The interpretation of working capital and the elements thereof, working capital management

Pupos, Tibor – Péter, Zsolt – Kis-Simon, Tünde – Gór, Arnold

Keywords: working capital, current assets, working capital investment, working capital management

Those literary sources dealing with such topics as the interpretation of working capital in the context of corporate financing strategies, the related financial indices, and the methodology of calculating all these, could be considered neither poor, nor unified. Several problems arise from the shortcomings of defining the concepts of working capital, net working capital, working (operational) capital, the circulation of current assets and working capital management, etc., which gives the theoretical basis and their vocational tenability, the controversial interpretation and the unclearness of the related methodological questions. On the other hand, the root of the problems can be found in the unclearness of the theoretical contexts, in the deficiency and vocational tenability of the defining of the related concepts, categories.
We define the concepts of working capital, net working capital, working (operating) capital based on the results of our several years’ research work. We prove the theoretical basis of the concepts and open up the causal connections and the interactions of the different elements. We prove that the correction of the related financial indices can not be considered apart from the interpretation of the theoretical contexts.

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