Working capital management involves balancing movements related to five main items – cash, trade receivables, trade payables, short-term financing, and inventory – to make sure a business possesses adequate resources to operate efficiently.

The levels of cash should be enough to deal with ordinary or small unexpected needs, but not so high to determine an inefficient allocation of capital.

Commercial credit should be used properly to balance the need to maintain sales and healthy business relationships with the need to limit exposure to customers with low creditworthiness.

Managing short-term debt and accounts payable should allow the company to achieve enough liquidity for ordinary operations and unexpected needs, without an excessive increase in financial risk.

Inventory management should make sure there are enough products to sell and materials for its production processes while avoiding excessive accumulation and obsolescence.