In the world of business,survivability of an organization is more doubtful especially if the businessorganization is unable to meet the short-term obligation even if they are stillable to gain a big sum of profit. Structure, budgeting and managing decisions ofworking capital are some of the factors that a corporate finance deals in thebusiness. The blood line of a business organization deals with the workingcapital, with a proper management of the working capital it could affect the organizationalperformance of a business knowing that it is a significant affair to themanagement of the business.
With the help of proper management of workingcapital it could maintain the factors that could affect the business operationlike profitability, liquidity, survivability and solvency of the business. Withthe connection between working capital and organizational performance of abusiness, there is an increasing interest in the investigation of the two variable.Small Medium Enterprises gained a widespread recognition as it could give job opportunitiesto the people within the economy and promoting its culture, with SMEs they canmake a healthy and vital economy. Accordingto Storey (1994) majority of the enterprises in the world are SMEs, however thefailure to manage the business of SMEs are also substantial the reason for thisfailure is the lack of ability to control their business performance (SnoberJavid, 2014).
Part of the firms totalwealth is the Working Capital, wherein the high ranking management has anunderlying control of it because for them lack of results and observation ofthe idea that organizational performance is due to the working capital. (Ricci and Divito, 1998; Garcia- Teruel andMartinez Sonano, 2007; Hill et al., 2010). On the other hand, according toAdeel Mumtaz er. al (2010) with the use of working capital efficiently and bymanaging it effectively there is a high possibility that organizationalperformance would increase and could decrease the change of bankruptcy of thebusiness, according to them in order for the firm performance to increase thebusiness should minimize their debt.