Study On The Working Capital Management From The Spective Of Life Cycle Of Companies

Appropriate working capital management is a necessity for the company to survive. It isdirectly related to the short-term solvency, the ability to take risks and the profitability ofassets. High level of working capital means the low assets utilization, while the low level ofworking capital indicates that companies may face potential difficulties. In addition, scientificand effective working capital management can ensure the achievement of prediction of cashflow in long run, and thus will undoubtedly promote the realization of the goal of maximizingvalue of a company. It seems that working capital management in a company relates only toshort-term business strategy, but from the view of the definition of working capital, theworking capital is used to measure the difference between the capital that is available in thelong-term and that is required in the long-term，we can see that the working capital is notaffected by daily activities, on the contrary, it is affected by the strategy of investments andfinancing activities in the long-term. So when we make decisions of the working capitalmanagement strategy, we should combine it with the development strategy in the long-term.Whatever strategies the company take, it must be affected by their life cycle stages they locate.Different stages of development the company stays, different strategy objectives and paths itmay take, and will take different strategies of the management of working capital. Therefore,it is necessary to study the impact of life cycle towords working capital management forcompanies from the perspective of life-cycle.This paper analyzes the research status on working capital management, and thenintroduces the basic theory of working capital and life-cycle theory. Then I selected data fromListed Companies of China from the year2008to2013to divide corporate life cycle, and gotdata on the neonatal period, the growing period, the maturity period and the recession period,and then I made empirical analysis of the four stages of business from the spect of the level ofliquid assets, current liabilities and the net working capital. The results show that there aresignificant differences on those indicators between the four stages. And then to prove to the correlation between management efficiency of working capital and business performance ofthe manufactories, I made a empirical analysis. The results show that there is anot-siginificant negative coeerlation betwween the operating working capital turnround andthe corporation performance.The innovation of this paper is to take the industry classification into consideration firstand then divide the companies to different life cycle, and made a detaild analysis of the statusof working capital management in each period and made a empirical analysis on thecorrelation between the efficiency of operating working capital manangement and thecomanpies’ performance to improve the level of working capital management for themanufacturing.