The Impact of Working Capital Management on Corporate Liquidity

Abstract

Working capital management is recognized as one of the most important managerial tools for improving liquidity and reducing financial risks in companies. Liquidity refers to a company's ability to meet short-term financial obligations without requiring emergency financing. Effective management of working capital, including the optimization of inventory, receivables, and short-term liabilities, can significantly enhance a company's liquidity. This article examines the impact of working capital management on corporate liquidity. This research is a narrative review using a descriptive analysis method. Data was collected through a thorough review and analysis of scientific articles and previous studies on working capital management and liquidity. Sources were retrieved from reputable databases and selected based on relevance, academic quality, and recent publication. The findings show that optimized working capital management, especially in managing inventory and receivables, can improve a company’s liquidity. Furthermore, the use of modern technologies in financial management helps reduce costs and increase liquidity. Additionally, challenges such as financial constraints and short-term debt management can negatively impact liquidity. Working capital management plays a critical role in enhancing corporate liquidity. Companies that employ modern methods for effective working capital management can mitigate financial risks and increase their financial stability.