Working Capital Management: An Operative Component in the Financial Strategy of Enterprises
Abstract
Given the financial and economic crisis and the consequent deficit of internal and external financing, Ukrainian enterprises urgently in need to optimize and enhance performance. This can be achieved through enhancing the quality of the financial strategy’s operational component, working capital management of an enterprise. The study aims to define the role of working capital management within the financial strategy system of an enterprise. Analysis of working capital management is conducted in Ukraine’s brewing industry, for 2013–2015. 3 major brewing enterprises are selected for analysis, PJSC “Obolon”, PJSC “Carlsberg Ukraine”, PJSC “SUN InBev Ukraine”. The liquidity analysis reveals the following trend: PJSC “Obolon” – rapid reduction of the liquidity; PJSC «Carlsberg Ukraine” – the increasing liquidity; PJSC “SUN InBev Ukraine” – the liquidity is low and tends to decrease further under the influence of the rapidly increasing current liabilities compared to the current assets. Turnover analysis finds out the following trends: PJSC “Obolon” – the reduced inventory turnover, with the immobilization of funds in inventory’s financing; PJSC “Carlsberg Ukraine” – the increasing turnover of accounts payable, i. e. the enterprise started paying to suppliers faster, which strengthens their partnership; PJSC “SUN InBev Ukraine” – the declining turnover of receivables due to the deteriorated debtors’ operations, with measures aimed at liberalization of trade credit policy.
Effective working capital management is highly important for operational management and implementation of enterprise’s strategic objectives: high profitability, implementation of financial strategy, creation of shareholder value. Liquidity and turnover analysis of the largest beer producers in Ukraine reveals general trends to declining quality of working capital management over 2013–2015: the declining liquidity, the falling inventory turnover, the declining accounts payable turnover. The expected study in this field will be devoted to peculiarities of working capital management in the conditions of limited funding and high economic uncertainty.
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