Working Capital Management Studies Based On The Theory Of Enterprises’ Lifecycle

Working capital is the blood which necessary to maintain the normal operation of thecompany. If there is not enough working capital, companies’ operating will inevitable behard-pressed. And if working capital is less than zero, it will induce the financial failure ofthe company. Analyze companies experienced financial failure, the plight of workingcapital is the main reason of most companies, it’s also the joint performance of thecompanies which step into financial failure. In recent years, Working Capital Managementhas been recognized by more and more enterprises and being increasingly applied to theenterprise financial management. Meanwhile, Theory of Enterprises’ Lifecycle has beenwidely used. The author believes that Working Capital Management and Theory ofEnterprises’ Life Cycle have their intersection points, and if we combine the two studies,we can better promote the development of enterprises. If we study the working capitalmanagement standard and improvement measures without distinguish the differentstages of the life cycle of enterprises, the results obtained will be a general average. It’ssimilar to study the situation of the human spirit of different ages mixed together. Thisresearch model is not conducive to our understanding of the different focus and effectiveimprovement ways of the company’s working capital management. Therefore, this paperwill study working capital management at different stages (divide by the different lifecycle).On the other hand, it’s not difficult to find despite the different scholars have differententerprises’ lifecycle division, is from gradual decline to extinction in almost every theoryof the decline stage, the overall present a declining trend. The author believes that theyignored the recession enterprises can get regeneration through business and financialreform. Therefore, this paper focuses on how companies make good use of workingcapital to keep alive and to get regeneration.This article is divided into seven chapters. The first chapter is an introduction,describes the study background, study meanings, study ideas and methods; The secondchapter is literature review, discusses the existing domestic and international WorkingCapital Management and Enterprises’ Lifecycle Theory, analyze shortages in previousstudies and put forward the author’s opinions. The third chapter divides the enterprises’ lifecycle according to a new method, put forward the regeneration stage, and to analyzeits feasibility and necessity. The fourth chapter studies the characteristics of workingcapital and the main problems in every lifecycle stage, analyzes the main components ofworking capital and makes a comparison. The fifth chapter analyzes the working capitalmanagement objectives in every enterprises’ lifecycle, and analyzes working capitalmanagement strategies which should adopt in accordance with the objectives, the paperselects several typical cases of each enterprises’ lifecycle, to help our analysis; The sixthchapter selects cases of Narcissus Company’s financial failure, analyze the reasons of itsfailure to achieve regeneration, contrast to the case of Amoi to achieve regeneration, thepaper analyzes the five lifecycle stages of Amoi, as a guide to other companies; The lastchapter is conclusion, to summarize the paper and analyze the shortcomings andproblems to be solved.This paper combines Working Capital Management and Enterprises’ Lifecycle Theory,seeking to establish working capital management model in each stage of the lifecycle, andput forward the regeneration stage, study how companies in recession stage step intoregeneration stage as soon as possible with the help of working capital management. Thepaper opens up a new working capital management perspective, and has some practicalsignificance.