The optimal management of Working Capital Requirement (WCR): Key driver of financial performance and a lever for the sustainability of firms: A multidisciplinary literature review

Abstract

In a complex, risky and constantly changing environmental context, maintaining a high-performance, healthy and balanced financial structure remains a major concern for companies, as it helps to ensure their long-term viability and counteract the disastrous effects of the organisation's economic environment. In this respect, effective management of working capital requirements (WCR) is an essential tool for maintaining financial equilibrium and boosting overall performance, in order to protect the business against the risk of failure. In this respect, the deployment of strategic WCR management at the heart of the finance function is now a competitive advantage and a key to prosperity and survival for businesses. The ultimate objective of this article is to gain a better understanding of how optimising working capital management enables companies to ensure a solid financial balance, which is the foundation of financial performance, an antidote to the risk of default as well as a source of financial independence. through a detailed analysis of the scientific literature, drawing on some 92 scientific articles published over the last decade on various academic search engines such as ProQuest, Elsevier, Cairn, Google Scholar, etc. To this end, the results of this article emphasise that the implementation of controlled management of short-term financing requirements is the key to financial equilibrium and the cornerstone of healthy, optimised cash flow. In addition, rigorous management of working capital is a catalyst for competitiveness and an essential lever for survival. At the same time, it is the cornerstone of a company's solvency and financial performance. It should also be noted that this is the first systematic review article to deal with working capital management from a multidisciplinary perspective.

Keywords: WCR, cash conversion cycle, cash management, financing, business failure.

JEL Classification : D24-D53-E4-F6-G32-H12-M1

Paper type : Theoretical Research