Mastering Working Capital: A Practical Guide for Finance and Accounting Professionals
Working capital is the lifeblood of any organization. It represents the short-term liquidity available to fund day-to-day operations and is a critical metric for financial health. Yet, despite its importance, working capital is often misunderstood - especially during cash flow planning and mergers and acquisitions (M&A). This guide clarifies what working capital truly means, addresses common misconceptions, and provides actionable best practices for managing working capital effectively in both routine operations and strategic transactions.
Mastering working capital goes beyond applying standard formulas. Understanding business model nuances, segment contributions, relative importance of working capital components, and seasonality factors are all essential. Whether managing multiple business segments with unique working capital needs, navigating asset-light businesses with minimal inventory, or handling highly seasonal operations, the approach must be tailored to your specific circumstances.
This article explores:
- What is Working Capital? – The fundamental definition and key components that shape liquidity
- Non-Operating Balances and Excess Cash – Identifying what truly drives operational needs vs. strategic positioning
- Common Misunderstandings – Dispelling myths about cash, inventory turnover, and WC optimization
- Cash Flow Management and WC – Essential metrics including DSO, DPO, DIO, and the cash conversion cycle
- Complex Structures and Non-Traditional WC Drivers – Real-world scenarios: multiple segments, minimal inventory, and seasonal businesses
📄 Please download the full document below to discover more.
Contact us
Hai Hoang Director, Financial advisory - Ho Chi Minh City
Mastering Working Capital
Working capital is the lifeblood of any organization. It represents the short-term liquidity available to fund day-to-day operations and is a critical metric for financial health. Yet, despite its importance, working capital is often misunderstood - especially during cash flow planning and mergers and acquisitions (M&A). This guide clarifies what working capital truly means, addresses common misconceptions,...
IFRS Transition
For companies in Vietnam, the move to International Financial Reporting Standards (IFRS) has become a pressing strategic decision.
Tax Risk Identification – Software Production
Tax audits of software production activities often reveal risks related to cost allocation, revenue recognition, and compliance with tax regulations. Identifying these risks early is essential to avoid penalties and ensure accurate reporting.
Mastering ESOP Valuation
Equity compensation has become a mainstream tool in Vietnam’s competitive talent market, offering strategic benefits far beyond cash incentives. Yet accurately valuing Employee Stock Ownership Plans (ESOPs) demands rigorous methodology, disciplined assumptions, and deep regulatory understanding. Whether you’re a startup CFO, private equity professional, or corporate finance leader, mastering ESOP...
Company formation ahead of IRC
Vietnam’s proposed amendment to the Investment Law would allow foreign investors to establish a company before obtaining an Investment Registration Certificate (IRC). The reform aims to simplify procedures, align treatment between domestic and foreign investors, and accelerate market entry.