ABSTRACT
This chapter provides the key aspects of differences between profits and cash, the concept of funds flow, the purpose of cash flow statements and how they are prepared, and the importance of the management of working capital. The working capital of an organization can be described as its current assets less its current liabilities. The face of an organization’s balance sheet will display the value of the working capital or the net current assets. The balancing act continues when the financial controller is attempting to minimize costs. Most managers are aware of the cost of capital for investing activities. The modern organization would seek to implement an activity-based costing strategy to manage costs. The financial controller will need to have regard for a wide range of interrelationships in deriving the working capital budget. Cash is clearly a significant element of the working capital budget.
