 A firm's balance sheet contains assets and liabilities. Now assets can be classified into long-term assets and short-term assets whereas liabilities can also be classified into long-term liabilities and short-term liabilities. Now long-term assets are supposed to be financed through long-term liabilities whereas short-term or current assets are supposed to be financed through long-term or current liabilities. Now the management of current assets and current liabilities is termed as working capital management and in modern day corporate finance working capital management is occupying a significant importance. The goal of effective working capital management is of twofold. On one hand it is desirable to have readily available funds for the company to cover its daily operating expenses and on second hand the firm needs to have some productive investment of its funds. If the firm is facing some insufficient funds this may lead towards disposal of the firm's assets or reorganization of the firm itself or the liquidation of the firm at all. So there are certain aspects of effective working capital management policy like maintaining adequate cash levels by the firm converting short-term assets into cash at the earliest whenever the firm needs cash and controlling the outgoing payments made by the firm to different parties with which the firm deals. So what effective working capital management covers and the firm in this regards needs to do what. Let's see the firms need to invest in highly liquid securities then firm needs to arrangement of credit lines with the bank to finance its short-term financial needs and the firm needs to assess to issue money market instruments in the market. There are certain internal factors that affect working capital management practices of the firm. These factors include firms size and its growth rates, the organizational structure of the firm and sophistication of firms working capital management practices then borrowing and investment practices of the firm in the market. Likewise there are external factors that affect working capital management practices of the firm. They include banking services used by the firm, interest rates prevailing in the market, new technologies and products coming in the market, economic situation prevailing in the country's economy and competitors in the industry. So what it covers by the working capital management, it covers operating financing and investment activities of the firm in the shorter period of time, it covers relationship with financial institutions and trading partners of the firm, it covers the analysis of working capital management activities by the firm, it needs the firm to focus on its short-term liquidity.