Interview of:
Mr. Akhil Eranki,
Senior Relationship Manager at Anand Rathi Wealth Management
Linkedin Profile - https://www.linkedin.com/in/akhil-eranki
Q1. Why working capital management needed in a firm?
Mr. Eranki answered that working capital is part of the total assets of the company. It is the difference
between current assets and current liabilities. Practically speaking, it is the daily, weekly and monthly
cash requirement for the operations of a business. Working capital management is a process of
managing short-term assets and liabilities. He added that working capital makes sure that a firm has
sufficient liquidity to run its operations smoothly. If a company doesn’t have the funds to pay its shortterm expenses, it can quickly lead to the liquidation of assets and eventually to bankruptcy. It’s vital
for a company to constantly monitor and manage its working capital to ensure adequate funding for
daily operations.
Q2. How working capital is managed by the firm?
Mr. Eranki started off by saying that The Covid-19 pandemic has raised significant working capital
challenges and uncertainties for organizations. Supply chain disruptions have been a major
challenge, along with changing consumer demands and the collection of receivables. He said that to
manage working capital effectively you need procurement and inventory levels to check over buying
or insufficiency of stock, it is very important to maintain optimum stock levels. He also added that to
manage working capital you need to make sure that the money is coming in on time and you need to
manage your debtors vigilantly and need to make sure there is a constant cash flow in the company
and to write off and check bad debts as soon as possible.
Q3. What you should know as a student of finance for effective working capital management?
Working capital management is a broad-based function. Effective execution requires managing and
coordinating several tasks within the company, including managing short-term investments, granting
credit to customers and collecting on this credit, managing inventory, and managing payables.
Effective working capital management also requires reliable cash forecasts, as well as current and
accurate information on transactions and bank balances. Both internal and external factors influence
working capital needs. Working Capital management is particularly important since it is an accurate
barometer for assessing the long-term financial health of a business and ensures that adequate cash
flow is always maintained to meet its short-term commitments.