Liquidity and working capital management involve a company’s ability to effectively manage cash flows, maintain sufficient liquidity and ensure efficient utilization of available resources. It is focused on short-term strategies that help a business remain profitable by managing the flow of both cash and credit within an organization. An effective liquidity and working capital management system includes continually evaluating and predicting immediate cash needs, managing cash balances efficiently, accessing beneficial sources of financing, controlling credit risk exposure and balancing current accounts receivable and payable. This form of financial analysis helps businesses optimize their operational efficiency and better manage potential risks.