Liquidity or Profitability: Financial Effectivness of Investments in Working Capital
INTERNATIONAL FINANCIAL SYSTEMS, P. Cervinek, ed., BRNO, 2008
14 Pages Posted: 11 Nov 2008 Last revised: 3 Jan 2009
Date Written: June 25, 2008
The basic financial purpose of corporation is creation of its value. Liquidity management should also contribute to realization of this fundamental aim. Many of the current asset management models that are found in financial management literature assume book profit maximization as the basic financial purpose. These book profit-based models could be lacking in what relates to another aim (i.e., maximization of enterprise value). The corporate value maximization strategy is executed with a focus on risk and uncertainty. This article presents the discussion about relations between firm's net working investment policy and firms value.
Keywords: corporate value, investments, current assets, working capital, value based management
JEL Classification: D81
Suggested Citation: Suggested Citation