Working Capital Management Essay Example | Topics and Well Written Essays - 250 words

Working Capital Management - Essay Example The company has a policy of maintaining a strong balance sheet and free cash flows on a sustainable basis to become free from shot term debts and strengthen the position of liquidity. As on 2011, Nissan Motor Company achieved a positive free cash flow of 379.5 billion Yen (Nissan Motor Co. Ltd, 2013). The company uses its free cash flow for repurchasing stocks in order to increase the available capital with the company. According to the market demand, Nissan Motor Company also uses the free cash flows to investment in assets like factories, equipments, operational infrastructure and also decides to allocate a part to the shareholders as long term plans for raising capital. The use of free cash flows helps Nissan Motor Company to meet short term expenses without incurring current liability. The use of free cash flows by the company influences the approach of capital structure decisions. Nissan Motor Company reduces the debt capital and focuses on increasing the equity capital in its c apital structure model. The theory of Capital Structure proposed by Miller and Modigliani is applicable in such wide number of scenarios where the companies should adopt a balance between the debt and equity capital for raising finds in order to maintain an optimal cost of capital (Pratt,