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Net Working Capital Management Strategies as Factor Shaping Small Firm Value

Grzegorz Michalski

Oficyna Wydawnicza Szkoly Glownej Handlowej w Warszawie, 2005

Actually determining the intrinsic value of liquidity is one of the unsolved problems in finance. Firms hold liquidity for a variety of different reasons. Generally, liquidity balances held in a firm can be called considered, precautionary, speculative, transactional and intentional. The first are the result of management anxieties. Managers fear the negative part of the risk and hold liquidity to hedge against it. Second, liquidity balances are held to use chances that are created by the positive part of the risk equation. Next, liquidity balances are the result of the operating needs of the firm. Having information about value of liquidity we can better dissolve the problem of liquidity management. The net working capital management leaning on the information about the intrinsic value of liquidity drives to increase of the value of the firm. The theses of article show how firm should manage net working capital to maximise value of the firm.

Number of Pages in PDF File: 15

Keywords: Net working capital. Small Enterprise, Value Based Management, Risk, Uncertainty

JEL Classification: G39, G32, G11, M11, D81, O16, P33, P34

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Date posted: July 19, 2007  

Suggested Citation

Michalski, Grzegorz, Net Working Capital Management Strategies as Factor Shaping Small Firm Value. Available at SSRN: http://ssrn.com/abstract=1000770

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