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b. Variable Working Capital Variable working capital is using and always changing according to
circumstances. The changes are due to seasonal fluctuations, fluctuations conjuncture, and changes the nature of the emergency, so the variable working
capital divided into: 1. Seasonal Working capital
Seasonal working capital is the amount of funds which is required to anticipate when there are fluctuations in the activities of company.
2. Working capital cycle Working capital cycle is the amount of working capital which is
their necessary influences by the conjuncture. 3. Emergency working capital
Emergency working capital is the amount of working capital needs which is influenced by the circumstances that happen beyond the
capabilities of the company.
6. Definition of working capital management
According to Wes ton and Copeland 1999: 327 “Working capital
management is activities that cover all the management functions of current assets and current liabilities which is included in the company in order to
finance spending to daily operations.
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According to Sawir 2005: 133 Working capital management is an activity that includes all the functions of the management of current assets
and current liabilities of the company. Working capital management purpose is managing current assets and current liabilities to obtain net
working capital and also to guarantee the profitability of the company. Therefore, a manager is expected to managing of company in order to meet
working capital can be carried out effectively and efficiently. Working capital management is also important, because it relates to some aspects, as
follows: a. Some research has indicated that most of the time of the financial
manager is to spent by daily internal activities and this is the part of working capital management,
b. If more than half the total assets of company are current assets as part of a large investment and easily converted to cash, so current assets is
require the careful attention of financial managers, c. Relationship between the rate of sales growth and the need of financial
capital also current assets are close and straight, d. Working capital management is very important, especially for smaller
companies. Although a small company can reduce fixed asset, but they can not avoid the need for cash, receivables and inventories. Because
access to capital markets is limited, the pressure should be directed to debt and accounts receivable and short-term bank loans Weston
Copeland, 1999: 324.
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There are two fundamental principles in the management of operational funding working capital Horne, 2005: 313, namely: The
ability to earn income is inversely related to liquidity and the ability to earn profits in line with risk. Control the exact amount of working
capital will ensure the continuity of operations of the company efficiently and economically. When working capital is too large, then
the funds that are embedded in the working capital requirement exceeded, resulting in idle funds, because these funds could be used for
other purposes in order to increase profits. Targets to be achieved from working capital management is
Sawir, 2005 : 133 : a. Maximize the value of the company by managing current assets so
that the level of margin return on investment return on investment is equal to or greater than the cost of capital used to finance the
current assets, b. Minimize the cost of capital used to finance the current assets in the
long term, c. Control of the flow of funds in the current assets and the availability
of funds from debt sources so that the company can always meet its financial obligations as they fall due Sawir.2005: 133.
