Where Knowledge Meets Awareness
| Basis of Difference | Management of Working Capital | Cash Management |
|---|---|---|
| Definition | Involves managing current assets and current liabilities to ensure operational efficiency. | Focuses specifically on managing cash inflows, outflows, and liquidity. |
| Scope | Broad scope, includes inventory, receivables, payables, and cash. | Narrow scope, deals only with cash and bank balances. |
| Objective | To maintain an optimal level of working capital for smooth operations. | To ensure the firm has sufficient cash to meet short-term obligations. |
| Tools Used | Current ratio, quick ratio, working capital turnover, operating cycle. | Cash budget, cash flow statement, bank reconciliation, liquidity ratios. |
| Decision Areas | Inventory control, credit policies, payment terms, and financing. | Cash collection timing, disbursement planning, idle cash investment. |
| Time Focus | Short to medium-term financial management. | Strictly short-term liquidity management. |
| Impact | Affects overall current asset and liability structure. | Directly impacts the company's ability to stay solvent daily. |
