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Literature Of Working Capital Management
2.1 Introduction
In this chapter, literatures of the working capital management are classified in accordance with the different themes. Specifically, it includes the basic theory of the working capital management, working capital management performance evaluation system, the study method of Working capital management and working capital management case studies of the three aspects of the review and commentary.
2.2 The Concept of Working Capital
As for the study of the basic theory of working capital management, most of them concentrate on early studies of working capital management. They mainly involved the concepts and classifications of working capital, working capital management and the max value of companies, and influence factors. Among of them, the concepts and classification are the starting point of research about working capital management.
George (1945) points out working capital are the part which current assets exceed current liability. In his essay, he mainly uses balance sheet and income statement to study the sources and uses of working capital and finally, they are established into a source and use table of working capital by adjusting entries. These tables show how working capital changes. In addition, a lot of words illustrate that concerning working capital changes bring impacts to business. However, Park and Gladson recognize that this definition is not significantly related with companies’ management analysis and plan, so they are more inclined to define it as the liquidity of the assets and liabilities which are relatively high portion of working capital.
Published by The American Institute of Certified the Public Accountants,in Chapter 3 of the Accounting Research Bulletin NO.43 (1953),it points out that working capital means the part of the amount of liquidity that is measured on the balance sheet, and working capital has an important significance for measuring the liquidity of the corporates’ assets. At the same time, it indicates that the characters of working capital are in order to guarantee or buffer the day-to-day business activities of companies’ turnover. Therefore as a static measurement tool working capital has become an important financial analysis tool.
Mao Fugen (1995) points out that the working capital generally refers to the current total assets of company and net working capital is the difference between current assets and current liabilities. The emergence of the concept of "working capital" is closely related to the evolution of presentation and classification of the financial statements. Generally speaking, "working capital" comes from the financial statements and it exists as an important tool of financial analysis or measure. The reason why working capital is defined as current assets which exceed current liabilities section is closely bound up the   resentation of the financial statements and the management philosophy. Specifically, the presentation of the balance sheet distinguishes the part of liquidity from the part of the non-liquidity. And then what working capital measured is liquidity. Meanwhile companies and their report users pay more attention to the strong part of the liquidity of assets and liabilities change.
Particularly, they more concerned about the recent changes. However, the discussion of the definition broad of working capital has not attracted more attention; mostly they concentrated in the study of the early working capital. Most of scholars believe working capital exists as a static indicator of working capital to measure liquidity, and they have no higher requirements for liquidity. So in different circumstances, the definition of working capital should relax or narrow accordingly.


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