Determining the Optimum Level of wroking Capital in the Cameroon Business Environment:The Case of Cameroon Development Corporation (CDC)
Visemith William Muffee (Department of Economics and Management, University of Buea )
Download Article | Published On 01/07/2001

Abstract

The issue of working capital is very important to the operations of the Cameroon Development Corporation (CDC). Net working capital (i.e. the excess of liquid current assets over current liabilities) is an indespensable component of any business organisation's capital structure. For any company to make profits in order to enhance growth depends on the size of working capital and its proper management. The mismatch of working capital and fixed capital will always bring problems to the financial operations of the company. There must be an optimum size of working capital, because too much working capital is dangerousus to an organisation's working life as too little working capital. This article sets out the modalities for determining the optimum size of working capital. This coupled with sound working capital management decisions will certainly minimise all technical insolvency risks inherent in the company's business operations. Shortage of working capital always forces management to go into an overtrading (negative working capital). Looking at the case of CDC there is an overtrading situation.This case is used to examine the causes and consequences of overtrading. The paper condudes that organizations must properly manage their working capital in order to achieve growth. To achieve the main objective of this study (i.e determinign the optimum size of working capital) data was collected and analysed from CDC. This is because CDC 1s a very large corporation and working capital problems are very likely. The study found that CDC has acute working capital problems resulting in losses. These problems stem from poor working capital management aproaches employed over the years. Every organisation must seek a pomt of balance in its working capital in order to avoid a loss-making situation.

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