Working capital is defined as current asset less the totality of the firm’s current liabilities. The current assets of a firm include: Inventory, account receivable, short-term marketable securities and cash while the current liabilities include items such as account payable, notes payable, accounts, customers deposits (i.e. prepayments), differed taxes, and other short term debt obligations.Working capital management deals with the management of investment in current asset and in current liabilities that is, management of current asset level and arrangement of the short term credit to finance the current assets investments. The management of working capital involves the determination of optimum level of working capital to keep monitoring and controlling the level of individual component of working capital to ensure that the optimum level is not exceeding, and provision of fund to finance current assets.
Management of working capital is also all about the provision of sufficient current assets that will be able to sustain the normal process of acquisition of raw materials and supplies, turning out the finished product and collection of payment. In some organization the estimated provision of working capital or current asset are not adequate, in such a case, other measures must be opened to provide the short fund, or the business will fall.
However, in practice, some organization separate working capital management from other aspects of financial management. I observed that it should not be so. Therefore I wrote this conceptually in such a way that it will give good understanding to various components of working capital, management from the more fundamental decisions of investment.
Observing the historical background of Modotel, On 27th April 1978 the Modotel Nigeria ltd was registered as a private liability company with the name Valid Hotel ltd. the Authorized share capital at the start was 10,000 ordinary share of N1each. Its operation started in 1986 September to be precise i.e. eight years after the registration.