Comment on the following: Working capital management is all about deciding the level, structure and financing of current assets.

Management of working capital involves three broad decisions: deciding the level of current asset; the structure/composition of current assets i.e., choosing the levels and mix of cash, marketable securities, receivables and inventories; and the financing of current asset. A firm can have a flexible or restrictive policy of working capital management. In case of flexible policy it will keep large cash and securities balances, large amounts of inventory, and grant liberal credit terms to its customers. Such a policy is most appropriate when carrying costs are low relative to shortage costs. The level of holding current assets also depends upon a number of factors such as nature of firm's business, the extended reach of business. The strategy for effective working capital management is to ensure uninterrupted supply of cash to the operating cycle. Restrictive policy actions include keeping low level of cash and securities balances, keeping small amounts of inventory and allowing few or no credit sales. Restrictive Policy uses long-term financing for permanent asset requirements only and short-term borrowing for seasonal variations.