be used to help improve firms' competitive position. We start by discussing the role of working capital management during the strategic planning and execution stages. We stress the importance of conducting a careful forecast of current assets and their respective financial needs, to ensure sufficient financing. Finally, we focus on how firms can use working capital policies to compete. That is, while financial needs for operation are difficult to control, being sensitive to market trends, firms can choose between aggressive and conservative working capital policies. We show that more conservative financing strategies might lead to lower returns during normal times but overcome more aggressive strategies during periods of market disorder.

Keywords: corporate finance; working capital management; corporate strategy; working capital

Chapter.  5112 words.  Illustrated.

Subjects: Financial Markets

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