A Case Analysis Of Jiangxi Copper Company Limited’s Working Capital Management

In recent years, many companies have come to realize that money is the key to thedevelopment of enterprises under the impact of the financial crisis and the volatility inthe international market. To a certain extent, stabilizing the cash flow andstrengthening the management of working capital determine the business performanceand the survival of enterprises.Early studies of working capital management mainly drew on foreign CashConversion Cycle Theory. This theory focused on the analysis the liquidity turnoverperiod to evaluate the quality of working capital management; this method revealedthe efficiency of working capital turnover simply and intuitively.However, due to the distribution of liquidity in all aspects of project operations,if the study did not bind to the business processes and just focused on the separatedworking capital related elements, it`s difficult to help companies precisely positionwhere the working capital turnover problems lied among the business process, anddistinguished responsibilities in management, so it might be little of use in improvingeffectively for companies.In order to improve the deficiencies of traditional working capital management andmeet the needs of enterprise development, China’s scholars based on the traditionaltheoretical research and practical experience, had speculated that channelmanagement and business process management played a decisive role in themanagement of working capital. Combined with supply chain management andcustomer relationship management theories, working capital management broke thelimitations of the existing research perspective, and established a new pattern whichfitted the present situation about the working capital management–A working capitalmanagement pattern based on channel management. In addition, since the currentconcept of working capital had some deficiencies, Chinese scholars combined thefinancial presentation ideas of the IASB and FASB and re-defined the concept of theworking capital and re-classified the items. Under the reconstruction of the conceptabout working capital, working capital management based on channel managementwas more concerned about the integrity and coordination of working capital. Thispattern emphasized the relationship between value creation and working capital management, and its corresponding evaluation model could more accurately evaluatethe effect of different channels of working capital management.In this paper，the research methods of the specification analysis and case analysiswill be used. By reviewing the foreign and domestic literatures, this papersummarizes the characteristics of working capital management, and analyzes thetraditional working capital theory, pointing out that the deficiencies and limitationsthe traditional theory owns. By introducing the new concept of channel managementtheory and international financial reporting, this paper points out that working capitalmanagement study presents a new perspective. The financial presentation ideas ofthe IASB and FASB leads to redefinition of the concept of working capital. Then,based on the redefinition, the paper emphasizes the importance of the channelmanagement theory used into working capital management, and proposes toestablish evaluation pattern of working capital management based on channelmanagement, supplemented by traditional performance evaluation method. Thismulti-angle evaluation pattern follows the traditional evaluation pattern andcombines with channel management theory, which evaluates the performance ofworking capital management by the multi-level point to surface. In addition toliquidity analysis, the paper suggests working capital management evaluation patternis also configured to analysis the sources of working capital and financial risk.Building up such a relatively complete evaluation pattern can be more fully reflectthe performance of the business working capital management.On the basis of theoretical research, this paper chooses the representativeenterprise in the nonferrous metals industry，Jiangxi Copper Company Limited as thecase and collects the recent years data to analyze its source of working capital,performance level, financial risk, etc.. Then it comes to a conclusion that JiangxiCopper Company`s channel management, financial risk control and other aspectshave certain advantages and characteristics in the field of non-ferrous metals industry.But it also raises some working capital management questions under the pressures ofweak market demand and poor liquidity. Finally, this paper summarizes the excellentexperience of working capital management. Combined with non-ferrous metalindustry development status, this paper presents some improved proposals, hoping toprovide excellent experience for the improvement of China’s non-ferrous metalindustry companies`working capital management, which enables companies todevelop a reasonable working capital management strategy to enhance the competitiveness of enterprises.