Working Capital Management Practices - Essay Example

ernal short term financing is secured to finance the working capital however; firms also tend to tie most of their productive funds with non-productive assets. Family Dollar- One of the most growing retain chain stores in US provides low overhead, self service retail stores. Founded in 1959, in North Carolina, Family Dollar is now one of the leading retail chain stores in US with over 6000 stores operating all over the US. Family Dollar is also unique and fast growing retail chain stores in US in the sense that its success is largely driven from the ease and convenience that it offers to its customers.

Family Dollar offers low prices everyday and is on its way to become one of the leading retail chain stores in US. Last five years have witnessed one of the rapid growths in the history of Family Dollar as it expanded very fast and opened more than 4000 new stores during last five years. Family Dollar’s business model is based on effective and unique branding and merchandising strategy similar to neighborhood type of stores. It has collaboration with most of the major brands of the world which not only provides an opportunity to project itself as the leading brands of the world.

This paper will discuss and critically assess the strengths and weaknesses of the working capital management policies of the Family Dollar. At the end, recommendations will also be provided as to how the firm can improve its working capital policies and how these recommendations can be implemented. Working capital requirements of every organization vary depending upon the nature of the industry as well as internal dynamics of the firm. However, roughly, it is often estimated at 25 to 40% of the total assets of the firm hence indicating a substantial amount of investment into assets which are typically unproductive in nature.

(Glynn, Abraham, Murphy, & Wilkinson, 2008). Typically, the difference between the current assets and current liabilities of the firm is called working capital