ABSTRACT

Working Capital management is one of the most aspects of the bank's overall financial

management. Because efficiency in working capital management is necessary for the bank's

long term success and this leads to the achievement of bank's overall objective which is the

maximization of the shareholders' wealth. Working Capital of a Bank represents the

operating liquidity available to run the operations of a bank.

Working Capital management refers to the management of current assets and current

liabilities. It is an important component of corporate finance because it directly affects the

liquidity and profitability of the company. Working capital management is one of the most

important areas while making the liquidity and profitability comparisons among firms

involving the decision of the amount and composition of current assets and the financing of

these assets (Elfelly 2009). For all firms in both developed and developing economies, one of

the fundamental objectives of working capital management is to ensure that they have

sufficient, regular and consistent cash flow to finance their activities. This objective is

particularly increased for deposit money banks.

It has been widely accepted that the profitability of a business concern largely

depends upon the manner in which its working capital is managed (Brigham and Houston

2003). Brigham and Houston emphasize that working capital management involves both

setting working capital policy and carrying out that policy in the day-to-day operations. It

equally involves making appropriate investment decisions in cash, receivables and

inventories as well as the level of short term financing.